UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 000-56415

StartEngine Crowdfunding, Inc.

(Exact Name of Registrant As Specified In Its Charter)


4100 West Alameda Avenue, 3^rd Floor Burbank, CA		91505
(Address of Principal Executive Offices)		(ZIP Code)

(800) 317-2200

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities to be registered under Section 12(b) of the Act:

None.

Securities to be registered under Section 12(g) of the Act:

Common Stock, $0.00001 par value

(Title of Class)

Indicate by check mark whether the registrant has (1) filed reports required to be filed by Section 13 or 15(d) of the Securities 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 Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition 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 Company 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 May 15, 2024, there were 697,863,880 shares of Common Stock, par value $0.00001 per share, of the registrant issued and outstanding.

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STARTENGINE CROWDFUNDING, INC.

TABLE OF CONTENTS


PART 1	FINANCIAL INFORMATION	3
Item 1	Financial Statements	3
	Condensed Consolidated Balance Sheets as at March 31, 2024 (unaudited) and December 31, 2023 (audited)	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	27

PART II	OTHER INFORMATION	28
Item 1	Legal Proceedings	28
Item 1A	Risk Factors	28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 5	Other Information	35
Item 6	Exhibits	36
	Signatures	37

In this Form 10-Q, the term “StartEngine”, “we”, “us”, “our”, or “the Company” refers to StartEngine Crowdfunding, Inc. and our subsidiaries on a consolidated basis. The terms “StartEngine Capital” or “our funding portal” refers to StartEngine Capital LLC, the terms “StartEngine Secure” or “our transfer agent” refer to StartEngine Secure LLC, the terms “StartEngine Primary” or “our broker-dealer” refer to StartEngine Primary LLC, the term “StartEngine Private” refers to StartEngine Private LLC, the term “StartEngine Private Manager” refers to StartEngine Private Manager LLC, the term “StartEngine Adviser” refers to StartEngine Adviser LLC and the term “StartEngine Assets” refers to StartEngine Assets LLC.

THIS FILING MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

STARTENGINE CROWDFUNDING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31,		December 31,
	2024		2023

Assets
Current assets:
Cash	$	10,635,656	$	12,656,298
Marketable securities		1,856		1,856
Accounts receivable, net of allowance		264,651		193,696
Other current assets		936,540		720,767
Total current assets		11,838,703		13,572,617

Property and equipment, net		119,464		119,723
Investments - warrants		195,487		195,487
Investments - stock		8,957,321		8,623,212
Investments - Private		4,537,608		4,357,083
Investments - Collectibles		2,448,535		2,446,121
Investments - Real Estate		2,136,628		2,136,628
Due from related party		209,190		209,190
Intangible assets		21,035,049		21,892,192
Other assets		42,138		42,138
Total assets	$	51,520,123	$	53,594,391

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	285,418	$	278,691
Accrued liabilities		3,831,442		4,456,756
Deferred revenue		3,217,760		3,520,150
Total current liabilities		7,334,620		8,255,597

Total liabilities	$	7,334,620	$	8,255,597

Commitments and contingencies

Stockholders’ equity:
Series A Preferred Stock, par value $0.00001, 207,000,000 shares authorized, 185,440,880 and 185,440,880 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectfully, liquidation preference of $5,310,409 and $5,310,409 at March 31, 2024 and December 31, 2023, respectively.		5,286,667		5,286,667
Series T Preferred Stock, par value $0.00001, 99,000,000 shares authorized, 9,642,080 and 9,642,080 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively, liquidation preference of $1,414,172 and $1,414,486 at March 31, 2024 and December 31, 2023, respectively.		983,634		983,634
Series Seed Preferred Stock, par value $0.00001, 213,000,000 shares authorized, 204,810,720 and 204,810,720 and shares issued and outstanding at March 31, 2024 and December 31, 2023, respectfully, liquidation preference of $1,707,990 and $1,707,990 at March 31, 2024 and December 31, 2023, respectively.		1,706,756		1,706,756
Common stock, par value $0.00001, 1,500,000,000 shares authorized, 697,053,980 and 697,053,980 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.		6,973		6,971
Additional paid-in capital		84,872,740		82,005,447
Noncontrolling interest		(13,251)		(13,251)
Accumulated deficit		(48,658,016)		(44,637,430)
Total stockholders’ equity		44,185,503		45,338,794
Total liabilities and stockholders’ equity	$	51,520,123	$	53,594,391

See accompanying notes to unaudited condensed consolidated financial statements

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STARTENGINE CROWDFUNDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended March 31,
		2024	2023

Revenues	$	9,757,597	$	5,240,039

Cost of revenues		4,797,451		1,655,967

Gross profit		4,960,146		3,584,072

Operating expenses:
General and administrative		2,641,364		1,879,509
Sales and marketing		3,898,419		2,656,824
Research and development		2,041,320		1,138,408
Change in fair value of shares received for fees		384,746		—
Total operating expenses		8,965,849		5,674,741

Operating income (loss)		(4,005,703)		(2,090,669)

Other Expense (Income)
Other expense (income), net		(8,687)		(37,260)
Total other expense (income), net		(8,687)		(37,260)

Income (loss) before provision for income taxes		(3,997,016)		(2,053,409)

Taxes - Other		23,570		6,508

Net loss		(4,020,586)		(2,059,917)
Less: net loss attributable to noncontrolling interest		—		—
Net loss attributable to stockholders		(4,020,586)	$	(2,059,917)

Weighted average loss per share - basic and diluted	$	(0.01)	$	(0.00)
Weighted average shares outstanding - basic and diluted		697,263,880		669,479,540

See accompanying notes to unaudited condensed consolidated financial statements

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STARTENGINE CROWDFUNDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Series A Preferred Stock			Series T Preferred Stock			Series Seed Preferred Stock			Common Stock				Additional	Noncontrolling		Accumulated
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount			Paid-in Capital	Interest		Deficit		Total
Balance at December 31, 2022	185,440,880	$	5,286,667	9,642,080	$	983,634	204,810,720	$	1,706,756	666,033,240	$	6,660	$	45,418,943	$	(13,251)	$	(28,261,951)	25,127,458
Sale of common stock	—		—	—		—	—		—	1,184,700		12		1,124,508		—		—	1,124,520
Offering costs	—		—	—		—	—		—	—		—		(770,651)		—		—	(770,651)
Exercise of stock options	—		—	—		—	—		—	2,261,600		23		20,971		—		—	20,994
Stock compensation expense	—		—	—		—	—		—	—		—		897,634		—		—	897,634
Net loss	—		—	—		—	—		—	—		—		—		—		(2,059,917)	(2,059,917)
Balance at March 31, 2023	185,440,880	$	5,286,667	9,642,080	$	983,634	204,810,720	$	1,706,756	669,479,540	$	6,695	$	46,691,405	$	(13,251)	$	(30,321,868)	24,340,038


	Series A Preferred Stock			Series T Preferred Stock			Series Seed Preferred Stock			Common Stock				Additional	Noncontrolling		Accumulated
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount			Paid-in Capital	Interest		Deficit		Total
Balance at December 31, 2023	185,440,880	$	5,286,667	9,642,080	$	983,634	204,810,720	$	1,706,756	697,085,900	$	6,971	$	82,005,447	$	(13,251)	$	(44,637,430)	45,338,794
Sale of common stock	—		—	—		—	—		—	177,980		2		201,124		—		—	201,126
Stock compensation expense	—		—	—		—	—		—	—		—		2,666,169		—		—	2,666,169
Net loss	—		—	—		—	—		—	—		—		—		—		(4,020,586)	(4,020,586)
Balance at March 31, 2024	185,440,880	$	5,286,667	9,642,080	$	983,634	204,810,720	$	1,706,756	697,263,880	$	6,973	$	84,872,740	$	(13,251)	$	(48,658,016)	44,185,503

See accompanying notes to unaudited condensed consolidated financial statements

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STARTENGINE CROWDFUNDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2024		2023

Cash flows from operating activities:
Net loss attributable to stockholders	$	(4,020,586)	$	(2,059,917)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		3,273		3,273
Amortization		857,143		—
Fair value of warrants received for fees		—		(741)
Fair value of investments - other received for fees		(718,855)		(749,631)
Impairment of investments - other received for fees		384,746		—
Stock-based compensation		2,666,169		897,634
Changes in operating assets and liabilities:
Accounts receivable		(70,955)		(483,630)
Other current assets		(215,773)		459,473
StartEngine Private stock purchases		(180,525)		—
Accounts payable		6,727		(172,964)
Accrued liabilities		(625,314)		(424,611)
Deferred revenue		(302,390)		442,634
Net cash received (used) in operating activities		(2,216,340)		(2,088,480)

Cash flows from investing activities:
Investments - Collectibles sales, gross		(2,414)		170,040
Purchase of Intangible Assets		—		(121,040)
Purchase of property and equipment		(3,014)		(4,209)
Net cash received (used) in investing activities		(5,428)		44,791

Cash flows from financing activities:
Proceeds from sale of common stock		201,126		1,124,509
Offering costs		—		(770,651)
Proceeds from exercise of employee stock options		—		20,971
Net cash provided by financing activities		201,126		374,829

(Decrease)in cash and restricted cash		(2,020,642)		(1,668,861)
Cash and restricted cash, beginning of period		12,656,298		15,460,469
Cash and restricted cash, end of period	$	10,635,656	$	13,791,608

Supplemental disclosures of cash flow information:
Cash paid for interest	$	—	$	—
Cash paid for income taxes	$	23,570	$	6,507

See accompanying notes to unaudited condensed consolidated financial statements

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STARTENGINE CROWDFUNDING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS

StartEngine Crowdfunding, Inc. was formed on March 19, 2014 (“Inception”) in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc. and changed to the current name on May 8, 2014. The condensed consolidated financial statements of StartEngine Crowdfunding, Inc. (the “Company” are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s headquarters are located in Burbank, California.

