Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Apr. 15, 2024 | |
Document Information | ||
Document Type | 10-K/A | |
Document Annual Report | true | |
Document Period End Date | Dec. 31, 2023 | |
Document Transition Report | false | |
Entity File Number | 000-56415 | |
Entity Registrant Name | StartEngine Crowdfunding, Inc. | |
Entity Address, Address Line One | 4100 West Alameda Avenue | |
Entity Address, Address Line Two | 3rd Floor, | |
Entity Address, City or Town | Burbank | |
Entity Address State Or Province | CA | |
Entity Incorporation, State or Country Code | DE | |
City Area Code | 800 | |
Local Phone Number | 317-2200 | |
Title of 12(g) Security | Common Stock, $0.00001 par value | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001661779 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | FY | |
Amendment Flag | true | |
Entity Tax Identification Number | 46-5371570 | |
Trading Symbol | False | |
Entity Address, Postal Zip Code | 91505 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
ICFR Auditor Attestation Flag | false | |
Document Financial Statement Error Correction [Flag] | false | |
Entity Public Float | $ 672,898,700 | |
Amendment Description | StartEngine Crowdfunding, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Original Filing” and, together with this Amendment, the “Form 10-K Filings”), which was filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2024 (the “Original Filing Date”), to amend and restate disclosure regarding our subsidiary, StartEngine Private LLC, including its operations and accounting treatment of revenues and cost of revenues to Part I Item 1, Part II Item 7, and Part II Item 8 Note 2 (“Summary of Significant Accounting Policies”) to the Audited Consolidated Financial Statements for the fiscal year ended December 31, 2023 (“2023 FYE Financial Statements”). The Company also herein amends and restates and Note 5 (“Intangible Assets”) to the 2023 FYE Financial Statements with respect to disclosure concerning the Company’s acquisition of SeedInvest assets. Additionally, the Company amends and restates its Audited Consolidated Financial Statement for the fiscal year ended December 31, 2022 (“2022 FYE Financial Statements”), in compliance with the SEC’s “Statement on Issuer Disclosure and Reporting Obligations in Light of Rule 102(e) Order against BF Borgers CPA PC,” dated May 3, 2024, and corresponding disclosure in Part II Item 7 regarding changes to the 2022 FYE Financial Statements as a result of the re-audit by our current independent registered accounting firm, Haynie and Company. In addition, the Company also amended Part II, Item 9A. Controls and Procedures was amended to reflect these restatements. | |
Common Stock | ||
Document Information | ||
Entity Common Stock, Shares Outstanding | 700,612,240 | |
Series A Preferred Stock | ||
Document Information | ||
Entity Common Stock, Shares Outstanding | 185,440,880 | |
Series T Preferred Stock | ||
Document Information | ||
Entity Common Stock, Shares Outstanding | 9,642,080 | |
Series Seed Preferred Stock | ||
Document Information | ||
Entity Common Stock, Shares Outstanding | 204,810,720 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash | $ 12,656,298 | $ 15,460,469 |
Marketable securities | 1,856 | 1,856 |
Accounts receivable, net of allowance | 193,696 | 678,672 |
Other current assets | 720,767 | 1,304,304 |
Total current assets | 13,572,617 | 17,445,301 |
Property and equipment, net | 119,723 | 109,142 |
Investments - warrants | 195,487 | 206,895 |
Investments - stock | 8,623,212 | 7,943,817 |
Investments - Private | 4,357,083 | |
Investments - Collectibles | 2,446,121 | 2,984,699 |
Investments - Real Estate | 2,136,628 | $ 2,136,628 |
Due from related party | $ 209,190 | |
Other Receivable, after Allowance for Credit Loss, Noncurrent, Related Party, Type [Extensible Enumeration] | us-gaap:RelatedPartyMember | us-gaap:RelatedPartyMember |
Intangible assets | $ 21,892,192 | $ 20,000 |
Other assets | 42,138 | 66,600 |
Total assets | 53,594,391 | 30,913,082 |
Current liabilities: | ||
Accounts payable | 278,691 | 284,371 |
Accrued liabilities | 4,456,756 | 2,785,500 |
Deferred revenue | 3,520,150 | 2,715,422 |
Total current liabilities | 8,255,597 | 5,785,293 |
Total liabilities | 8,255,597 | 5,785,293 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value $0.00001, 1,500,000,000 shares authorized, 697,053,980 and 666,033,240 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively. | 6,971 | 6,660 |
Additional paid-in capital | 82,005,447 | 45,419,275 |
Noncontrolling interest | (13,251) | (13,251) |
Accumulated deficit | (44,637,430) | (28,261,952) |
Total stockholders' equity | 45,338,794 | 25,127,789 |
Total liabilities and stockholders' equity | 53,594,391 | 30,913,082 |
Series A Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock value | 5,286,667 | 5,286,667 |
Series T Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock value | 983,634 | 983,634 |
Series Seed Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock value | $ 1,706,756 | $ 1,706,756 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | |
Preferred stock, shares authorized | 519,000,000 | |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 1,500,000,000 | 1,500,000,000 |
Common stock, shares issued | 697,053,980 | 666,033,240 |
Common stock, shares outstanding | 697,053,980 | 666,033,240 |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 207,000,000 | 207,000,000 |
Preferred stock, shares issued | 185,440,880 | 185,440,880 |
Preferred stock, shares outstanding | 185,440,880 | 185,440,880 |
Preferred stock, liquidation preference | $ 5,310,409 | $ 5,310,409 |
Series T Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 99,000,000 | 99,000,000 |
Preferred stock, shares issued | 9,642,080 | 9,642,080 |
Preferred stock, shares outstanding | 9,642,080 | 9,642,080 |
Preferred stock, liquidation preference | $ 1,414,172 | $ 1,414,486 |
Series Seed Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 213,000,000 | 213,000,000 |
Preferred stock, shares issued | 204,810,720 | 204,810,720 |
Preferred stock, shares outstanding | 204,810,720 | 204,810,720 |
Preferred stock, liquidation preference | $ 1,707,990 | $ 1,707,990 |
Consolidated Statement of Opera
Consolidated Statement of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Consolidated Statement of Operations | ||
Revenues | $ 23,385,998 | $ 24,054,832 |
Cost of revenues | 8,703,894 | 7,050,899 |
Gross profit | 14,682,104 | 17,003,933 |
Operating expenses: | ||
General and administrative | 10,207,544 | 8,678,128 |
Sales and marketing | 13,013,676 | 12,208,947 |
Research and development | 5,779,920 | 4,667,596 |
Change in fair value of warrants received for fees | 11,409 | 501,522 |
Change in fair value of shares received for fees | 2,122,211 | (953,131) |
Total operating expenses | 31,134,760 | 25,103,062 |
Operating income (loss) | (16,452,656) | (8,099,129) |
Other Expense (Income) | ||
Other expense (income), net | (144,290) | (188,684) |
Total other expense (income), net | (144,290) | (188,684) |
Income (loss) before provision for income taxes | (16,308,366) | (7,910,445) |
Taxes - Other | 67,112 | 63,563 |
Net loss | (16,375,478) | (7,974,008) |
Less: net loss attributable to noncontrolling interest | (9,124) | |
Net loss attributable to stockholders | $ (16,375,478) | $ (7,964,884) |
Weighted average loss per share - basic | $ (0.02) | $ (0.01) |
Weighted average loss per share - diluted | $ (0.02) | $ (0.01) |
Weighted average shares outstanding - basic | 677,344,569 | 660,765,225 |
Weighted average shares outstanding - diluted | 677,344,569 | 660,765,225 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Preferred Stock Series A Preferred Stock Previously Reported | Preferred Stock Series A Preferred Stock | Preferred Stock Series T Preferred Stock Previously Reported | Preferred Stock Series T Preferred Stock | Preferred Stock Series Seed Preferred Stock Previously Reported | Preferred Stock Series Seed Preferred Stock | Common Stock Previously Reported | Common Stock | Additional Paid-in Capital Previously Reported | Additional Paid-in Capital Adjustment | Additional Paid-in Capital | Subscription Receivable Previously Reported | Subscription Receivable | Noncontrolling Interest Previously Reported | Noncontrolling Interest | Accumulated Deficit Previously Reported | Accumulated Deficit Adjustment | Accumulated Deficit | Previously Reported | Adjustment | Total |
Balance at the beginning at Dec. 31, 2021 | $ 5,286,667 | $ 5,286,667 | $ 983,852 | $ 983,852 | $ 1,707,990 | $ 1,707,990 | $ 6,573 | $ 6,573 | $ 39,240,479 | $ (515,911) | $ 38,724,568 | $ (367,831) | $ (367,831) | $ (4,127) | $ (4,127) | $ (18,938,969) | $ (1,367,223) | $ (20,306,192) | $ 27,914,634 | $ (1,883,134) | $ 26,031,500 |
Balance at the beginning (in shares) at Dec. 31, 2021 | 185,440,880 | 185,440,880 | 9,644,220 | 9,644,220 | 204,958,760 | 204,958,760 | 657,303,860 | 657,303,860 | |||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||||||||
Sale of common stock | $ 80 | 7,101,353 | $ 367,831 | $ 7,469,264 | |||||||||||||||||
Sale of common stock (in shares) | 8,032,900 | 8,032,900 | |||||||||||||||||||
Conversion to Common Stock | $ (218) | $ (1,234) | $ 5 | 1,447 | |||||||||||||||||
Conversion to Common Stock (in shares) | (2,140) | (148,040) | 537,940 | ||||||||||||||||||
Exercise of stock options | $ 2 | 38,033 | $ 38,035 | ||||||||||||||||||
Exercise of stock options (in shares) | 158,540 | 158,540 | |||||||||||||||||||
Stock compensation expense | 3,993,424 | $ 3,993,424 | |||||||||||||||||||
Offering Costs | (4,439,550) | (4,439,550) | |||||||||||||||||||
Noncontrolling interest | (9,124) | 9,124 | |||||||||||||||||||
Net loss | (7,964,884) | (7,964,884) | |||||||||||||||||||
Balance at the end at Dec. 31, 2022 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 6,660 | 45,419,275 | (13,251) | (28,261,952) | $ 26,738,265 | $ (1,610,476) | 25,127,789 | |||||||||||
Balance at the end (in shares) at Dec. 31, 2022 | 185,440,880 | 9,642,080 | 204,810,720 | 666,033,240 | |||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||||||||
Sale of common stock | $ 91 | 10,161,973 | $ 10,162,064 | ||||||||||||||||||
Sale of common stock (in shares) | 9,105,220 | 9,105,220 | |||||||||||||||||||
Exercise of stock options | $ 28 | 86,362 | $ 86,390 | ||||||||||||||||||
Exercise of stock options (in shares) | 2,715,520 | 2,676,100 | |||||||||||||||||||
Stock compensation expense | 7,057,402 | $ 7,057,402 | |||||||||||||||||||
SeedInvest Acquisition | $ 192 | 23,999,805 | 23,999,997 | ||||||||||||||||||
SeedInvest Acquisition (in shares) | 19,200,000 | ||||||||||||||||||||
Offering Costs | (4,719,370) | (4,719,370) | |||||||||||||||||||
Net loss | (16,375,478) | (16,375,478) | |||||||||||||||||||
Balance at the end at Dec. 31, 2023 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 6,971 | $ 82,005,447 | $ (13,251) | $ (44,637,430) | $ 45,338,794 | |||||||||||||
