United States securities and exchange commission logo
September 9, 2022
Howard Marks
Chief Executive Officer
StartEngine Crowdfunding, Inc.
3900 West Alameda Avenue
Suite 1200
Burbank, CA 91505
Re: StartEngine
Crowdfunding, Inc.
Amendment No. 2 to
Form 10-12G
Filed August 4,
2022
File No. 000-56415
Dear Mr. Marks:
We have reviewed your amended filing and have the following
comments. In some of
our comments, we may ask you to provide us with information so we may
better understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response and any amendment you may file in
response to these
comments, we may have additional comments. Unless we note otherwise, our
references to prior
comments are to comments in our June 22, 2022 letter.
Amendment No. 2 to Form 10-12G filed August 4, 2022
General
1. We note your disclosure
on pages 5 and 7 that StartEngine Assets is selling shares in
series for wine, fine
art, trading cards and comics. On page F-11, we also note
your disclosure that
you have added an NFT and watches to these previously enumerated
assets and that you
hold crypto assets, which are included as other current assets in the
balance sheets. Please
revise your description of StartEngine Assets throughout, as
appropriate, to include
a discussion of these additional assets, as well as any other assets
you have, or
contemplate adding. In addition, please add detailed disclosure regarding
your future plans with
respect to crypto assets and NFTs and the role you anticipate these
assets playing in your
business, including whether you intend to offer interests in
Howard Marks
StartEngine Crowdfunding, Inc.
September 9, 2022
Page 2
collectible assets relating to any additional NFTs or crypto assets
other than bitcoin. We
may have further comments based upon your response and revised
disclosures.
Item 1A. Risk Factors, page 15
2. We note your response to prior comment 3 and disclosure of your
restated consolidated
financial statements for the year ended December 31, 2021. We also
note that on August
9, 2022, you filed a Form 8-K to report Item 4.02 Non-Reliance on
Previously Issued
Financial Statements or a Related Audit Report or Completed Interim
Review, including
that the Company's management concluded that, in light of the
classification errors and
aggregation of errors as described, your disclosure controls and
procedures were not
effective and you deemed these errors to be a material weakness in
your internal
controls. Please enhance your risk factor disclosure on page 15, "As
we grow our
business, we may not be able to manage our growth successfully......"
in which you
address the risks with regard to your internal controls, to provide
consistent disclosure
with your Item 4.02. Refer to Regulation S-K, Item 308(c).
Item 10. Recent Sales of Unregistered Securities, page 35
3. We note your response to prior comment 2 and your revised disclosures.
You disclose
that the Company has not yet received funds for all of the sales
related to the March 11,
2019 through July 7, 2020 Common Stock issuances however on page F-23
you do not
disclose any subscription receivable outstanding at December 31, 2020.
Please revise
your disclosures accordingly.
Note 2. Summary of Significant Accounting Policies
Fair Value of Financial Instruments, page F-6
4. We note your response to prior comment 7 and reissue in part as
follows:
Please remove investment stock received from customers accounted
for in
accordance with ASC 321-10-35-2; Equity Securities without Readily
Determinable
Fair Values; from your fair value hierarchy tables on pages F-7 and
F-30 as well as
related fair value disclosures based on your accounting policy and
provide the
FirstName LastNameHoward
required disclosures Marks
in ASC 321-10-50.
Comapany NameStartEngine
Tell us how the stockCrowdfunding, Inc.
received with a cost of $2.9 million as
disclosed on page F-32
reconciles
September 9, 2022 Pageto related
2 cash flow activity on page F-24.
FirstName LastName
Howard Marks
FirstName
StartEngineLastNameHoward Marks
Crowdfunding, Inc.
Comapany 9,
September NameStartEngine
2022 Crowdfunding, Inc.
September
Page 3 9, 2022 Page 3
FirstName LastName
Investments - Collectibles, page F-10
5. We note your NFT investment collectible totaling $47.8k as of March
31, 2022. We
further note your disclosure that your collectibles are purchased by
your subsidiary,
StartEngine Assets, LLC (the "Administrative Manager") and sold to
your Series LLC
subsidiary collectible funds for cash or a promissory note. Please
provide us with the
following additional information:
Confirm for us that the Series LLC subsidiary collectible fund you
are referring to is
StartEngine Collectibles Fund I LLC;
Tell us whether the NFT was purchased with cash;
Describe the nature of the underlying rights acquired via purchase
of the NFT and
explain what happens to those rights when an NFT is sold to your
subsidiary
collectible fund;
Tell us how long collectibles, including the NFT, are typically
held by StartEngine
Assets LLC prior to sale to your subsidiary collectible fund; and
Quantify for us any revenue and costs recognized for the NFT and
provide any other
relevant metrics to describe the materiality of the NFT on your
financial results and
business plan. Additionally, tell us how you expect the purchase
of NFTs to impact
your financial results and trends in future periods.
6. Please tell us and revise to disclose the unit of account for your
impairment testing of
each class of investment collectibles. Refer to ASC 350-30-35-23.
Crypto Assets, page F-11
7. We note crypto assets totaled $36.8k as of March 31, 2022, which
included one bitcoin
recorded at cost less impairment. Please tell us the purpose for which
the bitcoin was
purchased and whether it was purchased with cash. In addition,
quantify for us any
impairment recognized for the bitcoin during the period and provide
any other relevant
metrics to describe the materiality of the bitcoin on your financial
results and business
plan. Additionally, tell us how you expect the purchase of crypto
assets to impact your
financial results and trends in future periods.
Accounts Receivable, page F-31
8. We note your response to prior comment 6 and reissue in part as
follows. Please address
the following:
Tell us how the recognition of accounts receivable complies
with the guidance in
ASC 606-10-25 and ASC 606-10-32.
Tell us how much of the balances at both March 31, 2022 and
December 31, 2021 for
accounts receivable and deferred revenue offset.
Provide us with deferred revenue disaggregated by revenue type
at both March 31,
2022 and December 31, 2021 and tell us how the recognition
compiles with the
guidance in ASC 606-10-45.
Howard Marks
StartEngine Crowdfunding, Inc.
September 9, 2022
Page 4
Tell us how the increase in your allowance directly against
deferred revenue complies
with the guidance in ASC 310-10-35-24.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Michelle Miller at (202) 551-3368 or Sharon Blume at
(202) 551- 3474
if you have questions regarding comments on the financial statements and
related matters. Please
contact Eric Envall at (202) 551-3234 or David Lin at (202) 551-3552 with any
other questions.
FirstName LastNameHoward Marks Sincerely,
Comapany NameStartEngine Crowdfunding, Inc.
Division of
Corporation Finance
September 9, 2022 Page 4 Office of Finance
FirstName LastName