The Company aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. StartEngine Crowdfunding Inc. has wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Assets LLC and StartEngine Primary LLC. StartEngine Capital LLC is a funding portal registered with the US Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA), StartEngine Secure LLC is a transfer agent registered with the SEC. StartEngine Assets LLC was formed in 2020 to buy, hold and manage assets in various asset classes such as real estate, automobiles, luxury goods and royalty-producing intangible assets. StartEngine Primary LLC was formed in October 2017 and received approval to operate as a registered broker-dealer in July 2019. On April 16, 2020, StartEngine Primary LLC received approval to operate as an alternative trading system. The Company’s mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years.

Management Plans

The Company’s revenue producing activities commenced in 2015 with the approved start of Title IV of the JOBS Act, which created new rules for Regulation A, and increased since then with the start of Regulation Crowdfunding under Title III of the JOBS Act. Because this is a relatively new industry, there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. Because there is a level of uncertainty and because we are still in the early stages of these new regulations, the Company is expected to incur losses until such time that the volume of Regulation A, Regulation D and Regulation Crowdfunding campaigns and the investments in those campaigns is sufficient for revenues derived from those campaigns to cover its costs. These factors could indicate substantial doubt about the Company’s ability to continue as a going concern.

The Company has cash and cash equivalents of approximately $10.6 million, which its management believes will cover losses for the foreseeable future. The Company’s management believes that any substantial doubt about the Company’s ability to continue as a going concern has been alleviated.

On May 6, 2024, StartEngine Crowdfunding Inc. split its designated “Common Stock” and “Preferred Stock” on a 20 for 1 basis. The total number of shares of Common Stock that the Company is authorized to issue was increased to 1,500,000,000 shares after the split. The total number of shares of Preferred Stock that the Company is authorized to issue was increased to 519,000,000 after the split. Accordingly, all share and per share amounts for all periods presented in the condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP. The condensed consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc., its subsidiaries where we have controlling financial interests, and any variable interest entities for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year ending December 31, 2024.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.’s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, and StartEngine Primary LLC and StartEngine Assets LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of expenses during the reporting periods. Significant estimates include the value of marketable securities, the value of stock and warrants received as compensation and collectability of accounts receivable. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2- Include other inputs that are directly or indirectly observable in the marketplace.

Level 3- Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2024. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets.

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Level 1

Investments: Marketable securities are made up of mutual funds and shares of common stock that are valued based on quoted prices in active markets.

Non-Fungible Token (“NFT”): Blockchain based collectible images that are valued based on quoted prices in active markets.

Level 2

Investments - warrants (public portfolio): Fair value measurements of warrants of publicly traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable volatility assumptions based on comparable public company.

Level 3

Investments - warrants (private portfolio): Fair value measurements of warrants of private portfolio companies are priced based on a modified Black-Scholes option pricing model to estimate the asset value by using stated strike prices, warrant expiration dates modified to account for estimates to actual life relative to stated expiration, risk-free interest rates, and volatility assumptions based on comparable public companies. Option volatility assumptions used in the modified Black-Scholes model are based on public companies who operate in similar industries as companies in our private company portfolio. For these warrants, the fair value of the underlying stock is an unobservable input consistent with Investment - stocks noted above. Certain adjustments may be applied as determined appropriate by management for lack of liquidity.

Investments – stock: Fair value measurements of stocks of private portfolio companies are prices based on a combination of issuer activity and the price of new issuances. The Company, on an annual basis, will review any new offerings from issuers and compare the offering price of the stock in the new issuance compared to the original value of the stock held. The Company will mark the held stock to the new stock price and adjust the carrying value accordingly. If an issuer has not made an offering in the year in review, the company will apply a flat 33% write down to the stock carrying value as a means of estimating the volatility and illiquidity of a privately held stock.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of March 31, 2024:


	Level 1		Level 2		Level 3		Total
Marketable securities		—		1,856		—		1,856
Investment - warrants		—		—		195,487		195,487
Investment - stock		270,867		—		8,686,454		8,957,321
Non-Fungible Token ("NFT")		3,144		—		—		3,144
	$	274,011	$	1,856	$	8,881,941	$	9,157,808

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2023:


	Level 1		Level 2		Level 3		Total
Marketable securities		—		1,856		—		1,856
Investment - warrants		—		—		195,487		195,487
Investment - stock		381,897		—		8,241,315		8,623,212
Non-Fungible Token ("NFT")		730		—		—		730
	$	382,627	$	1,856	$	8,436,802	$	8,821,285

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The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the three months ended March 31, 2024 and 2023 as it relates to Investments – warrants and Investments – stock, respectively:


	Investments-
	Warrants
Fair value at December 31, 2023	$	195,487
Receipt of warrants		—
Change in fair value of warrants		—
Fair value at March 31, 2024	$	195,487


	Investments-
	Stock
Fair value at December 31, 2023	$	8,623,212
Receipt of stock		718,855
Change in fair value of stock		(384,746)
Fair value at March 31, 2024	$	8,957,321

The following range of variables were used in valuing Level 3 warrant assets during the three months ended March 31, 2024 and 2023:


	2024
Expected life (years)		1.42 - 3.58
Risk-free interest rate		3.84 - 3.84	%
Expected volatility		36.0 - 102.00	%
Annual dividend yield		0	%
Underlying share values	$	0.30 – $100.00
Strike Prices	$	0.30 – $100.00

For Investments — Warrants, the primary and most significant unobservable input relates to the underlying share value of the issuers for which we receive warrants. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.

For warrants, the Company also adjusts the expected life of certain warrants to account for potential liquidation events, as well as doubts regarding the ability for the issuer companies to continue as a going concern. The quantitative measure used is based upon Black-Scholes modeling. Significant judgment is required by Management in selecting unobservable inputs, and accordingly a change in the assumptions used for the valuation could cause the value to be significantly different. In general, increases in underlying share prices, expected life and volatility, increase the value of the warrants, whereas decreases would reduce the value.

For Investments – Stock, the primary and most significant unobservable input relates to the share value of the issuers. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.

Accounts Receivable

Accounts receivables are recorded at the invoiced amount and are non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance for doubtful accounts as of March 31, 2024 and December 31, 2023 was $179,388 and $179,388, respectively. Bad debt expense for three months ended March 31, 2024 and 2023 was $0 and $23,585, respectively.

As of March 31, 2024 the Company had accounts receivable over 90 days totaling $0.

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Investment Securities

Marketable Securities

Our marketable securities consist of mutual funds and common stock equities that are tradable in an active market. Unrealized gains and losses on available-for-sale securities, net of applicable taxes, are reported as a component of other comprehensive income, net in the accompanying condensed consolidated statements of operations.

Non-Marketable and Other Securities

Non-marketable and other securities include investments in non-public equities. Our accounting for investments in non-marketable and other securities depends on several factors, including the level of ownership, power to control and the legal structure of the subsidiary making the investment. As further described below, we base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting.

Investments – Warrant Assets

In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks, nor do we use other derivative instruments to hedge economic risks stemming from these warrants.

We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a “cashless” exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our condensed consolidated balance sheet at the time they are obtained and remeasured each reporting period.

The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt.

Any changes in fair value from the grant date to fair value of warrants will be recognized as increases or decreases to investments on our condensed consolidated balance sheets and as a component of operating expenses on our condensed consolidated statements of operations.

In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the condensed consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities.

The fair value of the warrants portfolio is a critical accounting estimate and is reviewed each reporting period. We value our warrants using a modified Black-Scholes option pricing model, which incorporates the following significant inputs, in addition to certain adjustments for general lack of liquidity:

An underlying asset value, which is estimated based on current information available in valuation reports, including any information regarding subsequent rounds of funding or the performance of a company.

Stated strike price, which can be adjusted for certain warrants upon the occurrence of subsequent funding rounds or other future events.

Price volatility or risk associated with possible changes in the warrant price. The volatility assumption is based on historical price volatility of publicly traded companies within indices or companies similar in nature to the underlying client companies issuing the warrant.

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The expected remaining life of the warrants in each financial reporting period.

The risk-free interest rate is derived from the Treasury yield curve and is calculated based on the risk-free interest rates that correspond closest to the expected remaining life of the warrant on the date of assessment.

Investments - Stock

In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) whether the issuer have made an offering in the current year, (ii) if so, the valuation of the stock in the offering, and (iii) if not, the Company will write down the stock value at a flat 33% rate. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, plus adjustments for gross up, less write downs in accordance with ASC 321-10-35-2. During the three months ended March 31, 2024 and 2023, the Company received stock with a cost of $718,855 and $750,373, respectively, as payment for fees. During the three months ended March 31, 2024 and 2023, impairment expense related to shares received amounted to $384,746 and $0 respectively.

Investments – Collectibles

The Company, through its subsidiary, purchases collectibles including art, wine, memorabilia, and other collectible assets, and are recorded at cost. The cost of the underlying asset includes the purchase price, including any deposits for the underlying asset and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, discovery, investigation, development and acquisition of the underlying assets.

The Company treats the underlying assets as long-lived assets, and the underlying assets will be subject to an annual test for impairment and will not be depreciated or amortized. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The underlying assets are purchased by our subsidiary, StartEngine Assets, LLC, (the “Administrative Manager”) and sold to our Series LLC subsidiary collectible funds for cash or a promissory note. The Series uses the proceeds of the offering to pay off the note. Acquisition expenses are typically paid for in advance by the Administrative Manager and are reimbursed by the Series from the proceeds of the offering in accordance with the offering circular. All such transactions are eliminated in consolidation.

The Company discontinued the offerings of Collectibles in Q3 2023 and is no longer offering purchases in these investments. The Company intends to sell its remaining held assets.