Balance at the end (in shares) at Dec. 31, 2023 | 185,440,880 | 9,642,080 | 204,810,720 | 697,053,980 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss attributable to stockholders | $ (16,375,478) | $ (7,964,884) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 13,155 | 13,090 |
Amortization | 2,248,965 | |
Bad debt expense | 722,932 | 582,009 |
Fair value of warrants received for fees | (536,087) | |
Fair value of investments - other received for fees | (2,801,296) | (2,577,415) |
Change in fair value of warrant investments | 11,409 | 501,522 |
Impairment of investments - other received for fees | 2,121,901 | (953,131) |
Stock-based compensation | 7,057,402 | 3,993,424 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (237,956) | 217,206 |
Other current assets | 607,999 | 1,466,665 |
StartEngine Private stock purchases | (4,357,083) | |
Due from related parties | (317,007) | |
Accounts payable | (5,680) | (1,330,403) |
Accrued liabilities | 1,779,073 | 646,735 |
Deferred revenue | 804,728 | (1,147,000) |
Net cash received (used) in operating activities | (8,726,936) | (7,088,269) |
Cash flows from investing activities: | ||
Investments - Collectibles purchases, gross | (1,058,305) | |
Investments - Collectibles sales, gross | 417,421 | |
Purchase of property and equipment | (23,737) | (64,691) |
Net cash received (used) in investing activities | 393,684 | (1,122,996) |
Cash flows from financing activities: | ||
Proceeds from sale of common stock | 10,162,061 | 7,469,264 |
Offering costs | (4,719,370) | (4,439,550) |
Proceeds from exercise of employee stock options | 86,390 | 38,035 |
Net cash provided by financing activities | 5,529,081 | 3,067,749 |
(Decrease)in cash and restricted cash | (2,804,171) | (5,143,516) |
Cash and restricted cash, beginning of period | 15,460,469 | 20,603,985 |
Cash and restricted cash, end of period | 12,656,298 | 15,460,469 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | 67,112 | 62,344 |
Non Cash Investing & Financing Activities | ||
Purchase of SeedInvest Intellectual Property with Common Stock | $ 23,999,997 | |
Subscription Receivable as part of Common Stock | $ 367,832 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2023 | |
NATURE OF OPERATIONS | |
NATURE OF OPERATIONS | 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 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 has been providing accredited investors the opportunity to purchase membership interests in funds (“SE Funds”) which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC, an exempt reporting adviser. The Company’s mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years. Stock Split On May 5, 2024, StartEngine Crowdfunding Inc. split its designated “Common Stock” and “Preferred Stock” on a 20 Business Condition 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 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 $13 million, which its managements 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. Restatement 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. Accordingly, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2022, as more fully described below. In May 2024, the Company engaged with their auditors to complete re-audit of its Audited Consolidated Financial Statement for the fiscal year ended December 31, 2022 in light of its anticipated capital raising activities to comply with the SEC’s “Statement on Issuer Disclosure and Reporting Obligations in Light of Rule 102(e) Order against BF Borgers CPA PC,” dated May 3, 2024. During this process, the Company discovered certain errors in previously reported financial statements for the year ended December 31, 2021, and The restatement also includes corrections for other errors identified as immaterial, individually and in the aggregate, to our consolidated financial statements. Description of Restatement Tables The following tables present the impact of the restatements on our previously reported consolidated balance sheet, statement of operations for the year ended December 31, 2022 as well as the impact of correction to December 31, 2021 beginning balances. The changes are reflected in the consolidated statement of stockholders’ equity . Balance Sheet: Year Ended December 31, 2022 Previously Reported Adjustment As Restated Assets Current assets: Cash $ 15,460,469 $ — $ 15,460,469 Marketable securities 1,856 — 1,856 Accounts receivable, net of allowance 702,257 (23,585) 678,672 (c) Other current assets 1,953,756 (649,452) 1,304,304 (d) (f) Total current assets $ 18,118,338 $ (673,037) $ 17,445,301 Property and equipment, net $ 109,141 $ — $ 109,141 Investments - warrants 1,496,701 (1,289,806) 206,895 (a) Investments - stock 6,479,340 1,464,477 7,943,817 (b) Investments - Collectibles 3,072,227 (87,528) 2,984,699 (g) Investments - Real Estate 2,136,628 — 2,136,628 Intangible assets 20,000 — 20,000 Other assets 66,603 — 66,603 Total assets $ 31,498,978 $ (585,894) $ 30,913,084 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 284,371 $ — $ 284,371 Accrued liabilities 1,760,920 1,024,580 2,785,500 (e) Deferred revenue 2,715,422 — 2,715,422 Total current liabilities $ 4,760,713 $ 1,024,580 $ 5,785,293 Stockholders’ equity: Series A Preferred Stock $ 5,286,667 $ — $ 5,286,667 Series T Preferred Stock 983,634 — 983,634 Series Seed Preferred Stock 1,706,756 — 1,706,756 Common Stock 6,660 — 6,660 Additional paid-in capital 45,632,823 (213,548) 45,419,275 (f) Noncontrolling interest (13,251) — (13,251) Accumulated deficit (26,865,024) (1,396,928) (28,261,952) Total stockholders' equity $ 26,738,265 $ (1,610,476) $ 25,127,789 Total liabilities and stockholders’ equity $ 31,498,978 $ (585,896) $ 30,913,082 Statement of Operations: Year Ended December 31, 2022 Previously Reported Adjustment Second Adjustment As Restated Revenue $ 24,360,685 $ — $ (305,853) $ 24,054,832 Cost of Revenue 6,368,629 682,270 — 7,050,899 (e) General and administrative 8,723,615 881,760 (927,247) 8,678,128 (c) (d) Sales and marketing 12,478,887 7,571 (277,511) 12,208,947 (c) (e) Research and development 4,667,593 — 3 4,667,596 Change in fair value of warrants received for fees 169,520 1,289,806 (957,804) 501,522 (a) Change in fair value of shares received for fees 21,863 (1,464,477) 489,483 (953,131) (b) Other Expense (Income) (188,684) — — (188,684) Taxes - Other 63,563 $ — $ — $ 63,563 Net Loss $ (7,944,301) (1,396,930) 1,367,223 (7,974,008) Weighted average loss per share - basic and diluted 0.01 0.01 Descriptions of Misstatements a. Impairment of warrant compensation: While reviewing the Company’s warrant assets, it was determined that the value of the warrants received as compensation had not been subjected to a Black-Scholes pricing model to compute the warrant’s fair value. The Company had been impairing the warrants at a flat rate, which was not compliant with Generally Accepted Accounting Principles (“GAAP”). In reviewing the warrants using Black-Scholes modeling, the Company determined that an additional impairment based on a Black Scholes analysis was necessary as the value of the warrants at year end 2022 and 2021 were incorrectly valued. Additionally, an intercompany transaction for the transfer of assets between entities was reversed. b. Investments in common stock – fair value and impairment adjustment: The Company had historically performed a flat 33% impairment of shares received as compensation. In reviewing the investments in common stock, however, it was determined that the certain stocks held had increased in value based on subsequent raises hosted by the Company. Using the updated offer price per share, the Company adjusted the prior stock value to the new market value of the investments - stock. Additionally, the Company performed a more comprehensive analysis of the impairment to investments of common stock held and adjusted the impairment to be in line with the 33% estimated impairment for stocks that did not host an additional capital raise with the Company. c. Correction of receivable accounts: The Company determined that balances included in the accounts receivable, advertising loan and other reimbursable expense asset accounts were uncollectible, and the asset accounts were overstated as of December 31, 2022. d. Correction of prepaid expense amortization: The Company determined that the expense for purchases of software licenses were incurred, but not properly expensed during 2022. e. Correction of liability accounts: While reviewing the Company credit card expenses (“Ramp card”), payroll accrual and the bonus payable to employees it was determined that the liability accounts relating to the Company credit card expenses were not accrued for the correct amount at December 31, 2022. f. Reclassification of contra balance accounts: While reviewing the year-end balance sheet accounts, it was determined that several liability accounts incorrectly held debit or “contra liability” balances from items that should have been expensed in 2022. Additionally, an asset account held a credit or “contra asset” balance at December 31, 2022. The result of this error was an understatement of liability accounts, specifically accrued liabilities – marketing, and an overstatement of equity accounts. g. Reclassification of Collectible assets: While testing December 31, 2021 of the StartEngine Collectibles assets held for sale, it was determined that artwork had been incorrectly classified as comics, and Wine assets were overstated, resulting in an overstatement of assets. Position and Adjusting Entries The Company has determined that these transactions are not material in the years they occurred and conclude the prior financial reports can be relied upon. The Company’s determination is based on the following: The adjustments do not cause any changes to the previously reported cash balances as of the end of the period in 2022. The Company has determined that the adjustments have had little effect on the trend of earnings over the last three years. The Company reported losses in 2021 and 2022 prior to the adjustments and maintained a loss position in 2023. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying audited 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. The 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. Principles of Consolidation The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.’s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Primary LLC, StartEngine Assets LLC, StartEngine Advisor LLC and StartEngine Private Manager 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 December 31, 2023 and 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets. 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. 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 companies. 