| Stockholders’ Equity | Note
5. Stockholders’ Equity Authorized
Capital Stock On
March 9, 2022, the Company filed Articles of Incorporation with the state of Nevada to authorize the Company to issue 250,000,000 shares,
consisting of 10,000,000 shares of Class A Common Stock, $0.0001 par value per share (“Class A Common”), 190,000,000 shares
of Class B Common stock, $0.0001 par value per share (“Class B Common”), and 50,000,000 shares of Preferred
Stock, $0.0001 par value (the “Preferred Stock”). On
June 27, 2024, the Company filed a Certificate of Change pursuant to Section 78.209 of the Nevada Revised Statutes with the Secretary
of State of the State of Nevada authorizing a 1-for-5 reverse stock split of the Company’s issued and outstanding shares of class
A common stock and class B common stock. As a result of the Reverse Stock Split, the Company will be authorized to issue 40,000,000 shares
of common stock, consisting of 2,000,000 shares of Class A Common Stock and 38,000,000 shares of Class B Common Stock. Preferred
Stock The
Company shall have the authority to issue the shares of Preferred Stock in one or more series with such rights, preferences and designations
as determined by the Board of Directors of the Company. Series
A Convertible Preferred Stock On
May 24, 2024, the Company filed a Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”)
with the Secretary of State of the State of Nevada designating 660 shares of the Company’s Preferred Stock, $0.0001 par
value per share, as “Series A Convertible Preferred Stock,” and setting forth the voting and other powers, preferences
and relative, participating, optional or other rights of the Series A Preferred Stock. Each share of Series A Preferred Stock has an
initial stated value (“Stated Value”) of $10,000 per share. The
Series A Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and
winding up of the Company, ranks senior to all capital stock of the Company unless the holders of the majority of the outstanding shares
of Series A Preferred Stock consent to the creation of other capital stock of the Company that is senior or equal in rank to the Series
A Preferred Stock. Holders
of Series A Preferred Stock will be entitled to receive cumulative dividends, in shares of Class B Common Stock or cash on the Stated
Value at an annual rate of 6% (which will increase to 12% if a Triggering Event (as defined in the Certificate of Designation)
occurs. Dividends will be payable upon conversion of the Series A Preferred Stock or upon any redemption. Holders
of Series A Preferred Stock will be entitled to convert shares of Series A Preferred Stock into a number of shares of Class B Common
Stock determined by dividing the Stated Value (plus any accrued but unpaid dividends and other amounts due, unless paid by the Company
in cash) by the conversion price of the Series A Preferred Stock (the “Conversion Price”). The initial Conversion Price is
$0.75, subject to adjustment including adjustments due to full-ratchet anti-dilution provisions. Holders may elect to convert shares
of Series A Preferred Stock to Class B Common Stock at an alternate Conversion Price equal to 85% (or 70% if the Company’s
Class B Common Stock is suspended from trading on or delisted from a principal trading market or upon occurrence of a Triggering Event)
of the average lowest daily volume weighed average price of the Class B Common Stock during the Alternate Conversion Measuring Period
(as defined in the Certificate of Designation). On
September 4, 2024, the Company, filed an amendment (the “Second Amended Designation”) to the Certificate of Designation of
Series A Convertible Preferred Stock of the Company (as amended, the “Certificate of Designation”), which amended the original
Certificate of Designation, as amended by the Certificate of Amendment to Designation of Series A Convertible Preferred Stock of Asset
Entities Inc. filed with the Secretary of State of the State of Nevada on June 14, 2024, by providing that amendments may be made to
the beneficial ownership limitation provisions of the Certificate of Designation. The Second Amended Designation became effective immediately
upon filing. Immediately
after the filing of the Second Amended Designation, the Company filed an amendment (the “Third Amended Designation”) to the
Certificate of Designation to amend the conversion and beneficial ownership limitation provisions of the Certificate of Designation.