The below is a breakdown of the types of collectibles and their value held as of March 31, 2024 and December 31, 2023:


	Period Ended March 31,		Period Ended December 31,
	2024		2023

Wine	$	278,360	$	278,360
Trading Cards		466,484		466,484
Artwork		1,322,942		1,322,942
Comic Books		324,477		324,477
NFT		3,144		730
Watches		53,128		53,128

Total collectibles	$	2,448,535	$	2,446,121

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Investments – Real Estate

Investments in real estate are stated at cost less accumulated depreciation and presented separately from Property and Equipment used for internal operating purposes. Real Estate purchased for investment includes the cost of the purchased property, including the building, and related land. The Company allocates certain capitalized title fees and relevant acquisition expenses to the capitalized costs of the building. All capitalized property costs, except for the value attributable to the land, are depreciated using the straight-line method over the estimated useful life of 27.5-39 years depending on the use of the building. Additions and property improvements in excess of $5,000 are capitalized and depreciated using the straight-line method over the estimated useful lives of 5-7 years, while routine repairs and maintenance are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the condensed consolidated statement of operations.

StartEngine has purchased a residential apartment building for $2,136,628 in December 2021, which it still holds as of March 31, 2024, which it plans to sell in 2024.

Noncontrolling Interest

The Company presents third party minority interests in subsidiaries in accordance with ASC 810, Consolidation. Under that topic, such minority interests are presented on the Company’s balance sheet within the equity section as noncontrolling interest.

Equity Offering Costs

The Company accounts for offering costs in accordance with ASC 340, Other Assets and Deferred Costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity upon the completion of an offering or to expense if the offering is not completed. Offering costs of $0 and $770,651 charged to stockholders’ equity during the three months ended March 31, 2024 and 2023, respectively.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 contains a framework for analyzing potential revenue transactions by identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the Company satisfies a performance obligation.

The Company recognizes revenues from Regulation A and Regulation D platform fees at an agreed-upon rate. In 2023 the rate was a percentage of the capital raised. Platform fees are paid to the Company from customers’ escrow accounts. For certain Regulation A offerings, the Company earns a portion of its platform fees in warrants or shares. The grant date fair values of shares and warrants received are recognized as revenue when earned. The Company’s performance obligations are satisfied as services are rendered throughout the duration of the campaign.

Revenues from Regulation Crowdfunding platform fees are recognized at an agreed-upon rate based on the amount invested in an offering. Platform fees are due upon the disbursement of funds from escrow and are paid to the Company from customers’ escrow accounts. The Company’s performance obligations are satisfied as services are rendered throughout the duration of the campaign.

The Company provides marketing services branded under the name “StartEngine Premium” for its Regulation Crowdfunding issuers as part of services offered. The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due.

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The Company provides transfer agent services branded under the name “StartEngine Secure” through its registered transfer agent subsidiary, StartEngine Secure, LLC. The Company enters into an agreement with issuers for an annual term that commences from the date the issuers’ Regulation Crowdfunding or Regulation A offering launches and renews annually unless cancelled prior to renewal. Initial payment of services is paid from funds of the offering and is non-refundable. Renewals are invoiced on the first day of each annual period and are not subject to cancellation. The initial payment is paid from funds of the offering and is non-refundable. The transfer agent services represent a single performance obligation and is deferred over 12 months, which is the period over which the Company’s performance obligations are to be satisfied. Fees for transfer agent services are charged based on a per investor basis, subject to certain maximums. The Company may also invoice customers for ancillary services such as but not limited to: recording of stock splits, change of address, or other services. These services are provided and earned at a point-in-time based on defined amounts in the agreement. Payment for StartEngine Secure services are generally paid via customers’ escrow account, in full, during the initial year and billed to the client for cash payment for subsequent years if the customer does not have a follow-on offering or to the extent amounts in escrow are not sufficient. There are no significant judgments related to this revenue stream.

The Company provides services to investors branded the StartEngine Venture club (formerly OWNers bonus) program. The general public can become members of the StartEngine Venture Club program on StartEngine’s website for $275 per year. The Venture Club entitles members to 10% bonus shares on all investments they make in offerings on StartEngine where the issuer chooses to participate in the program. Issuers using our broker-dealer and funding portal services can choose to participate in our Venture Club program with respect to the offerings they are making under Regulation A or Regulation CF. Those issuers will grant bonus shares in their offerings to members of the StartEngine Venture Club program. The bonus shares are included in the offering statements filed with the SEC, and therefore offered and sold in reliance on Regulation A or Regulation CF, respectively. The Venture Club program provides member priority access to certain collectibles being offered through one of our subsidiary Series LLC offerings, notification of new bonus eligible launches and the ability to move to the front of the line on investment waitlists, and lower trading fees on StartEngine Secondary. The Company recognizes the revenue associated with memberships over 12 months, which is the term of the membership. There are no significant judgments related to this revenue stream. Such revenues are included in Venture Club revenue noted below.

The Company provides accredited investors the opportunity to purchase membership interests in funds (“SE Funds”), via StartEngine Private, which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Adviser LLC (“SE Adviser”), which is a subsidiary of the Company that is an investment adviser that qualifies as an Exempt Reporting Adviser under Rule 203(m)-1 under the Investment Advisers Act of 1940. The SE Funds sell their shares in offerings that are exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and specifically Regulation D promulgated thereunder. Such offerings are marketed to accredited investors by the Company’s FINRA-member and SEC-registered broker-dealer subsidiary, StartEngine Primary LLC (“SE Primary”). The Company purchases the private company shares either directly or through other special purpose vehicles and after a certain period of time sells its investment to an SE Fund. The Company takes principal risk in its acquisition of the private company shares and can recognize gross revenue from their sale to the SE Fund. Revenue can be recognized upon each such transaction with an SE Fund.

The Company hosts periodic events, such as summits, and recognizes revenues from ticket sales and sponsorships. Payments from event attendees and event sponsors received prior to each event are deferred and recognized in revenue once the event occurs.

The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered.

In all instances, as a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

The Company’s contracts with customers generally have a term of one years or less. The Company had deferred revenue of $3,217,760 and $3,520,150 as of March 31, 2024 and December 31, 2023, respectively, related to performance obligations yet to be fulfilled. The Company had no other customer contract assets.

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During the three months ended March 31, 2024 and 2023, revenue was made up of the following categories associated with the above-described services:


	Year		Year
	Ended March 31,		Ended March 31,
	2024		2023
Regulation Crowdfunding platform fees	$	2,550,101	$	2,893,241
Regulation A commissions		314,080		409,541
StartEngine Premium		486,000		822,500
StartEngine Secure		266,167		332,421
StartEngine Private		4,711,757		—
Venture Club (formerly OWNers Bonus) revenue		1,350,772		782,336
Other service revenue		78,720		—

Total revenues	$	9,757,597	$	5,240,039

Cost of Revenues

Cost of revenues consists of internal employees, hosting fees, processing fees, and certain software subscription fees that are required to provide services to our issuers. Additionally, costs related to StartEngine Private, which includes the cost basis of the stock as well as the acquisition fees related to obtaining the stock included in the offerings has been added to the cost of revenues as of Q3 2023.

Research and Development

We incur research and development costs during the process of researching and developing our technologies and future offerings. Our research and development costs consist primarily of non-capitalizable engineering fees for both employees and consultants related to our website and future product offerings, email and other tools that are utilized for client related services and outreach. During the three months ended March 31, 2024 and 2023, research and development costs were $2,041,320 and $1,138,408 respectively.

Stock-Based Compensation

The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or canceled during the periods reported. Stock-based compensation is recognized as an expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The Company recognized a significant increase in Stock-Based Compensation year over year as both the fair value grant and the employee count increased, further increasing the a granted.

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Earnings per Common and Common Equivalent Share

The computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus common stock equivalents which would arise from the exercise of securities outstanding using the treasury stock method and the average market price per share during the period. Options and convertible preferred stock which are common stock equivalents are not included in the diluted earnings per share calculation for the three months ended March 31, 2024 as the effects would be anti-dilutive. See Note 6 for outstanding stock-options as of March 31, 2024. The weighted average shares outstanding – diluted is calculated as follows for the period ended March 31, 2024 and 2023:


		March 31,
		2024
Weighted average shares outstanding - basic		697,263,880
Weighted average shares outstanding - diluted		697,263,880

		March 31,
		2023
Weighted average shares outstanding - basic		669,479,540
Weighted average shares outstanding - diluted		669,479,540

Concentration of Credit Risk

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be creditworthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.

At times, the Company may have certain vendors or customers that make up over 10% of the balance at any given time. However, the Company is not dependent on any single or group of vendors or customers, and accordingly, the loss of any such vendors or customers would not have a significant impact on the Company’s operations.

Recent Accounting Pronouncements

The FASB issues ASUs to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our condensed consolidated financial statements.

NOTE 3 – MARKETABLE SECURITIES AND INVESTMENTS

Marketable Securities

Marketable securities consisted of the following as of March 31, 2024 and December 31, 2023:


	March 31, 2024		December 31, 2023
Common stock	$	1,856	$	1,856
	$	1,856	$	1,856

Investments – Warrant Assets

Equity warrants, as described in Note 2, are equity warrants received for services provided. The warrants are valued on the date they are earned in accordance with revenue recognition criteria and again at each reporting date.

Investments – Stock

Investments - stock, as described in Note 2, consist of shares the Company holds in various companies that launched on its platform received in exchange for services provided. The shares are recorded at cost less any impairment.

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NOTE 4 – PROPERTY AND EQUIPMENT

As of March 31, 2024 and December 31, 2023, property and equipment consisted of the following:


	March 31, 2024		December 31, 2023
Computer equipment	$	163,798	$	160,784
Software		3,753		3,753
Total property and equipment		167,551		164,537
Accumulated depreciation		(48,087)		(44,814)
	$	119,464	$	119,723

Depreciation expense for the three months ended March 31, 2024 and 2023 was $3,273 and $3,273, respectively.