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 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 $ 384,483 $ — $ 8,436,802 $ 8,821,285 The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2022: Level 1 Level 2 Level 3 Total Marketable securities 1,856 — — 1,856 Investment - warrants (Restated) — — 206,895 206,895 Investment - stock (Restated) — — 7,943,817 7,943,817 Cryptocurrency 16,604 — — 16,604 Non-Fungible Token ("NFT") 47,868 — — 47,868 $ 66,328 $ — $ 8,150,712 $ 8,217,040 The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the year ended December 31, 2023 and 2022 as it relates to Investments – warrants and Investments – stocks: Investments- Warrants Fair value at December 31, 2022 $ 206,895 Receipt of warrants — Change in fair value of warrants (11,409) Fair value at December 31, 2023 $ 195,487 Investments- Warrants Fair value at December 31, 2021 (Restated) $ 172,330 Receipt of warrants (Restated) 536,087 Change in fair value of warrants (Restated) (501,522) Fair value at December 31, 2022 (Restated) $ 206,895 Investments- Stock Fair value at December 31, 2022 $ 7,943,817 Receipt of stock 2,801,296 Change in fair value of stock (2,121,901) Fair value at December 31, 2023 $ 8,623,212 Investments- Stock Fair value at December 31, 2021 (Restated) $ 4,413,271 Receipt of stock (Restated) 2,577,415 Change in fair value of stock (Restated) 953,131 Fair value at December 31, 2022 (Restated) $ 7,943,817 The following range of variables were used in valuing Level 3 warrant assets during the years ended December 31, 2023 and 2022: 2023 2022 Expected life (years) 1.42 - 3.58 2.42 - 4.58 Risk-free interest rate 3.84 - 3.84 % 3.99 % Expected volatility 36.0 - 102.0 % 25.0 - 89.0 % Annual dividend yield 0 % 0 % Underlying share values $ 0.30 – $100.00 $ 0.30 – $100.00 Strike Prices $ 0.30 – $100.00 $ 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 receivable are recorded at the recognized 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 December 31, 2023 and December 31, 2022 was $179,388 and $357,709, respectively. Bad debt expense for the year ended December 31, 2023 and 2022 was $722,932 and $582,009, respectively. As of December 31, 2023 the Company had accounts receivable over 90 days totaling $0. 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 income, net in the accompanying 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 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. 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 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. · 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 in 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 has 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 has 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. During the year ended December 31, 2023 and 2022, the Company received stock with a cost of $2,801,296 and $2,577,415, respectively, as payment for fees. During the year ended December 31, 2023 and 2022, write down expense related to shares received amounted to $2,121,901 for 2023, and gross up adjustment related to shares received amounted to $953,131, respectively. Investments – Private The Company purchases shares of venture capital backed, late-stage private companies and records the purchases at cost. The cost of the underlying asset includes the purchase price and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, investigation, and acquisition of the underlying securities. 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 StartEngine Fund. Each time the company sells shares to the StartEngine Funds, it reduces its holdings by the cost basis of the sale. Below is a breakdown of the StartEngine Private assets by industry held at the end of the reporting period, each of these investments are small minority stakes in the underlying companies. Industry Investment Video Games 643,558 Fintech 901,784 AI Hardware 1,040,039 Sales Technology 754,868 Messaging Platforms 403,495 Software Development 613,339 Total 4,357,083 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 below is a breakdown of the types of collectibles and their value held as of December 31, 2023 and 2022: Period Ended December 31, Period Ended December 31, 2023 2022 (Restated) Wine $ 278,360 $ 388,587 Trading Cards 466,484 486,657 Artwork 1,322,942 1,287,378 Comic Books 324,477 704,477 NFT 730 64,472 Watches 53,128 53,128 Total collectibles $ 2,446,121 $ 2,984,699 Investments – Real Estate The Company has invested $2,136,628 to purchase a membership interest in an LLC that owns one residential apartment building in California as of December 31, 2023. The company values this interest via the adjusted cost measurement alternative per ASC 321-10-35-2 Intangible Assets Intangible assets are stated at gross cost less accumulated amortization and presented separately from other long-term assets in accordance with ASC 350-30-50-2. 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 $4,719,370 and $4,439,550 were charged to stockholders’ equity during the year ended December 31, 2023 and 2022, 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 2021 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 through 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 through the duration of the campaign. The Company provides marketing services branded under the name “StartEngine Premium.”. The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due. 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. 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 previously offered campaign advertising services branded under the name “StartEngine Promote.” Under these services, we assist issuer campaigns through creating, designing, purchasing and organizing media across digital marketing channels. Promote services represent a single performance obligation. The term of the services commences upon the agreement being signed and through the closing of the related campaign. The revenues are earned based on a percentage of additional investments attributable to the campaign advertising services, and recognized monthly to the issuer throughout the campaign. The Company may also earn a commission on placing television advertisements on behalf of the issuer. StartEngine Promote fees are charged to the issuers and are paid to the Company from customers’ escrow accounts. The Company’s performance obligations are satisfied as services are rendered. There are no significant judgments related to this revenue stream. The Company has ceased conducting these services in 2022. 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 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 OWNers 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. The Company provides accredited investors the opportunity to purchase membership interests in funds (“SE Funds”) which own shares of venture capital backed, late-stage private companies (the “underlying securities”) via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised 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 membership interests 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. The Company purchases the underlying securities either directly or through other special purpose vehicles and after a certain period of time sells the underlying securities to an SE Fund. The Company can recognize gross revenue to the extent it is able to sell underlying securities to an SE Fund. The Company treats the amount it receives for selling underlying securities as revenues, and the acquisition cost related such underlying securities as cost of revenues. There are several factors that are used in pricing the securities of an SE Fund, including but not limited to: the price (including transaction costs) the securities were purchased by the SE Fund’s affiliate, the time spent and costs involved by the SE Fund’s management team including those related to identifying, verifying, acquiring, and managing the investments, sales of the underlying securities on the secondary market, as well as considerations are given for the illiquidity of private investments compared to publicly traded securities and investor interest in the SE Fund’s securities. The Company also believes that there is value added by allowing investors to have an economic interest in these companies with less hassle and smaller denominations than available in secondary markets. Additionally, consideration is also given to broader economic and market conditions that might impact the valuation of private companies, such as industry trends, regulatory changes, and economic cycles. The Company takes principal risk in its acquisition of the private company shares and can recognize gross revenue to the extent it is able to sell underlying securities to an SE Fund. The Company treats the amount it receives for selling underlying securities as gross revenues, and the acquisition cost related such underlying securities as cost of revenues. Revenue can be recognized upon each such transaction with an StartEngine Fund. 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’s contracts with customers generally have a term of one year or less. As of December 31, 2023 and 2022, the Company had deferred revenue of $3,520,150 and $2,715,422, respectively, related to performance obligations yet to be fulfilled. The Company had no other customer contract assets. During the year ended December 31, 2023 and 2022, revenue was made up of the following categories associated with the above described services: Year Year Ended December 31, Ended December 31, 2023 2022 (Restated) Regulation Crowdfunding platform fees $ 11,115,372 $ 10,278,596 Regulation A commissions 1,197,178 5,421,047 StartEngine Premium 2,740,337 2,289,999 StartEngine Secure 1,426,320 1,311,930 StartEngine Private 2,709,621 — Venture Club (formerly OWNers Bonus) revenue 4,002,656 4,106,643 Other service revenue 194,514 646,617 Total revenues $ 23,385,998 $ 24,054,832 Cost of Revenues Cost of revenues consists of internal employees, hosting fees, processing fees, certain software subscription fees that are required to provide services to our issuers, and for StartEngine Private acquisition costs related to underlying securities that it has sold to an SE Fund. Our cost of revenues during the fiscal years ended December 31, 2023 and December 31, 2022 was $8,703,894 and $7,050,899, respectively. The cost of revenues for StartEngine Private was $1,850,954 and $0 for the fiscal year ended December 31, 2023 and 2022. 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 year ended December 31, 2023 and 2022, research and development costs were $5,779,920 and $4,667,596, 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 cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. Income Taxes The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") Topic 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company also evaluates tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax |
MARKETABLE SECURITIES AND INVES
MARKETABLE SECURITIES AND INVESTMENTS | 12 Months Ended |
Dec. 31, 2023 | |
MARKETABLE SECURITIES AND INVESTMENTS | |