The conversion provisions were amended to provide that a holder of Series A Convertible Preferred Stock, $0.0001 par value per share
(the “Series A Preferred Stock”), is not prohibited from delivering a Conversion Notice (as defined by the Certificate of
Designation) while another Conversion Notice remains outstanding. The beneficial ownership provisions were amended to provide that any
conversion of shares of Series A Preferred Stock that would result in the holder beneficially owning in excess of 4.99% of the shares
of Class B Common Stock, $0.0001 par value per share (“Class B Common Stock”), will not be effected, and the shares of Class
B Common Stock that would cause such excess will be held in abeyance and not issued to the holder until the date the Company is notified
by the holder that its ownership is less than 4.99%, at the applicable Conversion Price (as defined by the Certificate of Designation),
and subject to the holder’s compliance with other applicable procedural requirements for conversion. The Third Amended Designation
became effective immediately upon filing. Securities
Purchase Agreement Series
A Convertible Preferred Stock On
May 24, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”)
for the issuance and sale of up to 330 shares of the Company’s newly designated Series A Convertible Preferred Stock,
$0.0001 par value per share (“Series A Preferred Stock”), for maximum gross proceeds of $3,000,000. Pursuant to the
Purchase Agreement, the Company is required to issue and sell 165 shares of Series A Preferred Stock at each of two closings
subject to the satisfaction of the terms and conditions for each closing. The first closing (the “First Closing”) occurred
on May 24, 2024 for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $1,500,000. The second
closing (the “Second Closing”), for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds
of $1,500,000, will occur on the first business day on which the conditions specified in the Purchase Agreement for the Second Closing
are satisfied or waived, including the filing and effectiveness of the Registration Statement and the effectiveness of the Stockholder
Consent. In addition, the Company issued a warrant to Boustead for the purchase of 30,800 shares of Class B Common Stock with
an exercise price of $3.75 per share. The warrant is exercisable for a period of five years and contains cashless
exercise provisions. The Company received $1,345,000, net of offering cost of $155,000. The
Second Closing, for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $1,500,000, occurred
on July 29, 2024, which was the first business day on which the conditions specified in the Purchase Agreement for the Second Closing
were satisfied or waived. The Company received $1,302,500, net of offering cost of $197,500. On
the date of the Second Closing, the Company was required to issue a warrant to Boustead Securities, LLC for the purchase of 30,800 shares
of Class B Common Stock, equal to 7% of the number of shares of Class B Common Stock that may be issued upon conversion of the shares
of Series A Preferred Stock sold at the Second Closing at the initial Conversion Price of $3.75 per share, subject to the Exchange
Limitation before the effectiveness of the Stockholder Approval (the “Fourth Tail Warrant”). The Fourth Tail Warrant has
an exercise price of $3.75 per share. On
July 30, 2024, Boustead’s rights to the Fourth Tail Warrant were assigned to an assignee. The Fourth Tail Warrant was consequently
cancelled and a new warrant was issued to the assignee. During
the nine months ended September 30, 2024, the Company issued 330 shares of Series A Convertible Preferred Stock for $2,647,500, net of
discount. During
the nine months ended September 30, 2024, 49 shares of Series A Convertible Preferred Stock valued at $497,766 including divided of $7,766
into 412,947 shares of Class B Stock. The
Company had 281 shares of Series A Convertible Preferred Stock issued and outstanding as of September 30, 2024. Waive
of agreement On
September 20, 2024, the Company entered into a Waiver and Consent, dated as of September 20, 2024 (the “Ionic ATM Waiver”),
between the Company and Ionic Ventures, LLC (“Ionic”), the sole holder of the Company’s Series A Convertible Preferred
Stock, $0.0001 par value per share (“Series A Preferred Stock”). Pursuant to the Waiver and Consent, Ionic waived any prohibition,
restriction or adverse adjustment that would otherwise apply to any action of the Company relating to an “at the market offering”
(as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”)), of equity securities
of up to $5 million (“Waived ATM”) under the Securities Purchase Agreement, dated as of May 24, 2024, between the Company
and Ionic. Pursuant to the Ionic ATM Waiver, regardless of the terms and conditions of the Ionic Purchase Agreement and the Series A
Certificate of Designation, the Company may at any time enter into any agreement relating to a Waived ATM, the filing of a prospectus
supplement to a prospectus contained in an effective registration statement that was filed under the Securities Act relating to a Waived
ATM, the announcement of a Waived ATM, the issuance, offer, sale, or grant of any shares of the Company’s Class B Common Stock,
$0.0001 par value per share (“Class B Common Stock”), relating to a Waived ATM, or the issuance, offer, sale, or grant of