NOTE 5 – INTANGIBLE ASSETS

Intangibles – Seedinvest

On May 5, 2023, StartEngine Crowdfunding, Inc. (“StartEngine”) completed its purchase of substantially all of the assets of the SeedInvest business as conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, a Delaware limited liability company (“Pluto Holdings”) and through SI Securities, LLC, a New York limited liability company (“SI Securities”), and SeedInvest Technology, LLC, a New York limited liability company, each a wholly-owned subsidiary of Pluto Holdings (“SeedInvest Technology,” collectively, with the assets acquired from Pluto Holdings and SI Securities, “SeedInvest”). This agreement specifically does not include the registered broker-dealer or the Alternative Trading System (“ATS”) belonging to SeedInvest. The total consideration for the purchase is 19,200,000 shares of StartEngine’s common stock, which based on StartEngine’s previous Regulation A offering price of $25 per share would be valued at $24 million. The acquisition included intellectual property including the customer list of SI Securities as well as other digital assets.

The Company adheres to the provisions of ASC 350 - Goodwill concerning the valuation and presentation of intangible assets. The Company determined the useful life of 7 years for the purchased assets based on historical investment data for users of the StartEngine platform. In 2023, the Company received investments from users with accounts created from 2015-2023 and have seen a continuation of that trend in to 2024. As the Company continues to provide new offerings and work on outreach to users, we believe that this purchase will maintain its useful life for the duration. This amortization will begin in Q3 2023 and continue until the end of Q2 2038.

As of March 31, 2024, the gross carrying amount of the purchase was $24,121,040, accumulated amortization is $3,105,991 and the estimated aggregate amortization for the five succeeding fiscal years is $17,229,314.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

The Company is currently not involved with and does not know of any pending or threatening litigation against the Company or any of its officers.

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

As of March 31, 2024, the Company has authorized the issuance of 519,000,000 shares of our preferred stock with par value of $0.00001. Of these authorized shares, 207,000,000 are designated as Series A, 99,000,000 are designated as Series T, and 213,000,000 are designated as Series Seed.

Series A Preferred Stock

The Series A has liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series A shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series T in proportion to its respective liquidation preference. Holders of Series A will receive an amount equal to $0.0286 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for

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distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series A votes on an as-converted basis. The Series A is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series A is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $0.1430 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series A has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Series T Preferred Stock

The Series T have liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series T shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series A in proportion to its respective liquidation preference. Holders of Series T will receive an amount equal to $0.1465 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series T votes on an as-converted basis. The Series T is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series T is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $0.1465 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series T has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Series Seed Preferred stock

The Series Seed have liquidation priority over the common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series Seed shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, after any payment made to Series A and Series T, but before any payment is made to the Company’s common stock, an amount equal to $0.0083 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of Series A and Series T first, then ratably in proportion to the full preferential amounts for which they are entitled to the Series Seed. The Series Seed votes on an as-converted basis. The Series Seed is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series Seed is automatically converted into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, converts the offer and sale of common stock at an offering price of not less than $0.1430 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series Seed has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

The following table summarizes the designation, shares authorized, and shares outstanding for the Company’s Preferred Stock:


Preferred Stock Series Designation	Shares Authorized		Shares Outstanding
Series Seed		213,000,000		204,810,720
Series A		207,000,000		185,440,880
Series T		99,000,000		9,642,080

Common Stock

As of March 31, 2024 we had authorized the issuance of 1,500,000,000 shares of our common stock with par value of $0.00001

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During the three months ended March 31, 2024, the Company sold 177,980 shares of common stock through its Regulation A offering for gross proceeds of $201,126 and incurred offering costs of $0.

During the three months period ended March 31, 2023, the Company sold 1,184,700 shares of common stock through its Regulation A offering for gross proceeds of $1,124,509 and incurred offering costs of $770,651.

Stock Options

In 2015, our Board of Directors adopted the StartEngine Crowdfunding, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of equity awards to employees, and consultants, including stock options, stock purchase rights and restricted stock units to purchase shares of our common stock. Up to 231,800,000 shares of our common stock may be issued pursuant to awards granted under the 2015 Plan. The 2015 Plan is administered by our Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

On January 1, 2024, the Company granted 12,960,000 options to 60 employees under the 2015 Plan. Additionally, grants of 100,000 were given to 4 employees individually on February 20, February 26 and March 14, and a grant of 60,000 was given to 1 employee on March 18. New option grants are included in the presentation below.

A summary of option activity under the 2015 Plan for three months ended March 31, 2024 is as follows:


	Options	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2023	185,748,880	0.20	6.50	20,229,215
Granted	13,320,000	1.25	6.50	16,650,000
Exercised	-	-	-	-
Forfeited	-	-	-	-
Expired	-	-	-	-
Outstanding at March 31, 2024	199,068,880	0.27	6.50	36,879,215

Stock option expense for the periods ended March 31, 2024 and 2023 was $2,666,167 and $897,635, respectively, and are included within the condensed consolidated statements of operations as follows:


	2024		2023
Cost of revenues	$	331,796	$	78,665
General and administrative		327,465		273,226
Sales and marketing		1,364,699		456,881
Research and development		642,207		88,863
Total	$	2,666,167	$	897,635

At March 31, 2024, the total compensation cost related to nonvested awards not yet recognized was approximately $25,740,927 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 2.18 years.

NOTE 8 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events that occurred after March 31, 2024 through May 15,2024.

On March 13, 2024, the Board of Directors voted unanimously for a twenty-for-one stock split of the Company’s outstanding shares of common stock. Stockholders of record at the close of business May 6, 2024 own twenty shares for every one share owned as of the split date.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2023 included in our most recent 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 anticipated in these forward-looking statements as a result of certain factors. We discuss certain factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q.

Our Company

StartEngine Crowdfunding, Inc. was incorporated on March 19, 2014 in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc., but changed to the current name on May 8, 2014. The Company’s revenue-producing activities commenced in 2015 with the effectiveness of the amendments to Regulation A under the Securities Act adopted in response to Title IV of the JOBS Act. Operations expanded in 2016, as Regulation Crowdfunding, adopted in response to Title III of the JOBS Act, went into effect. On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA. The Company became an Exempt Reporting Advisor on January 8, 2024.

Business and Trends

For Regulation A offerings, our broker-dealer subsidiary is permitted to charge commissions to the companies that raise funds on our platform. Regulation A offerings are subject to a commission ranging between 4% and 7% and usually include warrants to purchase shares of the Company or the securities that are the subject of the offering. The amount of commission is based on the risks and other factors associated with the offering. Through StartEngine Primary, we can also charge commissions on Regulation D offerings hosted on our platform. During the periods covered in these financial statements we did not receive any Regulation D commissions. In Regulation Crowdfunding offerings, our funding portal subsidiary is permitted to charge commissions to the companies that raise funds on our platform. We typically charge 6% to 10% for Regulation Crowdfunding offerings on our platform. We also generate revenue from services, which include a consulting package for Regulation Crowdfunding issuers called StartEngine Premium priced at $15,000 to help companies who raise capital with Regulation Crowdfunding, as well as transfer agent services marketed as StartEngine Secure. We additionally charge a $1,000 fee for certain amendments we file on behalf of companies raising capital under Regulation Crowdfunding as well as fees to run the required bad actor checks for companies utilizing our services. The Company also receives revenues from other programs such as the StartEngine OWNers where we sell annual memberships of the StartEngine Venture Club (formerly OWNers bonus program) for $275 per year, and StartEngine Secondary. We launched StartEngine Secondary on May 18, 2020 and generate revenues by charging trade commissions to the sellers of the shares. To date, StartEngine Secondary has a limited operating history. Through quarter end March 31, 2024, the Company itself as well as twenty-one additional companies are quoted on this platform. In Q3 2023, we established StartEngine Private which provides accredited investors the opportunity to purchase membership interests in our funds, which own shares of venture capital backed, late-stage private companies.

Trend Information

We are operating in a relatively new industry and there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. We continue to innovate and introduce new products to include in our current mix as well as continuing to improve our current services such as providing liquidity for our investors and issuers.

As we are a financial services company, our business, results of operations, and reputation are directly affected by elements beyond our control, such as economic and political conditions including unemployment rates, inflation and tax and interest rates, financial market volatility (such as we experienced during the COVID-19 pandemic), broad trends in business and finance, and changes in the markets in which such transactions occur (such as the bear markets that developed for equities in the second and third quarter of 2022), we might be disproportionately affected by declines in investor confidence caused by adverse economic conditions.

On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA. Since our approval as a broker-dealer, we have experienced increased costs for payroll and training that we believe continue to increase relative to our revenue. We anticipate that this trend will continue into 2024 as the Company explores new avenues for revenue and growth. In addition, in April 2020 we received approval to operate an ATS. StartEngine Primary launched its ATS, branded as “StartEngine Secondary” on May 18, 2020. StartEngine Secondary has a limited operating history, and even though over 400 issuers have signed to be quoted on this platform, only twenty-five companies have been quoted on this platform to date, including the Company itself.

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Currently, for StartEngine Secondary, we generate revenues by charging trade commissions to the sellers of the shares and we intend to generate revenues by charging a 5% commission to the seller. We expect increased costs due to technology and operations related to the operation of our ATS. We anticipate operating the ATS will initially increase our overall expenses by $50,000 per month. Further, we anticipate receiving increased revenue related to offerings under Regulation A.

In June 2022, we became a reporting company, as a result of which we anticipate higher internal costs related to the increased administrative burden as well as higher professional fees. On August 6, 2023, the Company launched “StartEngine Private”, a venture to provide accredited investors the opportunity to purchase membership interests in series which own shares of VC backed, and generally late-stage private companies. The Company will receive revenue at the price sold to the SE Funds, with the selling cost consisting of the cost basis of the stock purchased by the Company.