MARKETABLE SECURITIES AND INVESTMENTS | NOTE 3 – MARKETABLE SECURITIES AND INVESTMENTS Marketable Securities The Company’s marketable securities are classified as either available-for-sale, trading, or held-to-maturity in accordance with ASC 320, Investments—Debt and Equity Securities. These securities are recorded at fair value, with unrealized gains and losses recognized in accordance with the guidance outlined in ASC 320-10. Marketable securities consisted of the following as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 Common stock $ 1,856 $ 1,856 $ 1,856 $ 1,856 Unrealized gain during the year ended December 31, 2023 and 2022 were $0 and $0, respectively. 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. The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the year ended December 31, 2023 and 2022 as it relates to Investments – warrants: Beginning balance Received for fees Change in fair value Ending balance 2022 172,330 536,087 (501,522) 206,895 2023 206,895 741 (12,149) 195,487 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 and adjusted to the value of the stock price in an issuance within the current year or written down 33% if there is no issuance in the current year. The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the year ended December 31, 2023 and 2022 as it relates to Investments – stocks: Beginning balance Received for fees Change in fair value Ending balance 2022 4,413,271 2,577,415 953,131 7,943,817 2023 7,943,817 2,801,296 (2,121,901) 8,623,212 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2023 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT As of December 31, 2023 and December 31, 2022, property and equipment consisted of the following: December 31, 2023 December 31, 2022 Computer equipment $ 160,784 $ 137,048 Software 3,753 3,753 Total property and equipment 164,537 140,801 Accumulated depreciation (44,814) (31,659) $ 119,723 $ 109,142 Depreciation expense for the year ended December 31, 2023 and 2022 was $13,155 and $13,090, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2023 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | 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”). The total consideration for the purchase is 960,000 shares of StartEngine’s common stock, which based on StartEngine’s previous Regulation A offering price of $1.25 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. As part of the acquisition of the SeedInvest business, the Company acquired a significant intangible asset in the form of a customer list. At the time of acquisition, the Company determined the fair value of the acquired assets, noting that approximately 100% of the gross assets acquired was concentrated in the customer list. The value of intellectual property and various immaterial contracts with vendors was deemed insignificant, and no fair value was assigned to those assets. All contracts have since been canceled, and the SeedInvest webpage and domain are solely used as a redirect to the Company’s site, where users must set up new accounts with the Company. The acquisition did not include any fixed assets, vehicles, equipment, machinery, tools, furnishings, computer hardware, or fixtures, as outlined in Section 2.1(b) of the Asset Purchase Agreement. In accordance with the guidance in FASB ASC 350-30-35-14, the Company evaluates the customer list for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test for intangible assets with indefinite useful lives involves comparing the fair value of the intangible asset with its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess. The Company considers various factors that may indicate impairment of the customer list, including but not limited to: ● Declines in customer retention rates. ● Reductions in revenue per customer. ● Changes in market conditions affecting the value of the customer relationships . ● Strategic shifts that alter the utility of the acquired customer list. As of December 31, 2023, the gross carrying amount of the purchase was $24,121,040, accumulated amortization is $2,248,848 and the estimated aggregate amortization for the five succeeding fiscal years is $17,229,315. The breakdown of each of the five succeeding fiscal years amortization is below. 2024 3,445,863 2025 3,445,863 2026 3,445,863 2027 3,445,863 2028 3,445,863 Total 17,229,315 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2023 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 7 – STOCKHOLDERS’ EQUITY Preferred Stock As of December 31, 2023, 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 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 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 $2.86 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 $0.14667 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 $0.14317 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. Common Stock As of December 31, 2023 we had authorized the issuance of 1,500,000,000 shares of our common stock with par value of $0.00001. As described in Note 1, concurrently with a stock split, we increased the authorized shares of common stock to 1,500,000,000. During the year ended December 31, 2023, the Company sold 9,105,220 shares of common stock through its Regulation A offering for gross proceeds of $10,162,061 and incurred offering costs of $4,719,370. During the year ended December 31, 2022, the Company sold 8,032,900 shares of common stock through its Regulation A offering for gross proceeds of $7,469,264 and incurred offering costs of $4,539,550. 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. The Company valued options granted under the 2015 Plan under ASC 718 using the Black-Scholes pricing model. The granted options in 2023 and 2022 have exercise prices ranging from $0.2165 to $1.25, generally vest over four years and expire in ten years. The stock options granted during the year ended December 31, 2023 and 2022 were valued using the Black-Scholes pricing model using the range of inputs as indicated below: 2023 2022 Expected life (years) 6.5 6.5 Risk-free interest rate 3.6 % 2.5 % Expected volatility 45.7 % 45.7 % Annual dividend yield 0 % 0 % The weighted average grant date fair values of options granted during the years ended December 31, 2023 and 2022 were $0.99 and $0.73 per option, respectively. The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s employee stock options. The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options. The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public Company’s common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history to use historical volatility. The dividend yield assumption for options granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future. The Company currently recognizes option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates A summary of the Company’s stock option activity and related information is as follows A summary of the Company’s stock option activity and related information is as follows. Weighted Weighted average Average Remaining Number of Exercise Contractual Shares Price Term Outstanding at December 31, 2021 141,596,660 $ 0.1180 6.50 Granted 26,011,240 0.7295 Exercised (158,540) 0.1800 Expired/Cancelled (15,420,160) 0.4145 Outstanding at December 31, 2022 152,029,200 $ 0.1995 6.50 Granted 45,576,920 0.9900 Exercised (2,676,100) 0.0275 Expired/Cancelled (9,181,140) 0.7180 Outstanding at December 31, 2023 185,748,880 $ 0.1995 6.50 Exercisable at December 31, 2023 123,049,620 $ 0.1380 6.50 Vested and expected to vest at December 31, 2023 185,748,880 $ 0.0100 6.50 During the years ended December 31, 2023 and 2022, employees exercised their vested options to purchase 2,676,100 and 158,540 shares of common stock, and the Company received aggregate exercise proceeds of $86,390 and $38,035, respectively. The intrinsic value of the options exercised was $3,394,400 and $925,607 during the year ended December 31, 2023 and 2022, respectively. Stock option expense for the years ended December 31, 2023 and 2022 was $7,057,401 and $3,993,425, respectively, and are included within the consolidated statements of operations as follows: 2023 2022 Cost of revenues $ 743,087 $ 299,881 General and administrative 1,220,932 1,327,114 Sales and marketing 4,001,941 1,994,853 Research and development 1,091,441 371,577 Total $ 7,057,401 $ 3,993,425 At December 31, 2023, the total compensation cost related to nonvested awards not yet recognized was approximately $20,229,215 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 2.74 years. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2023 | |
INCOME TAXES | |
INCOME TAXES | NOTE 8 – INCOME TAXES The provision for income tax expense (benefit) consists of the following: Current income tax expense (benefit) - Deferred income tax expense (benefit) - Total income tax expense (benefit) - Effective Rate Reconciliation: Pre-Tax income (loss) (16,308,366) The U.S. Federal Statutory Tax Rate for 2023 is 21%. The reconciliation of the expected income tax expense (benefit) and the actual income tax expense (benefit) is as follows: 2023 2022 Expected Federal income tax expense (benefit) (3,424,757) 21.00% (1,661,193) 21.00% State income tax expense (benefit) (1,141,586) 7.00% (553,731) 7.00% Stock option compensation 926,072 (5.68)% 1,118,159 (14.14)% Section 162(m) Limitation 364,000 (2.23)% 711,245 (8.99)% Warrants issued - 0.00% (150,105) 1.90% Other permanent differences (3,577) 0.02% (27,695) 0.35% Prior Year True-Up Adjustments (3,117,890) 19.12% (713,419) 9.02% Change in Valuation Allowance 6,397,738 (39.23)% 1,276,739 (16.14)% Total income tax expense (benefit) - - - The Company has U.S. Federal net operating loss (NOL) carryovers of $17,516,800. Under the Tax Cuts and Jobs Act (TCJA), Federal NOL's incurred in taxable years beginning in 2018 and later have an indefinite carryforward period, but the use of the NOL carryover is limited to 80% of taxable income in the subsequent year. Federal NOL Carryovers incurred prior to 2018 expire after 20 years. The Company has $2,217,168 of Federal NOL carryovers incurred prior to 2018 which begin to expire in 2036. The Company has NOL carryovers in California of $25,412,005 which begin to expire in 2034. NOL carryovers and capital loss carryovers are a benefit to the Company in the form of future tax savings and such carryovers are recorded as deferred tax assets, subject to a valuation allowance. Net deferred income tax assets (liabilities) are comprised of the following: 2023 2022 Deferred tax assets (liabilities) Net Operating Loss Carryovers 5,457,368 3,283,454 Credit Carryovers 2,127,544 1,390,684 Capitalized Research and Development 1,752,064 732,731 Reserves and Allowances 50,229 100,159 Capital Loss Carryover 21,557 22,425 Depreciation 1,922 (8,590) Deferred Tax Assets 9,410,684 5,520,863 Less: Valuation Allowance (9,410,684) (5,520,863) Net Deferred Tax Assets - - |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 9 – SUBSEQUENT EVENTS The Company has evaluated subsequent events that occurred after December 31, 2023 through September 11, 2024. The Company settled arbitration with a previous issuer as mentioned in Item 3. Legal Proceedings in February 2024 for a total of $2,100,000 of which the Company was responsible for $200,000 and the remaining $1,900,000 was reimbursed through an insurance policy. 