any securities in connection with either the provision of goods or services or settlement of any obligations that may otherwise arise
with respect to a Waived ATM. In addition, pursuant to the Ionic ATM Waiver, Ionic waived any adjustment to the applicable Conversion
Price (as defined in the Series A Certificate of Designation), which partly determines the number of shares of Class B Common Stock issuable
upon conversion of a share of Series A Preferred Stock, that would otherwise occur as a result of any Waived ATM under the terms of the
Series A Certificate of Designation. On
September 26, 2024, the Company entered into a Limited Waiver and Consent, dated as of September 26, 2024 (the “Boustead ATM
Waiver”), between the Company and Boustead Securities, LLC. Pursuant to the Boustead ATM Waiver, Boustead waived any condition
on, restriction on, compensation rights, or rights of first refusal that would be applicable under the letter agreement, dated November
29, 2021, between the Company and Boustead (the “Boustead Engagement Letter”) and the Underwriting Agreement, dated as of
February 2, 2023, between the Company and Boustead (as representative of the underwriters named therein) in relation to an “at
the market offering” (as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”))
of equity securities of up to $5 million (a “Boustead Waived ATM”). Pursuant to the Boustead ATM Waiver, the Company may
at any time enter into any agreement relating to a Boustead Waived ATM, the filing of a prospectus supplement to a prospectus contained
in an effective registration statement that was filed under the Securities Act relating to a Boustead Waived ATM, the announcement of
a Boustead Waived ATM, the issuance, offer, sale, or grant of any shares of the Class B Common Stock relating to a Boustead Waived ATM,
or the issuance, offer, sale, or grant of any securities in connection with either the provision of goods or services or settlement of
any obligations that may otherwise arise with respect to a Boustead Waived ATM. As consideration, the Boustead ATM Waiver provides that
the Company will promptly pay Boustead 3.0% of the gross sales price of all shares of Class B Common Stock sold in connection with any
Boustead Waived ATM until the end of the applicability of the provisions of the right of first refusal provisions of the Boustead Engagement
Letter. Class
A Common Stock Each
share of Class A Common Stock entitles the holder to ten (10) votes, in person or proxy, on any matter on which an action of
the stockholders of the Company is sought and is convertible by the holder into one (1) share of Class B Common Stock. As
part of a share conversion in March 2022, the Company converted the 97.56% membership interest to 1,951,200 shares of
Class A Common Stock of the Company. The Company has reflected this conversion for all periods presented. The
Company had 1,250,000 and 1,677,056 shares of Class A Common Stock issued and outstanding as of September 30, 2024
and December 31, 2023, respectively. Class
B Common Stock Each
share of Class B Common Stock entitles the holder to one (1) vote, in person or proxy, on any matter on which an action of
the stockholders of the Company is sought. The
Company had 2,225,889 and 1,207,827 shares of Class B Common Stock issued as of September 30, 2024 and December 31,
2023, respectively. Nine
months ended September 30, 2024 During
the nine months ended September 30, 2024, the Company issued Class B common stock as follows:
● 427,056 shares of Class A common stock were converted into 427,056 shares of Class B common stock.
● 124,318 shares of Class B common stock for cash of $194,434 net (Triton Purchase agreement).
● 51,800 shares of Class B common stock for restricted stock awards valued at $95,342.
● 5,000 shares of Class B common stock for purchase of intangible asset valued at $9,500.
● 368,947 shares of Class B common stock for conversion of Series A Convertible Preferred stock. 44,000 shares were not yet issued at September 30, 2024.
● 30,067 shares of Class B common stock for cancellation
● 71,008 shares of Class B common stock for reverse stock split adjustment valued. Treasury
Stock During
the year ended December 31, 2023, the Company repurchased 50,000 shares of Class B Common stock at $176,876 and recorded
as treasury stock as of September 30, 2024 and December 31, 2023. Triton
Purchase Agreement On
June 30, 2023, the Company, entered into a Closing Agreement (the “Closing Agreement”) with Triton. Under the Closing Agreement,
the Company agreed to sell to Triton shares of class B common stock, $0.0001 par value per share, of the Company (the “Class
B Common Stock”), having a total value, as determined under the Closing Agreement, of $1,000,000. On
August 1, 2023, the Company and Triton entered into an Amended and Restated Closing Agreement (the “Amended and Restated Closing
Agreement”). Subject to the terms of the Amended and Restated Closing Agreement, the Company may deliver a closing notice (the
“Closing Notice”) and issue certain securities to Triton at any time on or before April 30, 2024, pursuant to which Triton
will be obligated to purchase such securities of the Company with an aggregate value of $1,000,000 in the following manner. Upon
delivery of the Closing Notice, Triton must purchase newly-issued shares of Class B Common Stock of the Company (the “Triton Shares”)