We additionally anticipate having to engage and train additional compliance personnel, to better ensure continued compliance with FINRA and SEC and also in order to expand our broker-dealer operations. As previously disclosed in the Company’s Exchange Act reports, our Board of Directors dismissed BF Borgers as independent auditor on May 30, 2023, and approved Haynie & Company as our new independent auditor. Although BF Borgers audited our financial statements for the fiscal year ended December 31, 2022 (“FYE 2022 Financials”), which were subsequently corrected by Haynie & Company without having a material effect on that reporting period, our FYE 2022 Financials have no impact on the financials presented herein for the fiscal year ending December 31, 2023 or the interim periods for the three months ended March 31, 2024 and 2023.

Operating Results

Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023

The following table summarizes the results of our operations for the three months ended March 31, 2024 (“Q1 2024”) as compared to the three months ended March 31, 2023 (“Q1 2023”).


	Three Months Ended March 31,
	2024		2023			$ Change


Revenues	$	9,757,597	$	5,240,039	$	4,517,558

Cost of revenues		4,797,451		1,655,967		3,141,484

Gross profit		4,960,146		3,584,072		1,376,074

Operating expenses:
General and administrative		2,641,364		1,879,509		761,855
Sales and marketing		3,898,419		2,656,824		1,241,595
Research and development		2,041,320		1,138,408		902,912
Impairment in value of shares received for fees		384,746		—		384,746
Total operating expenses		8,965,849		5,674,741		3,291,108

Operating income (loss)		(4,005,703)		(2,090,669)		(1,915,034)

Other expense (income), net:
Other expense (income), net		(8,687)		(37,260)		(28,573)
Total other expense (income), net		(8,687)		(37,260)		(28,573)

Income (loss) before provision for income taxes		(3,997,016)		(2,053,409)		(1,943,607)

Taxes - Other		23,570		6,508		17,062

Net income (loss)		(4,020,586)		(2,059,917)		(1,960,669)
Less: net loss attributable to noncontrolling interest		—		—		—
Net Income (loss) attributable to stockholders	$	(4,020,586)	$	(2,059,917)	$	(1,960,669)

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Our revenues during the three months ended March 31 2024 were $9,757,597 which represented an increase of $4,517,558 or 86%, from revenues in the same period in 2023 due to the addition of StartEngine Private revenue, which was not in operation in Q1 2023. The following are the major components of our revenues during the three months ended March 31, 2024 and 2023:


	Three Months		Three Months
	Ended March 31,		Ended March 31,
	2024		2023		$ Change
Regulation Crowdfunding platform fees	$	2,550,101	$	2,893,241	$	(343,140)
Regulation A commissions		314,080		409,541		(95,461)
StartEngine Premium		486,000		822,500		(336,500)
StartEngine Secure		266,167		332,421		(66,254)
StartEngine Private		4,711,757		—		4,711,757
Venture Club (formerly OWNers Bonus) revenue		1,350,772		782,336		568,436
Other service revenue		78,720		—		78,720

Total revenues	$	9,757,597	$	5,240,039	$	4,517,558

The increase in total revenues in three months ended March 31, 2024 as compared to the same period in 2023 is primarily due to the following:

●

Decrease in Regulation Crowdfunding platform fees of $343,140 due primarily to fewer issuers in Regulation Crowdfunding offerings. The Company focused on reducing the number of Regulation Crowdfunding offerings beginning in 2023 and ensuring that issuers who were onboarded were at a higher likelihood to have a successful raise. This effect was evidenced by the fact that while there was a 45% reduction in the number of issuers with disbursements in Q1 2024 compared to Q1 2023, revenue for Regulation Crowdfunding dropped just 11%. In Q1 2024, the Company raised approximately $22.6 million for 89 issuers compared with Q1 2023 of raising approximately $28.1 million from 161 issuers. The top 5 raises in Q1 2024 raised $5.5 million vs $9.5 million for the top 5 issuers in Q1 2023*.

●

Decrease in Regulation A commissions of $95,461, were due primarily to lower amounts raised from Regulation A offerings. We have experienced with Regulation A raises that when 1 to 3 raises have larger success, they alone have materially impacted revenue results, as has been the case in Q1 2024 vs Q1 2023. In Q1 2024, the Company raised approximately $4.1 million for 7 issuers including $2.5 million from the top 2 issuers. In Q1 2023, the Company hosted Regulation A offerings for 12 issuers for a combined raise amount of $6.8 million including $3.4 million from the top 2 issuers*.

●

Decrease in revenues of $66,254 from StartEngine Secure, primarily due to decrease in number of issuers utilizing the service. Specifically, StartEngine Secure had 544 companies utilizing Secure as of March 31, 2024 compared with 597 companies as of March 31, 2023.

●

Decrease in StartEngine Premium revenue of $336,500 in line with the decrease of companies who have been added to the platform in 2024 and are charged for Premium on their first disbursement. Specifically, in Q1 2024, the Company had 37 issuers who were charged for Premium, whereas in Q1 2023, the Company charged 70 issuers for Premium.

●

StartEngine Private revenue began generating revenue in Q4 2023. The $4.7 million represents the raise and closings on 8 StartEngine Private offerings, and the Company plans to continue growing this revenue source in the future.

●

Increase in StartEngine Venture Club revenue of $568,436 related to increased sales of Venture Club during 2023 as the company adds greater focus towards growing this revenue source. Venture Club memberships are annual packages, which are recognized over 12 months, see Note 2 – “Revenue Recognition” to the accompanying financial statements, and therefore the performance of this product in terms of revenue recognition lags behind actual sales.

●

Increase in other service revenue of $78,720 primarily from revenue derived from material amendments of $23,000 as well as ancillary service charges of $43,260. Other service revenue also includes revenue from StartEngine Secondary, which did not record a material number of trades in Q1 2024.

*Offerings can span multiple periods and the amount raised during the period is based on the amounts closed on during that period.

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Cost of Revenues

Our cost of revenues during the three months ended March 31, 2024 was $4,797,451, which represented an increase of $3,141,484, or 190%, from the amounts during the same period in 2023. The increase was primarily due to the inclusion of StartEngine Private cost of goods sold of $3,282,412, which started in Q3 2023 and were not applicable to Q1 2023. Our gross margin in the first quarter of 2024 decreased to 51% compared to 68% in 2023. This decrease is due to selling costs related to StartEngine Private, which commenced in Q4 2023 and carries a lower gross margin of approximately 33%.

Operating Expenses

Our total operating expenses during the three months ended March 31, 2024 amounted to $8,965,849, which represented an increase of $3,291,108, or 58%, from the expenses in the same period in 2023. The increase in operating expenses is primarily due to the following:

●

Increase in general and administrative expenses of $761,855 was primarily due to amortization of the company’s SeedInvest intangible asset of $857,143. This increase was offset by a reduction of software expenses by $88,541 as the Company focused on reduction of spending for software and licenses that were no longer needed.

●

Increase in sales and marketing expenses of $1,241,595 which included an increase in advertising expense of $378,317 related to the Company’s Regulation A raise. The Regulation A raise, which ran from 2022 until it concluded in Q4 2023, allowed certain advertising costs related to the raise to be capitalized. Additionally, stock based compensation increased $907,818 due to the increase in options granted to employees as part of their compensation package.

●

Increase of research and development expenses of $902,912 partially due to an increase in employee payroll of $278,554 as the company increases headcount of engineers to develop the company’s platform and additional services. Additionally, stock based compensation increased $553,344 due to the increase in options granted to employees as part of their compensation package.

●

Change in fair value of shares received for fees expense increased $273,716 for the period based on review of the underlying value of the stock held by the Company.

Other Expense (Income), net

Our other income, net during the three months ended March 31, 2024 amounted to $8,687, which represented cashback earned from our credit cards during the period as well as interest earned in the Company’s money-market accounts. During the same period in 2023 our other income, net was $37,260 which was also related to cashback earned. The decrease in cashback received is in line with the decrease in advertising loans granted which were paid via credit card and generated the majority of the cashback for the Company.

Net Loss (Income)

Net loss attributable to stockholders totaled $4,020,586 for the three months ended March 31, 2024, an increase of $1,960,669 compared to the net loss attributable to shareholders of $2,059,917 recognized during the three months ended March 31, 2023.

Critical Accounting Policies

See Note 2 in the accompanying financial statements.

Use of Estimates

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A significant portion of the Company’s assets relate to investments in stock and warrants received as compensation from issuer companies undertaking Regulation Crowdfunding or Regulation A offerings. As described in Note 2, in the accompanying financial statements, stock and warrants require significant unobservable inputs, primarily related to the underlying stock price of the security received which may include marketability discounts. Warrants have further unobservable inputs related to the estimated life. In all cases, there were sales of the stock to the public through Regulation Crowdfunding or Regulation A funding mechanism, but such sales are often not to the level that an active market existed or exists. Once the funding round is concluded it is difficult to ascertain the fair value of the issuer shares or the status of the issuer’s financial health, unless additional rounds of financing are undertaken in a public setting, or the issuer reports reliable and regular information publicly. Any change in the underlying shares would impact on the valuation of the related investments. Shares held are generally illiquid. Valuations require significant management judgment related to these unobservable inputs.

As many of the companies that undertaking Regulation Crowdfunding and Regulation A are considered emerging growth companies, require significant capital to maintain or commence operations, and often contain warnings regarding substantial doubt about the Company’s ability to continue as a going concern, it is reasonable to conclude that through the passage of time, a significant portion of the stock and warrants held by the Company will ultimately be deemed worthless, decline in value, or in the case of warrants, expire without exercise. Similar to traditional venture capital results, it is reasonable to conclude that only a small portion of each investment may ever increase in value.

Investments – Warrant Assets

In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks nor do we use other derivative instruments to hedge economic risks stemming from these warrants.

We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a “cashless” exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our consolidated balance sheet at the time they are obtained, and remeasured each reporting period.

The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt.