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 consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split. On May 3, 2024, the SEC instituted administrative and cease-and-desist proceedings against BF Borgers CPA PC and its sole audit partner Benjamin Borger. BF Borgers was the prior auditor of the December 31, 2022 consolidated financial statements. As a result, the Company has re-audited its annual consolidated financial statements for the fiscal year ended December 31, 2022, which are included herein. On March 25, 2024, the Company granted 13,480,000 options with a strike price of $1.25 per share to employees. On June 14, 2024, the Company granted 9,160,000 options with a strike price of $1.25 per share for 7,160,000 options to employees and $1.38 for 2,000,000 options to Howard Marks, CEO. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying audited 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. The 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. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.’s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Primary LLC, StartEngine Assets LLC, StartEngine Advisor LLC and StartEngine Private Manager LLC. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | 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 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 December 31, 2023 and 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets. 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. 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 companies. 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 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 $ 384,483 $ — $ 8,436,802 $ 8,821,285 The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2022: Level 1 Level 2 Level 3 Total Marketable securities 1,856 — — 1,856 Investment - warrants (Restated) — — 206,895 206,895 Investment - stock (Restated) — — 7,943,817 7,943,817 Cryptocurrency 16,604 — — 16,604 Non-Fungible Token ("NFT") 47,868 — — 47,868 $ 66,328 $ — $ 8,150,712 $ 8,217,040 The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the year ended December 31, 2023 and 2022 as it relates to Investments – warrants and Investments – stocks: Investments- Warrants Fair value at December 31, 2022 $ 206,895 Receipt of warrants — Change in fair value of warrants (11,409) Fair value at December 31, 2023 $ 195,487 Investments- Warrants Fair value at December 31, 2021 (Restated) $ 172,330 Receipt of warrants (Restated) 536,087 Change in fair value of warrants (Restated) (501,522) Fair value at December 31, 2022 (Restated) $ 206,895 Investments- Stock Fair value at December 31, 2022 $ 7,943,817 Receipt of stock 2,801,296 Change in fair value of stock (2,121,901) Fair value at December 31, 2023 $ 8,623,212 Investments- Stock Fair value at December 31, 2021 (Restated) $ 4,413,271 Receipt of stock (Restated) 2,577,415 Change in fair value of stock (Restated) 953,131 Fair value at December 31, 2022 (Restated) $ 7,943,817 The following range of variables were used in valuing Level 3 warrant assets during the years ended December 31, 2023 and 2022: 2023 2022 Expected life (years) 1.42 - 3.58 2.42 - 4.58 Risk-free interest rate 3.84 - 3.84 % 3.99 % Expected volatility 36.0 - 102.0 % 25.0 - 89.0 % Annual dividend yield 0 % 0 % Underlying share values $ 0.30 – $100.00 $ 0.30 – $100.00 Strike Prices $ 0.30 – $100.00 $ 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 Receivable Accounts receivable are recorded at the recognized 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 December 31, 2023 and December 31, 2022 was $179,388 and $357,709, respectively. Bad debt expense for the year ended December 31, 2023 and 2022 was $722,932 and $582,009, respectively. As of December 31, 2023 the Company had accounts receivable over 90 days totaling $0. |
Investment Securities | 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 income, net in the accompanying 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 | 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. 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 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. · 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 | Investments - Stock In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment in 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 has 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 has 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. During the year ended December 31, 2023 and 2022, the Company received stock with a cost of $2,801,296 and $2,577,415, respectively, as payment for fees. During the year ended December 31, 2023 and 2022, write down expense related to shares received amounted to $2,121,901 for 2023, and gross up adjustment related to shares received amounted to $953,131, respectively. |
Investments - Private | Investments – Private The Company purchases shares of venture capital backed, late-stage private companies and records the purchases at cost. The cost of the underlying asset includes the purchase price and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, investigation, and acquisition of the underlying securities. 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 StartEngine Fund. Each time the company sells shares to the StartEngine Funds, it reduces its holdings by the cost basis of the sale. Below is a breakdown of the StartEngine Private assets by industry held at the end of the reporting period, each of these investments are small minority stakes in the underlying companies. Industry Investment Video Games 643,558 Fintech 901,784 AI Hardware 1,040,039 Sales Technology 754,868 Messaging Platforms 403,495 Software Development 613,339 Total 4,357,083 |
Investments - Collectibles | 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 below is a breakdown of the types of collectibles and their value held as of December 31, 2023 and 2022: Period Ended December 31, Period Ended December 31, 2023 2022 (Restated) Wine $ 278,360 $ 388,587 Trading Cards 466,484 486,657 Artwork 1,322,942 1,287,378 Comic Books 324,477 704,477 NFT 730 64,472 Watches 53,128 53,128 Total collectibles $ 2,446,121 $ 2,984,699 |
Investments - Real Estate | Investments – Real Estate The Company has invested $2,136,628 to purchase a membership interest in an LLC that owns one residential apartment building in California as of December 31, 2023. The company values this interest via the adjusted cost measurement alternative per ASC 321-10-35-2 |
Intangible Assets | Intangible Assets Intangible assets are stated at gross cost less accumulated amortization and presented separately from other long-term assets in accordance with ASC 350-30-50-2. |
Noncontrolling Interest | 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 | 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 $4,719,370 and $4,439,550 were charged to stockholders’ equity during the year ended December 31, 2023 and 2022, respectively. |
Cost of Revenues | Cost of Revenues Cost of revenues consists of internal employees, hosting fees, processing fees, certain software subscription fees that are required to provide services to our issuers, and for StartEngine Private acquisition costs related to underlying securities that it has sold to an SE Fund. Our cost of revenues during the fiscal years ended December 31, 2023 and December 31, 2022 was $8,703,894 and $7,050,899, respectively. The cost of revenues for StartEngine Private was $1,850,954 and $0 for the fiscal year ended December 31, 2023 and 2022. |
Research and Development | 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 year ended December 31, 2023 and 2022, research and development costs were $5,779,920 and $4,667,596, respectively. |
Stock-Based Compensation | 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 cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. |
Earnings per Common and Common Equivalent Share | 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 year ended December 31, 2023 and 2022 as the effects would be anti-dilutive. See Note 7 for outstanding stock-options as of December 31, 2023 and 2022. The weighted average shares outstanding – diluted is calculated as follows for the period ended December 31, 2023 and 2022: December 31, 2023 Weighted average shares outstanding - basic 677,344,569 Weighted average shares outstanding - diluted 677,344,569 December 31, 2022 Weighted average shares outstanding - basic 660,765,225 Weighted average shares outstanding - diluted 660,765,225 |
Concentration of Credit Risk | 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 credit worthy. 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 | 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 consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of assets and liabilities that are measured at fair value | 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 $ 384,483 $ — $ 8,436,802 $ 8,821,285 Level 1 Level 2 Level 3 Total Marketable securities 1,856 — — 1,856 Investment - warrants (Restated) — — 206,895 206,895 Investment - stock (Restated) — — 7,943,817 7,943,817 Cryptocurrency 16,604 — — 16,604 Non-Fungible Token ("NFT") 47,868 — — 47,868 $ 66,328 $ — $ 8,150,712 $ 8,217,040 |
Schedule of additional information about transfers in and out of Level 3 assets measured at fair value | Investments- Warrants Fair value at December 31, 2022 $ 206,895 Receipt of warrants — Change in fair value of warrants (11,409) Fair value at December 31, 2023 $ 195,487 Investments- Warrants Fair value at December 31, 2021 (Restated) $ 172,330 Receipt of warrants (Restated) 536,087 Change in fair value of warrants (Restated) (501,522) Fair value at December 31, 2022 (Restated) $ 206,895 Investments- Stock Fair value at December 31, 2022 $ 7,943,817 Receipt of stock 2,801,296 Change in fair value of stock (2,121,901) Fair value at December 31, 2023 $ 8,623,212 Investments- Stock Fair value at December 31, 2021 (Restated) $ 4,413,271 Receipt of stock (Restated) 2,577,415 Change in fair value of stock (Restated) 953,131 Fair value at December 31, 2022 (Restated) $ 7,943,817 |
Schedule of range of variables used in valuing Level 3 warrant assets | 2023 2022 Expected life (years) 1.42 - 3.58 2.42 - 4.58 Risk-free interest rate 3.84 - 3.84 % 3.99 % Expected volatility 36.0 - 102.0 % 25.0 - 89.0 % Annual dividend yield 0 % 0 % Underlying share values $ 0.30 – $100.00 $ 0.30 – $100.00 Strike Prices $ 0.30 – $100.00 $ 0.30 – $100.00 |
Schedule of StartEngine Private assets by industry held at the end of the reporting period | Industry Investment Video Games 643,558 Fintech 901,784 AI Hardware 1,040,039 Sales Technology 754,868 Messaging Platforms 403,495 Software Development 613,339 Total 4,357,083 |
Schedule of breakdown of the types of collectibles and their value held | Period Ended December 31, Period Ended December 31, 2023 2022 (Restated) Wine $ 278,360 $ 388,587 Trading Cards 466,484 486,657 Artwork 1,322,942 1,287,378 Comic Books 324,477 704,477 NFT 730 64,472 Watches 53,128 53,128 Total collectibles $ 2,446,121 $ 2,984,699 |