in an amount equal to up to 9.99% of the outstanding shares of Class B Common Stock following such purchase, plus pre-funded warrants
(the “Triton Pre-Funded Warrants” and together with the Triton Shares, the “Triton Securities”) that may be exercised
to purchase an amount of newly-issued shares of Class B Common Stock (the “Triton Warrant Shares”), such that the aggregate
price of the Triton Shares and the Triton Pre-Funded Warrants together with the exercise price to be paid upon full exercise of the Triton
Pre-Funded Warrants will equal a total gross purchase price of $1,000,000. Upon the Company’s election to deliver the Closing Notice,
the price of each of the Triton Shares will be set at 85% of the lowest daily volume-weighted average price of the Class B Common
Stock during the five (5) business days before and five business days after the date of the Closing Notice. On
March 27, 2024, the Company delivered a Closing Notice to Triton (the “Second Closing Notice”) for the purchase of 124,318 shares
of the Company’s Class B Common Stock to Triton Funds LP, a Delaware limited partnership (“Triton”). The price of the
shares was required to be 85% of the lowest daily volume-weighted average price of the Class B Common Stock during the five five five In
connection with the Triton Closing, pursuant to the Boustead Engagement Letter and the Underwriting Agreement, the Company paid Boustead,
as placement agent compensation, a total of $16,907, equal to 7% of the aggregate purchase price and a non-accountable expense allowance
equal to 1% of the aggregate purchase price for the Triton Shares. In addition, the Company issued a warrant to Boustead for the
purchase of 8,702 shares of Class B Common Stock, equal to 7% of the number of the Triton Shares, with an exercise price
of $1.70 per share, equal to the purchase price per share of the Triton Shares (the “Tail Warrant”). The Tail Warrant
is exercisable for a period of five years and contains cashless exercise provisions. Sales
agreement of Class B Common Stock On
September 27, 2024, the Company entered into a Sales Agreement between the Company and A.G.P./Alliance Global Partners (the “Sales
Agent”). Pursuant to the prospectus supplement and accompanying base prospectus relating to the offering of the Shares (as defined
below), and under terms of the Sales Agreement and the prospectus supplement and the accompanying base prospectus, filed on September
27, 2024, the Company may, from time to time, in transactions that are deemed to be “at the market offerings” as defined
in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), issue and sell through or to the Sales Agent,
up to a maximum aggregate amount of $1,791,704 of shares of the Company’s Class B Common Stock, $0.0001 par value per share (the
“Shares”). The
Company will pay the Sales Agent a cash commission of 3.0% of the gross sales price of the Shares sold by the Sales Agent pursuant to
the Sales Agreement. Pursuant to the terms of the Sales Agreement, the Company also agreed to reimburse the Sales Agent for reasonable
fees and expenses, not to exceed $60,000 (including but not limited to the reasonable and documented fees and disbursements of its legal
counsel), and additional amounts for annual maintenance of the Sales Agreement (including but not limited to the reasonable and documented
fees and disbursements of its legal counsel) on a quarterly basis, not to exceed $5,000 per quarter. 2022
Equity Incentive Plan The
maximum number of shares of Class B Common Stock that may be issued pursuant to awards granted under the 2022 Plan is 550,000 shares.
Awards that may be granted include: (a) Incentive Stock Options, or ISO, (b) Non-statutory Stock Options, (c) Stock Appreciation Rights,
(d) Restricted Stock, the Restricted Stock Units, or RSUs, (f) Stock granted as a bonus or in lieu of another award, and (g) Performance
Awards. These awards offer us and our shareholders the possibility of future value, depending on the long-term price appreciation of
our Class B Common Stock and the award holder’s continuing service with us. The
RSA shares to directors vest quarterly for one year from the date of grantee’s appointment as a director. The RSA shares to officers
vest annually over three years from the grant date. RSA shares are measured at fair market value on the date of grant and stock-based
compensation expense is recognized as the shares vest with a corresponding offset credited to additional paid-in-capital. For the nine
months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense of $910,583 and $904,241, respectively.
As of September 30, 2024, 204,766 RSA shares have vested. As
of September 30, 2024, there was $1,302,748 of unrecognized stock-based compensation expense related to unvested RSUs, which is
expected to be recognized over a weighted-average period of 1.39 years. Warrant A
summary of activity during the nine months ended September 30, 2024, follows: Number of Weighted Average Weighted Average shares Exercise Price Life (years) Outstanding, December 31, 2023 35,188 $ 28.12 4.05 Granted 70,302 3.50 4.92 Expired - - - Exercised - - - Outstanding, September 30, 2024 105,490 $ 11.71 4.17 All
the outstanding warrants are exercisable as of September 30, 2024. The intrinsic value of the warrants as of September 30, 2024, is $0. |