Any changes in fair value from the grant date fair value of warrants will be recognized as increases or decreases to investments on our consolidated balance sheets and as a component of operating expenses on our consolidated statements of operations.

In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities.

●

Stated strike price, which can be adjusted for certain warrants upon the occurrence of subsequent funding rounds or other future events.

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●

The expected remaining life of the warrants in each financial reporting period.

●

Investments - Stock

In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) whether the issuer have made an offering in the current year, (ii) if so, the valuation of the stock in the offering, and (iii) if not, the Company will write down the stock value at a flat 33% rate. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, plus adjustments for gross up, less write downs in accordance with ASC 321-10-35-2. During the three months ended March 31, 2024 and 2023, the Company received stock with a cost of $718,855 and $750,373, respectively, as payment for fees. During the three months ended March 31, 2024 and 2023, write down expense related to shares received amounted to $384,746 and $0, respectively.

Collectibles and Real Estate

The Company records collectibles and real estate at cost in accordance with the Company’s policy. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, we believe that we purchase these assets in arms-length transactions at fair value and such transactions are evidence of fair market value in the near term. For collectibles, over time, and as trends change and economic factors affect various markets for which we hold assets, the estimation of certain assets that do not trade in a regular market may be difficult to assess for fair value. Certain assets may be subject to market manipulation or overproduction that could affect the underlying value of like or similar items. The quality of authentication bodies may affect future valuation. If there are limited data points to assess fair value, especially for one-of-a-kind collectibles, we may not identify impairments in a timely manner. Many of the collectibles have value that is in the eye of the beholder. Accordingly, there is significant uncertainty to what these assets would be valued at in subsequent arms-length transactions. For real estate assets, there tend to be more relevant data points, including comparable sales in close proximity to held real estate assets. The Company can also assess trend information in the overall economy and local economy where such assets may be held. However, sharp changes in economic conditions may make it difficult to estimate fair value and therefore potential impairment.

Liquidity and Capital Resources

Statement of Cash Flows

The following table summarizes, for the periods indicated, selected items in our condensed Statements of Cash Flows:


	Three Months Ended
	March 31,
	2024		2023		$ Change

Net cash used in operating activities	$	(2,216,340)	$	(2,088,480)	$	(127,860)
Net cash (used in) provided by investing activities	$	(5,428)	$	44,791	$	(50,219)
Net cash provided by financing activities	$	201,126	$	374,829	$	(173,703)

Cash used by operating activities for the three months ended March 31, 2024 was $2,216,340 as compared to $2,088,480 for the same period in 2023. Our net loss attributable to stockholders was $4,020,586 and $2,059,917 during the three month period ended March 31, 2024 and 2023, respectively. The increase in cash used by operating activities in Q1 2024 was primarily due to Accrued Liabilities cash outflow increasing $200,703. The increase in Accrued Liabilities cash outflow was primarily attributable to payments made for the Company’s year-end commission payments and performance based bonuses to employees.

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Cash used by investing activities for the three months ended March 31, 2024 was $5,428, as compared to cash provided by investing activities of $44,791 in the same period in 2023. This cash inflow in 2023 is related to the net proceeds of selling Collectibles, which was not repeated in 2024.

Cash provided by financing activities was $201,126 and $374,829 for the three months ended March 31, 2024 and 2023, respectively. The biggest driver of change of for financing activities is the proceeds received from the sale of common stock via the StartEngine Regulation A raise hosted on the Company’s platform. While the Company did not have an active raise in Q1 2024, there were investments that cleared and were disbursed on within the quarter

Balance Sheet

The following table summarizes our assets and liabilities as of March 31, 2024 as compared as of December 31, 2023:


	March 31,		December 31,
	2024		2023

Assets
Current assets:
Cash	$	10,635,656	$	12,656,298
Marketable securities		1,856		1,856
Accounts receivable, net of allowance		264,651		193,696
Other current assets		936,540		720,767
Total current assets		11,838,703		13,572,617

Property and equipment, net		119,464		119,723
Investments - warrants		195,487		195,487
Investments - stock		8,957,321		8,623,212
Investments - Private		4,537,608		4,357,083
Investments - Collectibles		2,448,535		2,446,121
Investments - Real Estate		2,136,628		2,136,628
Due from related party		209,190		209,190
Intangible assets		21,035,049		21,892,192
Other assets		42,138		42,138
Total assets	$	51,520,123	$	53,594,391

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	285,418	$	278,691
Accrued liabilities		3,831,442		4,456,756
Deferred revenue		3,217,760		3,520,150
Total current liabilities		7,334,620		8,255,597

Total liabilities		7,334,620		8,255,597

The Company’s current assets decreased by $1,733,914 from December 31, 2023 to March 31, 2024. The decrease was primarily driven by a decrease in cash in the amount of $2,020,642 driven by the purchase of StartEngine Private assets. This decrease was offset by an increase in other current assets of $215,773 further due to the increase in other receivables of $200,000. This receivable relates to a payment for the settlement of an arbitration case that may be recovered via insurance reimbursement in 2024.

The Company’s long-term assets decreased by $340,354 from December 31, 2023 to March 31, 2024, primarily due to the amortization of the Seedinvest intangible asset of $857,143, offset by the increase in Investment – stock of $334,109 for shares received as compensation.

Current liabilities decreased by $920,977 which is primarily due to a decrease in deferred revenue of $302,390 primarily due to recognition of StartEngine Secure annual invoice renewals which were not offset by a similar amount of renewal purchases as the Company shifts the service from an annual invoice to a monthly subscription service. Additionally, there was a $625,314 decrease in Accrued Liabilities which represents the Company requiring fewer accrual of expenses related to commission and bonus payments.

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Liquidity and Capital Resources

We do not currently have any significant loans or available credit facilities. As of March 31, 2024, the Company’s current assets were $11,838,703. To date, our activities have been funded from our revenues, investments from our founders, the previous sale of Series Seed Preferred Shares, Series A Preferred Shares, Series T Preferred Shares, and our Common Stock in our Regulation A and Regulation CF offerings.

We have no off-balance sheet arrangements, including arrangements that would affect the liquidity, capital resources, market risk support, and credit risk support or other benefits.

The Company currently has no material commitments for capital expenditures.

We believe we have the cash, marketable securities through our open Regulation A offering, other current assets available, revenues, and access to funding that will be sufficient to fund operations until the Company starts generating positive cash flows from normal operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).

ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact there are resource constraints and management are required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer, who is also our principal financial officer, has evaluated as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded our disclosure controls and procedures were effective as of March 31, 2024.

Changes in Internal Control Over Financial Reporting

As disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2023, the Company discovered certain material weaknesses that resulted in errors in its previously reported financial statements for the year ended December 31, 2022. Accordingly, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2022, and determined that a restatement based on the corrections made was not necessary; however, it has been noted in the 2023 financial statements. Management continues to evaluate the material weaknesses discussed in our annual report on Form 10-K, has created a remediation plan that it has already begun implementing and continues to finalize that plan's implementation. Specifically, in preparation for this report, management enhanced the Company’ internal controls regarding the review and preparation of financial statements by adding enhanced procedures for valuing option grants as well as a process for quarterly revaluation of the Company’s stocks and warrants.

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Assurance as to when all remediation efforts will be complete cannot be provided and the material weaknesses cannot be considered remedied until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management cannot provide assurances that the measures that have been taken to date, and are continuing to be implemented, will be sufficient to remediate the material weaknesses identified or to avoid potential future material weaknesses.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. Except as described below, the Company is not currently involved in any material litigation or threatened litigation. The Company was recently involved in an arbitration suit with an issuer whose offering was being conducted on the Company platform, StartEngine Capital. In 2021, the Company terminated the issuer’s offering and refunded investors for the amount previously raised prior to the termination. The issuer brought a claim against the Company for improperly relying on a recent SEC enforcement against a different crowdfunding portal in determining their course of action against the issuer. The Company and the issuer entered arbitration proceedings in July 2023. The matter was resolved on January 19, 2024 and payment of the settlement was resolved in March 2024. The settlement amount totaled $2.1 million of which the Company paid $200,000 with the remaining $1,900,000 covered by the Company’s liability insurance policy. The matter is now considered closed.

StartEngine Capital LLC was informed on December 21, 2021 that FINRA had preliminarily determined to pursue formal charges with respect to events in the period November 2016 to January 2018. After further discussions with FINRA, our funding portal submitted a Letter of Acceptance, Waiver, and Consent (“AWC”) on March 11, 2022, and FINRA accepted the AWC on May 4, 2022. The AWC provides for a censure, a $350,000 fine, and a certification to be made by our funding portal that it has established and implemented policies, procedures, and internal controls sufficient to address the issues identified in the AWC. The issues identified in the AWC concern certain content on our website that FINRA found our funding portal knew or had reason to know was false or misleading and our funding portal’s supervision of such content.

Item 1A. Risk Factors

Risk Factors Related to the Company and its Business

We are a relatively early stage company and have not yet generated any yearly profits.

StartEngine was formed in 2014 and is still working on fine tuning its business plan to one that will enable it to generate profits on an annual basis and to maintain profitability. Though our core business model of operating our funding portal and broker-dealer services have been receiving revenues for nearly eight years and three years, respectively, we are still evolving aspects of business model, including modifying our revenue models, adding additional products (e.g., StartEngine Secondary and our securitization products), and modifying our current offerings in light of regulatory changes and/or interactions with regulators (see, “Item 1. Legal Proceedings”). Accordingly, the Company’s operating history may not be indicative of future prospects. Our current and proposed operations are subject to all the business risks associated with relatively new enterprises that are still in growth and/or expansion phases. These include likely fluctuations in operating results as the Company reacts to developments in its market, manages its growth, and develops new services as well as the entry of competitors into the market. We will only be able to pay dividends on any shares once our directors determine that we are financially able to do so. Since inception, StartEngine has not generated sufficient revenues to cover operational expenses. There is no assurance that we will be consistently profitable in the next three years or generate sufficient revenues to pay dividends to the holders of our shares.