Schedule of disaggregation of revenues | Year Year Ended December 31, Ended December 31, 2023 2022 (Restated) Regulation Crowdfunding platform fees $ 11,115,372 $ 10,278,596 Regulation A commissions 1,197,178 5,421,047 StartEngine Premium 2,740,337 2,289,999 StartEngine Secure 1,426,320 1,311,930 StartEngine Private 2,709,621 — Venture Club (formerly OWNers Bonus) revenue 4,002,656 4,106,643 Other service revenue 194,514 646,617 Total revenues $ 23,385,998 $ 24,054,832 |
Schedule of calculation of weighted average shares outstanding - diluted | December 31, 2023 Weighted average shares outstanding - basic 677,344,569 Weighted average shares outstanding - diluted 677,344,569 December 31, 2022 Weighted average shares outstanding - basic 660,765,225 Weighted average shares outstanding - diluted 660,765,225 |
MARKETABLE SECURITIES AND INV_2
MARKETABLE SECURITIES AND INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
MARKETABLE SECURITIES AND INVESTMENTS | |
Schedule of marketable securities | December 31, 2023 December 31, 2022 Common stock $ 1,856 $ 1,856 $ 1,856 $ 1,856 |
Schedule of investment warrants | Beginning balance Received for fees Change in fair value Ending balance 2022 172,330 536,087 (501,522) 206,895 2023 206,895 741 (12,149) 195,487 |
Schedule of investment stocks | Beginning balance Received for fees Change in fair value Ending balance 2022 4,413,271 2,577,415 953,131 7,943,817 2023 7,943,817 2,801,296 (2,121,901) 8,623,212 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | December 31, 2023 December 31, 2022 Computer equipment $ 160,784 $ 137,048 Software 3,753 3,753 Total property and equipment 164,537 140,801 Accumulated depreciation (44,814) (31,659) $ 119,723 $ 109,142 |
INTANGIBLE ASSETS - (Tables)
INTANGIBLE ASSETS - (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
INTANGIBLE ASSETS | |
Schedule of estimated aggregate amortization for succeeding fiscal years | 2024 3,445,863 2025 3,445,863 2026 3,445,863 2027 3,445,863 2028 3,445,863 Total 17,229,315 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
STOCKHOLDERS' EQUITY | |
Schedule of inputs valued under using the Black-Scholes pricing model | 2023 2022 Expected life (years) 6.5 6.5 Risk-free interest rate 3.6 % 2.5 % Expected volatility 45.7 % 45.7 % Annual dividend yield 0 % 0 % |
Schedule of stock option activity and related information | Weighted Weighted average Average Remaining Number of Exercise Contractual Shares Price Term Outstanding at December 31, 2021 141,596,660 $ 0.1180 6.50 Granted 26,011,240 0.7295 Exercised (158,540) 0.1800 Expired/Cancelled (15,420,160) 0.4145 Outstanding at December 31, 2022 152,029,200 $ 0.1995 6.50 Granted 45,576,920 0.9900 Exercised (2,676,100) 0.0275 Expired/Cancelled (9,181,140) 0.7180 Outstanding at December 31, 2023 185,748,880 $ 0.1995 6.50 Exercisable at December 31, 2023 123,049,620 $ 0.1380 6.50 Vested and expected to vest at December 31, 2023 185,748,880 $ 0.0100 6.50 |
Schedule of stock option expense | 2023 2022 Cost of revenues $ 743,087 $ 299,881 General and administrative 1,220,932 1,327,114 Sales and marketing 4,001,941 1,994,853 Research and development 1,091,441 371,577 Total $ 7,057,401 $ 3,993,425 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
INCOME TAXES | |
Summary of provision for income tax expense (benefit) | The provision for income tax expense (benefit) consists of the following: Current income tax expense (benefit) - Deferred income tax expense (benefit) - Total income tax expense (benefit) - Effective Rate Reconciliation: Pre-Tax income (loss) (16,308,366) |
Summary of reconciliations of the expected income tax expense (benefit) and the actual income tax expense (benefit) | 2023 2022 Expected Federal income tax expense (benefit) (3,424,757) 21.00% (1,661,193) 21.00% State income tax expense (benefit) (1,141,586) 7.00% (553,731) 7.00% Stock option compensation 926,072 (5.68)% 1,118,159 (14.14)% Section 162(m) Limitation 364,000 (2.23)% 711,245 (8.99)% Warrants issued - 0.00% (150,105) 1.90% Other permanent differences (3,577) 0.02% (27,695) 0.35% Prior Year True-Up Adjustments (3,117,890) 19.12% (713,419) 9.02% Change in Valuation Allowance 6,397,738 (39.23)% 1,276,739 (16.14)% Total income tax expense (benefit) - - - |
Summary of Net deferred income tax assets (liabilities) | 2023 2022 Deferred tax assets (liabilities) Net Operating Loss Carryovers 5,457,368 3,283,454 Credit Carryovers 2,127,544 1,390,684 Capitalized Research and Development 1,752,064 732,731 Reserves and Allowances 50,229 100,159 Capital Loss Carryover 21,557 22,425 Depreciation 1,922 (8,590) Deferred Tax Assets 9,410,684 5,520,863 Less: Valuation Allowance (9,410,684) (5,520,863) Net Deferred Tax Assets - - |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | 12 Months Ended | |||
May 06, 2024 shares | May 05, 2024 shares | Dec. 31, 2023 USD ($) shares | Dec. 31, 2022 USD ($) | |
Error Corrections and Prior Period Adjustments Restatement | ||||
Stock split conversion ratio | 0.05 | |||
Common stock shares authorized to issue after split | 1,500,000,000 | 1,500,000,000 | ||
Preferred stock shares authorized to issue after split | 519,000,000 | |||
Cash and cash equivalents | $ | $ 12,656,298 | $ 15,460,469 | ||
Impairment of shares received as compensation | 33% | |||
Subsequent Event [Member] | ||||
Error Corrections and Prior Period Adjustments Restatement | ||||
Stock split conversion ratio | 0.05 | |||
Common stock shares authorized to issue after split | 1,500,000,000 | |||
Preferred stock shares authorized to issue after split | 519,000,000 |
NATURE OF OPERATIONS - Descript
NATURE OF OPERATIONS - Description of Restatement Tables (Balance Sheet) (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2021 | |
Current assets: | |||
Cash | $ 15,460,469 | $ 12,656,298 | |
Marketable securities | 1,856 | 1,856 | |
Accounts receivable, net of allowance | 678,672 | 193,696 | |
Other current assets | 1,304,304 | 720,767 | |
Total current assets | 17,445,301 | 13,572,617 | |
Property and equipment, net | 109,142 | 119,723 | |
Investments - warrants | 206,895 | 195,487 | |
Investments - stock | 7,943,817 | 8,623,212 | |
Investments - Collectibles | 2,984,699 | 2,446,121 | |
Investments - Real Estate | 2,136,628 | 2,136,628 | |
Due from related party | 209,190 | ||
Intangible assets | 20,000 | 21,892,192 | |
Other assets | 66,600 | 42,138 | |
Total assets | 30,913,082 | 53,594,391 | |
Liabilities | |||
Accounts payable | 284,371 | 278,691 | |
Accrued liabilities | 2,785,500 | 4,456,756 | |
Deferred revenue | 2,715,422 | 3,520,150 | |
Total current liabilities | 5,785,293 | 8,255,597 | |
Equity | |||
Common stock, value | 6,660 | 6,971 | |
Accumulated deficit | (28,261,952) | (44,637,430) | |
Total stockholders' equity | 25,127,789 | 45,338,794 | $ 26,031,500 |
Total liabilities and stockholders' equity | 30,913,082 | 53,594,391 | |
Series A Preferred Stock | |||
Equity | |||
Preferred stock value | 5,286,667 | 5,286,667 | |
Series T Preferred Stock | |||
Equity | |||
Preferred stock value | 983,634 | 983,634 | |
Series Seed Preferred Stock | |||
Equity | |||
Preferred stock value | 1,706,756 | $ 1,706,756 | |
Previously Reported | |||
Current assets: | |||
Cash | 15,460,469 | ||
Marketable securities | 1,856 | ||
Accounts receivable, net of allowance | 702,257 | ||
Other current assets | 1,953,756 | ||
Total current assets | 18,118,338 | ||
Property and equipment, net | 109,141 | ||
Investments - warrants | 1,496,701 | ||
Investments - stock | 6,479,340 | ||
Investments - Collectibles | 3,072,227 | ||
Investments - Real Estate | 2,136,628 | ||
Intangible assets | 20,000 | ||
Other assets | 66,603 | ||
Total assets | 31,498,978 | ||
Liabilities | |||
Accounts payable | 284,371 | ||
Accrued liabilities | 1,760,920 | ||
Deferred revenue | 2,715,422 | ||
Total current liabilities | 4,760,713 | ||
Equity | |||
Common stock, value | 6,660 | ||
Additional paid-in capital | 45,632,823 | ||
Noncontrolling interest | (13,251) | ||
Accumulated deficit | (26,865,024) | ||
Total stockholders' equity | 26,738,265 | 27,914,634 | |
Total liabilities and stockholders' equity | 31,498,978 | ||
Previously Reported | Series A Preferred Stock | |||
Equity | |||
Preferred stock value | 5,286,667 | ||
Previously Reported | Series T Preferred Stock | |||
Equity | |||
Preferred stock value | 983,634 | ||
Previously Reported | Series Seed Preferred Stock | |||
Equity | |||
Preferred stock value | 1,706,756 | ||
Adjustment | |||
Current assets: | |||
Accounts receivable, net of allowance | (23,585) | ||
Other current assets | (649,452) | ||
Total current assets | (673,037) | ||
Investments - warrants | (1,289,806) | ||
Investments - stock | 1,464,477 | ||
Investments - Collectibles | (87,528) | ||
Total assets | (585,894) | ||
Liabilities | |||
Accrued liabilities | 1,024,580 | ||
Total current liabilities | 1,024,580 | ||
Equity | |||
Additional paid-in capital | (213,548) | ||
Accumulated deficit | (1,396,928) | ||
Total stockholders' equity | (1,610,476) | $ (1,883,134) | |
Total liabilities and stockholders' equity | (585,896) | ||
As Restated | |||
Current assets: | |||
Cash | 15,460,469 | ||
Marketable securities | 1,856 | ||
Accounts receivable, net of allowance | 678,672 | ||
Other current assets | 1,304,304 | ||
Total current assets | 17,445,301 | ||
Property and equipment, net | 109,141 | ||
Investments - warrants | 206,895 | ||
Investments - stock | 7,943,817 | ||
Investments - Collectibles | 2,984,699 | ||
Investments - Real Estate | 2,136,628 | ||
Intangible assets | 20,000 | ||
Other assets | 66,603 | ||
Total assets | 30,913,084 | ||
Liabilities | |||
Accounts payable | 284,371 | ||
Accrued liabilities | 2,785,500 | ||
Deferred revenue | 2,715,422 | ||
Total current liabilities | 5,785,293 | ||
Equity | |||
Common stock, value | 6,660 | ||
Additional paid-in capital | 45,419,275 | ||
Noncontrolling interest | (13,251) | ||
Accumulated deficit | (28,261,952) | ||
Total stockholders' equity | 25,127,789 | ||
Total liabilities and stockholders' equity | 30,913,082 | ||
As Restated | Series A Preferred Stock | |||
Equity | |||
Preferred stock value | 5,286,667 | ||
As Restated | Series T Preferred Stock | |||
Equity | |||
Preferred stock value | 983,634 | ||
As Restated | Series Seed Preferred Stock | |||
Equity | |||
Preferred stock value | $ 1,706,756 |
NATURE OF OPERATIONS - Descri_2
NATURE OF OPERATIONS - Description of Restatement Tables (Statement of Operations) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Error Corrections and Prior Period Adjustments Restatement | ||
Revenues | $ (23,385,998) | $ (24,054,832) |
Cost of Revenue | 8,703,894 | 7,050,899 |
General and administrative | 10,207,544 | 8,678,128 |
Sales and Marketing | 13,013,676 | 12,208,947 |
Research and development | 5,779,920 | 4,667,596 |
Change in fair value of warrants received for fees | 11,409 | 501,522 |
Change in fair value of shares received for fees | 2,122,211 | (953,131) |
Impairment in value of shares received for fees | 2,121,901 | (953,131) |
Other expense (income), net | (144,290) | (188,684) |
Taxes - Other | 67,112 | 63,563 |
Net Loss | $ (16,375,478) | $ (7,974,008) |
Weighted average loss per share - basic | $ (0.02) | $ (0.01) |