We operate in a regulatory environment that is evolving and uncertain.

The regulatory framework for online capital formation or crowdfunding is relatively new. The regulations that govern our operations have been in existence for a limited period. Further, there are constant discussions among legislators and regulators with respect to changing the regulatory environment. New laws and regulations could be adopted in the United States and abroad. Further, existing laws and regulations may be interpreted in ways that would impact our operations, including how we communicate and work with investors and the companies that use our platform’s services and the types of securities that our clients can offer and sell on our platform. For instance, in prior years, there have been several attempts to modify the current regulatory regime. Some of those suggested reforms could make it easier for anyone to sell securities (without using our services). Any such changes would have a negative impact on our business.

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We operate in a highly regulated industry.

We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Further, our subsidiary StartEngine Capital LLC is registered as a funding portal; our subsidiary StartEngine Secure LLC is registered as a transfer agent; and our subsidiary StartEngine Primary LLC is registered as a broker-dealer and operates an alternative trading system under the brand “StartEngine Secondary”. As a funding portal and broker-dealer, we have to comply with stringent regulations, and the operation of our funding portal, broker-dealer and alternative trading system services exposes us to a significant amount of liability. Furthermore, new lines of business may subject us to other regulatory regimes, such those regulating investment advisers, including the Investment Advisers Act of 1940, if we fail to remain in compliance with certain exemptions. Regulated entities are frequently subject to examination, constraints on their business, and in some cases fines. For instance, our subsidiary StartEngine Capital LLC submitted a Letter of Acceptance, Waiver and Consent (“AWC”) on March 11, 2022, and FINRA accepted the AWC on May 4, 2022. The AWC provides for a censure, a $350,000 fine, and a certification to be made by our funding portal that it has established and implemented policies, procedures, and internal controls sufficient to address the issues identified in the AWC. Further we have seen increased regulations in this industry from regulators (both federal and state) and FINRA. In light of this, we expect increased compliance costs as well as potential subjecting us to additional liabilities. In addition, some of the restrictions and rules applicable to our subsidiaries could adversely affect and limit some of our business plans of other parts of our business.

We were approved as a broker-dealer in 2019, launched our alternative trading system in 2020, became a “carrying” broker-dealer in 2021, became an exempt reporting adviser in 2024, and are still in the process of adapting our business model and pricing structure.

As a broker-dealer, we not only are subjected to federal and state requirements but also have need to comply with the requirements of FINRA, the self-regulatory organization, that apply to broker-dealers and the regulations that apply to the operation of alternative trading systems. In addition, we have expanded the scope of our operation including launching our alternative trading system in May 2020, and became a “carrying” broker-dealer at the end of September 2021, which increased our net capital requirements. In 2023, we launched StartEngine Private, which required us to file as an exempt reporting adviser in early 2024 and may require us to become a registered investment adviser in the future. We are still in the process of adapting to these changes, but there have been and will be increased costs, including the need to hire personnel with specific qualifications and pay them in accordance with their experience. We are subjected to periodic examinations and we will be required to change aspects of our business processes and communications in response to the findings of those examinations. Becoming a broker-dealer and/or reporting adviser has and will continue to lead to increases in our compliance costs as well as increases in our exposure to liabilities, including subjecting us to liability for misstatements made by issuers utilizing our services.

We may be liable for misstatements made by issuers.

Under the Securities Act and the Exchange Act, issuers making offerings through our funding portal may be liable for including untrue statements of material facts or for omitting information that could make the statements misleading. This liability may also extend in Regulation Crowdfunding offerings to funding portals, such as our subsidiary. Further, as a broker-dealer, we may be liable for statements by issuers utilizing our services in connection with Regulation A and Regulation D offerings. Even though due diligence defenses may be available; there can be no assurance that if we were sued we would prevail. Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to such actions may cause us reputational harm that would negatively impact our business. Moreover, even if we are not liable or a party to a lawsuit or enforcement action, some of our clients have been and will be subject to such proceedings. Any involvement we may have, including responding to document production requests, may be time-consuming and expensive as well.

We have identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets and cause the price of our common stock to decline and subject us to regulatory penalties.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we maintain internal control over financial reporting that meets applicable standards. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no assurance that all control issues have been or will be detected. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction and a decrease in our stock price.

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During preparation for financial reporting related to the year ended December 31, 2023, the Company discovered certain errors in previously reported financial statements for the year ended December 31, 2022. The Company’s management conducted an investigation with the Company’s independent auditors. As a result of this investigation, the Company determined that several accounts required correction to be in accordance with US GAAP. In addition, certain footnotes to such financial statements were required as a result of such changes. Although management concluded that the adjustments to prior year financial statements are not material, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2022, as more fully described in our Annual Report on Form 10-K. As a result, management concluded that the Company’s internal control over financial reporting, as defined by Sections 13a-15(f) and 15d-15(f) of the Exchange Act, was not effective as of December 31, 2023, and undertook remediation efforts also described in our Form 10-K. Refer to Item 4 above for more details.

If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business, and would have a material adverse effect on our business, financial condition and results of operations.

Our compliance is focused on U.S. laws and we have not analyzed foreign laws regarding the participation of non-U.S. residents.

Some of the investment opportunities posted on our platform are open to non-U.S. residents. We have not researched all the applicable foreign laws and regulations, and we have not set up our structure to be compliant with foreign laws. It is possible that we may be deemed in violation of those laws, which could result in fines or penalties as well as reputational harm. This may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulations may limit our business operations and plans for future expansion.

StartEngine’s product offerings are relatively new in an industry that is still quickly evolving.

The principal securities regulations that we work with, Rule 506(c), Regulation A and Regulation Crowdfunding, have only been in effect in their current form since 2013, 2015 and 2016, respectively. StartEngine’s ability to continue to penetrate the market remains uncertain as potential issuer companies may choose to use different platforms or providers (including, in the case of Rule 506(c) and Regulation A, using their own online platform), or determine alternative methods of financing. Investors may decide to invest their money elsewhere. Further, our potential market may not be as large, or our industry may not grow as rapidly, as anticipated, for instance, according to the SEC, the size for the Regulation A market retracted in 2023. With a smaller market than expected, we may have fewer customers. Success will likely be a factor of investing in the development and implementation of marketing campaigns, subsequent adoption by issuer companies as well as investors, and favorable changes in the regulatory environment.

We have an evolving business model.

Our business model is one of innovation, including continuously working to expand our product lines and services to our clients, such as our expansion into the transfer agent and broker-dealer space as well as our foray into becoming an alternative trading system and acting as an administrative manager for companies. It is unclear whether these services will be successful. Further, we continuously try to offer additional types of services, and we cannot offer any assurance that any of them will be successful. From time to time we may also modify aspects of our business model relating to our service offerings. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage this evolution effectively, which could damage our reputation, limit our growth, and negatively affect our operating results.

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As we grow our business, we may not be able to manage our growth successfully.

If we are able to increase the scope of our business offerings, our customer base, the volume of our transactions and grow our business, we will face business risks commonly associated with rapidly growing companies, including the risk that existing management, information systems and financial and internal controls may be inadequate to support our growth. We cannot predict whether we will be able to respond on a timely basis, or at all, to the changing demands that our growth may impose on our existing management and infrastructure. For example, increasing demands on our infrastructure and management could cause any of the following to occur or increase:

inadequate internal controls required for a regulated entity;

inadequate financial controls needed as we transition to become a reporting company;

delays in our ability to handle the volume of customers, including issuers; and

failure to properly review and supervise personnel to make sure we are compliant with our duties as regulated entities.

This risk is illustrated by the fact that, during preparation for financial reporting related to the year ended December 31, 2023, and based on review from the auditors, the Company discovered certain errors (specifically for warrant and stock valuation, accrued liabilities, and accounts receivable) in its previously reported financial statements for the year ended December 31, 2022. The Company’s management has concluded that, in light of these errors, the Company’s internal control over financial reporting as of December 31, 2023 was not effective. To address these material weaknesses, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of the Company’s internal control over financial reporting. While the Company has processes to identify and appropriately apply applicable accounting requirements, management has enhanced these processes in the past year by enhancing the process by which the Company reviews and presents financial statements, and has also invested in accounting software to ensure more accurate reporting. Management’s report on internal control over financial reporting, a description of the material weaknesses identified, resulting changes to internal control over financial reporting, and continued plans for remediation can be found in Item 9A “Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. See also the above risk factor, “We have identified a material weakness in our internal control over financial reporting. Failure to remediate the material weakness, or any other material weaknesses that we identify if the future, could result in material misstatements in our financial statements.”

If we continue to have issues and/or fail to adapt our management, information systems and financial and internal controls to our growth, or if we encounter other unexpected difficulties, our business, financial condition and operating results will suffer.

We are primarily reliant on one main type of service.

Most of current services are variants on one type of service — providing a platform for online capital formation and ancillary services. Our revenues are therefore dependent upon the market for online capital formation.

We depend on key personnel and face challenges recruiting needed personnel.

Our future success depends on the efforts of a small number of key personnel, including our founder and Chief Executive Officer, Howard Marks, and our compliance, engineering and marketing teams. Expanding our compliance team in response to the growth in our business and the regulatory issues we have faced to date, is essential to our success, and recruiting and training compliance personnel will place demands on financial and management resources. Our software engineer team, as well as our marketing team led by Johanna Cronin, are critical to continually innovate and improve our products while operating in a highly regulated industry. In addition, due the specialized expertise required, we may not be able to recruit the individuals needed for our business needs. There can be no assurance that we will be successful in attracting and retaining the personnel we require to operate and be innovative.

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StartEngine and its providers are vulnerable to hackers and cyber attacks.