Weighted average loss per share - diluted | $ (0.02) | $ (0.01) |
Previously Reported | ||
Error Corrections and Prior Period Adjustments Restatement | ||
Revenues | $ 24,360,685 | |
Cost of Revenue | 6,368,629 | |
General and administrative | 8,723,615 | |
Sales and Marketing | 12,478,887 | |
Research and development | 4,667,593 | |
Change in fair value of warrants received for fees | 169,520 | |
Change in fair value of shares received for fees | 21,863 | |
Other expense (income), net | (188,684) | |
Taxes - Other | 63,563 | |
Net Loss | $ (7,944,301) | |
Weighted average loss per share - basic | $ 0.01 | |
Weighted average loss per share - diluted | $ 0.01 | |
Adjustment | ||
Error Corrections and Prior Period Adjustments Restatement | ||
Cost of Revenue | $ 682,270 | |
General and administrative | 881,760 | |
Sales and Marketing | 7,571 | |
Change in fair value of warrants received for fees | 1,289,806 | |
Change in fair value of shares received for fees | (1,464,477) | |
Net Loss | (1,396,930) | |
Second Adjustment | ||
Error Corrections and Prior Period Adjustments Restatement | ||
Revenues | (305,853) | |
General and administrative | (927,247) | |
Sales and Marketing | (277,511) | |
Research and development | 3 | |
Change in fair value of warrants received for fees | (957,804) | |
Change in fair value of shares received for fees | 489,483 | |
Net Loss | 1,367,223 | |
As Restated | ||
Error Corrections and Prior Period Adjustments Restatement | ||
Revenues | 24,054,832 | |
Cost of Revenue | 7,050,899 | |
General and administrative | 8,678,128 | |
Sales and Marketing | 12,208,947 | |
Research and development | 4,667,596 | |
Change in fair value of warrants received for fees | 501,522 | |
Change in fair value of shares received for fees | (953,131) | |
Other expense (income), net | (188,684) | |
Taxes - Other | 63,563 | |
Net Loss | $ (7,974,008) | |
Weighted average loss per share - basic | $ 0.01 | |
Weighted average loss per share - diluted | $ 0.01 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Hierarchy (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Investment - stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Stock carry value | 33% | |
Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | $ 8,821,285 | $ 8,217,040 |
Recurring | Marketable securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,856 | 1,856 |
Recurring | Investment - stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 8,623,212 | 7,943,817 |
Recurring | Investment - Warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 195,487 | 206,895 |
Recurring | Cryptocurrency | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 16,604 | |
Recurring | Non-Fungible Token ("NFT") | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 730 | 47,868 |
Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 384,483 | 66,328 |
Recurring | Level 1 | Marketable securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,856 | 1,856 |
Recurring | Level 1 | Investment - stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 381,897 | |
Recurring | Level 1 | Cryptocurrency | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 16,604 | |
Recurring | Level 1 | Non-Fungible Token ("NFT") | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 730 | 47,868 |
Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 8,436,802 | 8,150,712 |
Recurring | Level 3 | Investment - stock | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 8,241,315 | 7,943,817 |
Recurring | Level 3 | Investment - Warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | $ 195,487 | $ 206,895 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Transfers in and out of Level 3 assets measured at fair value - Investments - warrants (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Investments - warrants | ||
Transfers in and out of Level 3 assets measured at fair value | ||
Fair value at Beginning balance | $ 206,895 | $ 172,330 |
Receipt of warrants | 741 | 536,087 |
Change in fair value of warrants | (11,409) | (501,522) |
Fair value at Ending balance | 195,487 | 206,895 |
Investments - stock | ||
Transfers in and out of Level 3 assets measured at fair value | ||
Fair value at Beginning balance | 7,943,817 | 4,413,271 |
Receipt of warrants | 2,801,296 | 2,577,415 |
Change in fair value of warrants | (2,121,901) | 953,131 |
Fair value at Ending balance | $ 8,623,212 | $ 7,943,817 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Range of variables were used in valuing Level 3 warrant assets (Details) | Dec. 31, 2023 $ / shares Y | Dec. 31, 2022 $ / shares Y |
Expected life (years) | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | Y | 1.42 | 2.42 |
Expected life (years) | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | Y | 3.58 | 4.58 |
Risk-free interest rate | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 3.99 | |
Risk-free interest rate | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 3.84 | |
Risk-free interest rate | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 3.84 | |
Expected volatility | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 36 | 25 |
Expected volatility | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 102 | 89 |
Annual dividend yield | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 0 | 0 |
Underlying share values | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 0.30 | 0.30 |
Underlying share values | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 100 | 100 |
Strike Prices | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 0.30 | 0.30 |
Strike Prices | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 100 | 100 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts receivable and Investment - Stock (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Allowance for doubtful accounts | $ 179,388 | $ 357,709 |
Bad debt expense | 722,932 | 582,009 |
Accounts receivable over 90 days | 0 | |
Cost of stock received as payment for fees | $ 2,801,296 | 2,577,415 |
Investments - stock | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Stock carry value | 33% | |
Change in fair value of warrants | $ (2,121,901) | $ 953,131 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - A breakdown of the types of collectibles and their value held (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Wine | $ 278,360 | $ 388,587 |
Trading Cards | 466,484 | 486,657 |
Artwork | 1,322,942 | 1,287,378 |
Comic Books | 324,477 | 704,477 |
NFT | 730 | 64,472 |
Watches | 53,128 | 53,128 |
Total collectibles | $ 2,446,121 | $ 2,984,699 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - StartEngine Private assets by industry held at the end of the reporting period (Details) | Dec. 31, 2023 USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | $ 4,357,083 |
Video Games | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | 643,558 |
Fintech | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | 901,784 |
AI Hardware | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | 1,040,039 |
Sales Technology | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | 754,868 |
Messaging Platforms | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | 403,495 |
Software Development | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Investments - Private | $ 613,339 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Investments - Real Estate, Seedinvest and Equity Offering Costs (Details) | 12 Months Ended | |
Dec. 31, 2023 USD ($) building | Dec. 31, 2022 USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Number of residential apartment building in which the company has invested | building | 1 | |
Investments - Real Estate | $ 2,136,628 | $ 2,136,628 |
Equity offering costs stockholders' equity | $ 4,719,370 | $ 4,439,550 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Revenue Recognition | ||
Membership fee | $ 275 | |
Percentage of bonus shares that the members are entitled | 10% | |
Revenue, Practical Expedient, Financing Component [true false] | false | |
Term of contract with customers | 1 year | |
Deferred revenue | $ 3,520,150 | $ 2,715,422 |
Total revenues | 23,385,998 | 24,054,832 |
Cost of revenues | $ 8,703,894 | 7,050,899 |
Regulation Crowdfunding platform fees | ||
Revenue Recognition | ||
Revenue remaining performance obligation expected timing of satisfaction period | 12 months | |
Total revenues | $ 11,115,372 | 10,278,596 |
Regulation A commissions | ||
Revenue Recognition | ||
Total revenues | 1,197,178 | 5,421,047 |
StartEngine Premium | ||
Revenue Recognition | ||
Total revenues | 2,740,337 | 2,289,999 |
StartEngine Secure | ||
Revenue Recognition | ||
Total revenues | 1,426,320 | 1,311,930 |
StartEngine Private | ||
Revenue Recognition | ||
Total revenues | 2,709,621 | |
Cost of revenues | 1,850,954 | 0 |
Venture Club (formerly OWNers Bonus) revenue | ||
Revenue Recognition | ||
Total revenues | 4,002,656 | 4,106,643 |
Other service revenue | ||
Revenue Recognition | ||
Total revenues | $ 194,514 | $ 646,617 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Research and Development, Calculation of weighted average shares outstanding - diluted (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Research and development | $ 5,779,920 | $ 4,667,596 |
Balances are insured by the federal deposit insurance corporation | $ 250,000 | |
Calculation of weighted average shares outstanding - diluted | ||
Weighted average shares outstanding - basic | 677,344,569 | 660,765,225 |
Weighted average shares outstanding - diluted | 677,344,569 | 660,765,225 |
MARKETABLE SECURITIES AND INV_3
MARKETABLE SECURITIES AND INVESTMENTS - Marketable securities (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
MARKETABLE SECURITIES AND INVESTMENTS | ||
Marketable securities | $ 1,856 | $ 1,856 |
Common stock | ||
MARKETABLE SECURITIES AND INVESTMENTS | ||
Marketable securities | $ 1,856 | $ 1,856 |
MARKETABLE SECURITIES AND INV_4
MARKETABLE SECURITIES AND INVESTMENTS - Warrants & Stock (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Investments - warrants | ||
Marketable Securities [Line Items] | ||
Fair value at Beginning balance | $ 206,895 | $ 172,330 |
Received for fees | 741 | 536,087 |
Change in fair value | $ (12,149) | $ (501,522) |
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Fair Value Adjustment of Warrants | Fair Value Adjustment of Warrants |
Fair value at Ending balance | $ 195,487 | $ 206,895 |
Investments - Stock | ||
Marketable Securities [Line Items] | ||
Fair value at Beginning balance | 7,943,817 | 4,413,271 |
Received for fees | 2,801,296 | 2,577,415 |
Change in fair value | $ (2,121,901) | $ 953,131 |
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Fair Value Adjustment Of Shares, Received For Fees | Fair Value Adjustment Of Shares, Received For Fees |
Fair value at Ending balance | $ 8,623,212 | $ 7,943,817 |
MARKETABLE SECURITIES AND INV_5
MARKETABLE SECURITIES AND INVESTMENTS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
MARKETABLE SECURITIES AND INVESTMENTS | ||
Unrealized gain (loss) on investments | $ 0 | $ 0 |
Investments - stock | ||
MARKETABLE SECURITIES AND INVESTMENTS | ||
Stock carry value | 33% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
PROPERTY AND EQUIPMENT | ||
Total property and equipment | $ 164,537 | $ 140,801 |
Accumulated depreciation | (44,814) | (31,659) |
Property and equipment, net | 119,723 | 109,142 |
Computer equipment | ||
PROPERTY AND EQUIPMENT | ||
Total property and equipment | 160,784 | 137,048 |
Software | ||
PROPERTY AND EQUIPMENT | ||
Total property and equipment | $ 3,753 | $ 3,753 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
PROPERTY AND EQUIPMENT | ||
Depreciation | $ 13,155 | $ 13,090 |
INTANGIBLE ASSETS - (Details)
INTANGIBLE ASSETS - (Details) - USD ($) | 12 Months Ended | |
May 05, 2023 | Dec. 31, 2023 | |
Intangible Assets. | ||
Percentage of concentration of gross assets | 100% | |
SI Securities, LLC | ||
Intangible Assets. | ||
Number of common stock shares issuable | 960,000 | |
Share price | $ 1.25 | |
Consideration on acquisition | $ 24,000,000 | |
Useful life | 7 years | |
Gross carrying amount | $ 24,121,040 | |
Accumulated amortization | 2,248,848 | |
Aggregate amortization | $ 17,229,315 |
INTANGIBLE ASSETS - Schedule of
INTANGIBLE ASSETS - Schedule of estimated amortization expense (Details) - SI Securities, LLC | Dec. 31, 2023 USD ($) |
Intangible Assets. | |
2024 | $ 3,445,863 |
2025 | 3,445,863 |
2026 | 3,445,863 |
2027 | 3,445,863 |
2028 | 3,445,863 |
Total | $ 17,229,315 |
STOCKHOLDERS' EQUITY - Preferre
STOCKHOLDERS' EQUITY - Preferred Stock (Details) | 12 Months Ended | ||
May 05, 2024 | Dec. 31, 2023 USD ($) $ / shares shares | Dec. 31, 2022 $ / shares shares | |
Preferred stock, shares authorized | shares | 519,000,000 | ||
Preferred stock, par value (in dollars per share) | $ 0.00001 | ||
Stock split conversion ratio | 0.05 | ||
Series A Preferred Stock | |||
Preferred stock, shares authorized | shares | 207,000,000 | 207,000,000 | |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | |
Per share amount available for distribution on liquidation | $ 0.0286 | ||
Stock split conversion ratio | 1 | ||
Maximum offering price per share for conversion | $ 2.86 | ||
Maximum aggregate gross proceeds for conversion | $ | $ 15,000,000 | ||
Series T Preferred Stock | |||
Preferred stock, shares authorized | shares | 99,000,000 | 99,000,000 | |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | |
Per share amount available for distribution on liquidation | $ 0.1465 | ||
Stock split conversion ratio | 1 | ||
Maximum offering price per share for conversion | $ 0.14667 | ||
Maximum aggregate gross proceeds for conversion | $ | $ 15,000,000 | ||
Series Seed Preferred Stock | |||
Preferred stock, shares authorized | shares | 213,000,000 | 213,000,000 | |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | |
Per share amount available for distribution on liquidation | $ 0.0083 | ||
Stock split conversion ratio | 1 | ||
Maximum offering price per share for conversion | $ 0.14317 | ||
Maximum aggregate gross proceeds for conversion | $ | $ 15,000,000 |
STOCKHOLDERS' EQUITY - Common S
STOCKHOLDERS' EQUITY - Common Stock (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | May 05, 2024 | |
STOCKHOLDERS' EQUITY | |||
Common stock, shares authorized | 1,500,000,000 | 1,500,000,000 | |
Common stock shares authorized to issue after split | 1,500,000,000 | 1,500,000,000 | |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | |
Sale of common stock (in shares) | 9,105,220 | 8,032,900 | |
Proceeds from sale of common stock | $ 10,162,061 | $ 7,469,264 | |
Incurred offering costs | $ 4,719,370 | $ 4,539,550 |
STOCKHOLDERS' EQUITY - Inputs v
STOCKHOLDERS' EQUITY - Inputs valued under using the Black-Scholes pricing model (Details) | 12 Months Ended | |
Dec. 31, 2023 Y $ / shares shares | Dec. 31, 2022 Y $ / shares | |
Fair Value Measurement Inputs and Valuation Techniques | ||
Exercise price of options granted | $ 0.9900 | $ 0.7295 |
Expected life (years) | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | Y | 6.5 | 6.5 |
Risk-free interest rate | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 3.6 | 2.5 |
Expected volatility | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 45.7 | 45.7 |
Annual dividend yield | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Measurement input | 0 | 0 |
2015 Equity Incentive Plan | ||
Fair Value Measurement Inputs and Valuation Techniques | ||
Maximum number of shares authorized to issue | shares | 231,800,000 | |
Exercise price of options granted | $ 0.2165 | $ 1.25 |
Vesting term | 4 years | |
Expire term | 10 years |
STOCKHOLDERS' EQUITY - Addition
STOCKHOLDERS' EQUITY - Additional Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
STOCKHOLDERS' EQUITY | ||
Weighted average grant date fair values of options granted | $ 0.99 | $ 0.73 |
Proceeds from exercise of employee stock options | $ 86,390 | $ 38,035 |
Intrinsic value of options exercised | 3,394,400 | 925,607 |
Stock option expense | 7,057,401 | $ 3,993,425 |
Compensation cost related to nonvested awards not yet recognized | $ 20,229,215 | |
Compensation cost related to nonvested awards not yet recognized, expected weighted-average period for recognition | 2 years 8 months 26 days |
STOCKHOLDERS' EQUITY - Stock op
STOCKHOLDERS' EQUITY - Stock option activity and related information (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Options | |||
Beginning balance (in shares) | 152,029,200 | 141,596,660 | |
Granted | 45,576,920 | 26,011,240 | |
Exercised | (2,676,100) | (158,540) | |
Expired/Cancelled | (9,181,140) | (15,420,160) | |
Vested and expected to vest | 185,748,880 | ||
Exercisable | 123,049,620 | ||
Ending balance (in shares) | 185,748,880 | 152,029,200 | 141,596,660 |
Weighted Average Exercise Price | |||
Beginning balance (USD per share) | $ 0.1995 | $ 0.1180 | |
Granted (USD per share) | 0.9900 | 0.7295 | |
Exercised (USD per share) | 0.0275 | 0.1800 | |
Expired/Cancelled (USD per share) | 0.7180 | 0.4145 | |
Vested and expected to vest (usd per share) | 0.0100 | ||
Exercisable (usd per share) | 0.1380 | ||
Ending balance (USD per share) | $ 0.1995 | $ 0.1995 | $ 0.1180 |
Weighted average Remaining Contractual Life, Outstanding | 6 years 6 months | 6 years 6 months | 6 years 6 months |
Weighted average Remaining Contractual Term, Vested and expected to vest | 6 years 6 months | ||
Weighted average Remaining Contractual Term, Exercisable | 6 years 6 months | ||
2015 Equity Incentive Plan | |||
Weighted Average Exercise Price | |||
Granted (USD per share) | $ 0.2165 | $ 1.25 |
STOCKHOLDERS' EQUITY - Stock _2
STOCKHOLDERS' EQUITY - Stock option expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | $ 7,057,401 | $ 3,993,425 |
Cost of revenues | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | 743,087 | 299,881 |
General and administrative | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | 1,220,932 | 1,327,114 |
Sales and marketing | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | 4,001,941 | 1,994,853 |
Research and development | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | $ 1,091,441 | $ 371,577 |
INCOME TAXES - Provision for in
INCOME TAXES - Provision for income tax expense (benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
INCOME TAXES | ||
Total income tax expense (benefit) | $ 67,112 | $ 63,563 |
INCOME TAXES - Effective Rate R
INCOME TAXES - Effective Rate Reconciliation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
INCOME TAXES | ||
Pre-Tax income (loss) | $ (16,308,366) | $ (7,910,445) |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of the expected income tax expense (benefit) and the actual income tax expense (benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
INCOME TAXES | ||
Expected Federal income tax expense (benefit) | $ (3,424,757) | $ (1,661,193) |
State income tax expense (benefit) | (1,141,586) | (553,731) |
Stock option compensation | 926,072 | 1,118,159 |
Section 162(m) Limitation | 364,000 | 711,245 |
Other permanent differences | (3,577) | (27,695) |
Warrants issued | (150,105) | |
Prior Year True-Up Adjustments | (3,117,890) | (713,419) |
Change in Valuation Allowance | 6,397,738 | 1,276,739 |
Total income tax expense (benefit) | $ 67,112 | $ 63,563 |
U.S. Federal Statutory Tax Rate (Percentage) | 21% | 21% |
State income tax expense (benefit) | 7% | 7% |
Stock option compensation | (5.68%) | (14.14%) |
Section 162(m) Limitation | (2.23%) | (8.99%) |
Warrants issued | 0% | 1.90% |
Other permanent differences | 0.02% | 0.35% |
Prior Year True-Up Adjustments | 19.12% | 9.02% |
Change in Valuation Allowance | (39.23%) | (16.14%) |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) | Dec. 31, 2023 USD ($) |
U.S. | |
Effective Income Tax Rate Reconciliation [Line Items] | |
Net operating loss carryforwards | $ 17,516,800 |
Operating loss carryforwards subject to expiration | 2,217,168 |
State | |
Effective Income Tax Rate Reconciliation [Line Items] | |
Operating loss carryforwards subject to expiration | $ 25,412,005 |
INCOME TAXES - Net deferred inc
INCOME TAXES - Net deferred income tax assets (liabilities) (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
INCOME TAXES | ||
Net Operating Loss Carryovers | $ 5,457,368 | $ 3,283,454 |
Credit Carryovers | 2,127,544 | 1,390,684 |
Reserves and Allowances | 50,229 | 100,159 |
Capitalized Research and Development | 1,752,064 | 732,731 |
Capital Loss Carryover | 21,557 | 22,425 |
Depreciation | 1,922 | (8,590) |
Gross Deferred Tax Assets | 9,410,684 | 5,520,863 |
Less: Valuation Allowance | $ (9,410,684) | $ (5,520,863) |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | 1 Months Ended | 12 Months Ended | |||||
Jun. 14, 2024 $ / shares shares | May 06, 2024 shares | May 05, 2024 shares | Mar. 25, 2024 $ / shares shares | Feb. 29, 2024 USD ($) | Dec. 31, 2023 $ / shares shares | Dec. 31, 2022 $ / shares shares | |
SUBSEQUENT EVENTS | |||||||
Stock split conversion ratio | 0.05 | ||||||
Common stock shares authorized to issue after split | 1,500,000,000 | 1,500,000,000 | |||||
Preferred stock shares authorized to issue after split | 519,000,000 | ||||||
Granted | 45,576,920 | 26,011,240 | |||||
Exercise price of options granted | $ / shares | $ 0.9900 | $ 0.7295 | |||||
Subsequent events | |||||||
SUBSEQUENT EVENTS | |||||||
Litigation settlement amount | $ | $ 2,100,000 | ||||||
Litigation liability | $ | 200,000 | ||||||
Litigation settlement amount reimbursed from insurance policy | $ | $ 1,900,000 | ||||||
Stock split conversion ratio | 0.05 | ||||||
Common stock shares authorized to issue after split | 1,500,000,000 | ||||||
Preferred stock shares authorized to issue after split | 519,000,000 | ||||||
Granted | 9,160,000 | ||||||
Subsequent events | Employee | Employees other than Chief Executive Officer | |||||||
SUBSEQUENT EVENTS | |||||||
Granted | 7,160,000 | 13,480,000 | |||||
Exercise price of options granted | $ / shares | $ 1.25 | $ 1.25 | |||||
Subsequent events | Employee | Chief Executive Officer | |||||||
SUBSEQUENT EVENTS | |||||||
Granted | 2,000,000 | ||||||
Exercise price of options granted | $ / shares | $ 1.38 |