As an internet-based business, we may be vulnerable to hackers who may access the data of our investors and the issuer companies that utilize our platform. Further, any significant disruption in service on the StartEngine platform or in its computer systems could reduce the attractiveness of the StartEngine platform and result in a loss of investors and companies interested in using our platform. Further, we rely on a third-party technology provider to provide some of our back-up technology as well as act as our escrow agent. Any disruptions of services or cyber attacks either on our technology provider or on StartEngine could harm our reputation and materially negatively impact our financial condition and business.

StartEngine currently relies on two vendors for escrow services.

We currently rely on Bryn Mawr Trust Company and Kingdom Trust to provide escrow services. Any change in these relationships will require us to find another escrow agent and escrow bank. This may cause us delays as well as additional costs in transitioning our technology.

We are dependent on general economic conditions.

Our business model is dependent on investors investing in the companies presented on our platforms. Investment dollars are disposable income. Our business model is thus dependent on national and international economic conditions. Adverse national and international economic conditions may reduce the future availability of investment dollars, which would negatively impact our revenues and possibly our ability to continue operations. It is not possible to accurately predict the potential adverse impacts on the Company, if any, of current economic conditions on its financial condition, operating results and cash flow.

We face significant market competition.

We facilitate online capital formation. Though this is a relatively new market, we compete against a variety of entrants in the market as well likely new entrants into the market. Some of these follow a regulatory model that is different from ours and might provide them competitive advantages. New entrants could include those that may already have a foothold in the securities industry, including some established broker-dealers. Further, online capital formation is not the only way to address helping start-ups raise capital, and the Company has to compete with a number of other approaches, including traditional venture capital investments, loans and other traditional methods of raising funds and companies conducting crowdfunding raises on their own websites. Additionally, some competitors and future competitors may be better capitalized than us, which would give them a significant advantage in marketing and operations.

Moreover, as we continue to expand our offerings, including providing administrative services to issuers, securitizing various asset classes and transfer agent services, we will continue to face headwinds and compete with companies that are more established and/or have more financial resources than we do and/or new entrants bringing disruptive technologies and/or ideas.

We may not be able to protect all of our intellectual property.

Our profitability may depend in part on our ability to effectively protect our proprietary rights, including obtaining trademarks for our brand names, protecting our products and websites, maintaining the secrecy of our internal workings and preserving our trade secrets, as well as our ability to operate without inadvertently infringing on the proprietary rights of others. There can be no assurance that we will be able to obtain future protections for our intellectual property or defend our current trademarks and future trademarks and patents. Further, policing and protecting our intellectual property against unauthorized use by third parties is time-consuming and expensive, and certain countries may not even recognize our intellectual property rights. There can also be no assurance that a third party will not assert infringement claims with respect to our products or technologies. Any litigation for both protecting our intellectual property or defending our use of certain technologies could have material adverse effect on our business, operating results and financial condition, regardless of the outcome of such litigation.

Our revenues and profits (if any) are subject to fluctuation.

It is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors. These factors may include adverse changes in: number of investors and amount of investors’ dollars, the success of world securities markets, general economic conditions, our ability to market our platform to companies and investors, headcount and other operating costs, and general industry and regulatory conditions and requirements. The Company’s operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant and could impact our ability to operate our business.

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Natural disasters and other events beyond our control could materially adversely affect us.

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services.

Risk Factors Related to the Common Stock

Voting control is in the hands of a few large stockholders.

Voting control is concentrated in the hands of a small number of stockholders. Our CEO and Chairman currently hold approximately 40% of our voting shares in aggregate, including shares of our Common Stock and (on an as-converted basis) shares of our Series Seed Preferred Stock, Series A Preferred Stock and Series Seed Preferred Stock; and two other shareholders, SE Agoura Investment LLC and The Lee Miller Trust UA 09/05/2020, own approximately 21% and 11%, respectively, of our voting shares in aggregate. None of SE Agoura Investments LLC, The Lee Miller Trust UA 09/05/2020 or their beneficial owners are on our board or are employees of our company. Those four shareholders in aggregate control approximately 73% of our voting shares and approximately 52% of our preferred stock. Holders of our Common Stock are generally not be able to influence our policies or any other corporate matter, including the election of directors, changes to our company’s governance documents, expanding the employee option pool, and any merger, consolidation, sale of all or substantially all of our assets, or other major action requiring stockholder approval. Some of the larger stockholders include, or have the right to designate, executive officers and directors of our Board. These few people and entities make all major decisions regarding the Company.

Future fundraising may affect the rights of investors.

In order to expand, the Company is likely to raise funds again in the future, either by offerings of securities or through borrowing from banks or other sources. The terms of future capital raising, such as loan agreements, may include covenants that give creditors greater rights over the financial resources of the Company.

Holders of our Preferred Stock are entitled to potentially significant liquidation preferences over holders of our Common Stock if we are liquidated, including upon a sale of our company.

Holders of our outstanding Preferred Stock have liquidation preferences over holders of Common Stock. This liquidation preference is paid if the amount a holder of Preferred Stock would receive under the liquidation preference is greater than the amount such holder would have received if such holder’s shares of Preferred Stock had been converted to Common Stock immediately prior to the liquidation event. Holders of Series A Preferred Stock and Series T Preferred Stock are entitled to liquidation preferences superior to Series Seed Preferred Stock. If a liquidation event, including a sale of our company, were to occur that resulted in a distribution of less than approximately $8 million, the holders of our Preferred Stock could be entitled to all proceeds of cash distributions.

There is a limited current market for our Common Stock.

Currently, the only marketplace for our Common Stock is and will be our alternative trading system or “ATS” branded as “StartEngine Secondary.” To date, we only have limited experience selling our shares on StartEngine Secondary; and trading of our securities will only be available on StartEngine Secondary during limited periods, including periods where we do not have an open offering. To date, there has not been frequent enough trading to establish a market price. The limited volume of trading means that investors should assume that they may not be able to liquidate their investment for some time or to liquidate at their desired price. Further, it is unlikely that they will be able to pledge their shares as collateral.

Investors will need to keep records of their investment for tax purposes.

As with all investments in securities, investors who sell the Common Stock will probably need to pay tax on the long- or short-term capital gains that you realize if sold at a profit or set any loss against other income. If investors do not have a regular brokerage account, or their regular broker will not hold the Common Stock for them (and many brokers refuse to hold Regulation A securities for their customers) there will be nobody keeping records for investors for tax purposes and they will have to keep their own records, and calculate the gain on any sales of any securities they sell.

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The price for our Common Stock may be volatile.

To date, there has not been enough trading of our shares to establish a market price. The market price of our Common Stock may be highly volatile, if and when any trading begins again in the future and there is sufficient volume of trading to establish a market price, is likely to be continue to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

We may not be able to compete successfully against current and future competitors.

Our ability to obtain working capital financing.

Additions or departures of key personnel.

Sales of our shares.

Our ability to execute the business plan.

Operating results that fall below expectations.

Regulatory developments.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our securities. As a result, investors may be unable to resell your securities at a desired price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Offering type

Intermediary

Date commenced

Number of shares
issued

Class of
securities

Proceeds
raised

Use of
proceeds

Date closed
(if open, N/A)

2023 Acquisition of SeedInvest Assets in reliance on Section 4(2) of the Securities Act of 1933, as amended (1)

Pluto Holdings, LLC

October 24, 2022

19,200,000 (1)

Common Stock

24,000,000

Acquire substantially all of the assets of SeedInvest (1)

May 5, 2023

2022 Regulation A (2)

Dalmore Group, LLC*

March 14, 2022

15,627,180

Common Stock

17,514,890

Marketing, operations, product development, cash reserves

November 10, 2023

2021 Regulation A (3)

Dalmore Group, LLC*

August 27, 2021

24,698,440

Common Stock

14,813,168

Marketing, operations, product development, cash reserves

December 19, 2021

*	Only for certain investors, including residents in Florida for both offerings and residents in Texas during part of the offering in 2022.

(1)

On May 5, 2023, the Company consummated the purchase of substantially all of the assets of the SeedInvest business conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, and through SI Securities, LLC and SeedInvest Technology, LLC, for 19,200,000 shares of StartEngine Common Stock, valued at $24,000,000 based on StartEngine’s most recent Regulation A offering price of $1.25 per share.

(2)

Does not include 3,851,300 shares of Common Stock sold for a total of $4,312,920 by selling shareholders under the Company’s Regulation A offering.

(3)

Does not include 22,561,700 shares of Common Stock sold for a total of $13,958,197 by selling shareholders under the Company’s Regulation A offering.

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Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Insider trading arrangements and Rule 10b5-1 Trading Plans.

During the quarter ended March 31, 2024, none of the Company’s officers or directors have entered into a contract, established a plan, or issued instructions that provides for the purchase or sale of any equity securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act.

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Item 6. Exhibits.

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.


Exhibit No.	Title of Document	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Seventh Amended and Restated Certificate of Incorporation	8-K	000-56415	3.1	May 10, 2024
3.2	Second Amended and Restated Bylaws	8-K	000-56415	3.2	May 10, 2024
4.1	Second Amended and Restated Investors’ Rights Agreement	1-A	024-11177	3.1	March 12, 2020
10.1	Amended and Restated 2015 Equity Incentive Plan	1-A	024-11806	6.1	February 13, 2023
10.2+*	Employment Agreement effective as of January 1, 2024 (Howard Marks)	10-K	000-56415	10.2	April 15, 2024
10.3	Asset Purchase Agreement	8-K	000-56415	99.2	November 28, 2022
31.1	Certification of the principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1 #	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X


101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

+	Management contract or compensatory plan or arrangement.

*	Portions of this exhibit have been omitted pursuant to the instructions to Item 601(a) of Regulation S-K.

#	This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		STARTENGINE CROWDFUNDING, INC.
		(Registrant)
Date: May 15, 2024
	By:	/s/ Howard Marks
		Howard Marks
		Chief Executive Officer, principal financial officer, principal accounting officer and Director