Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 14, 2023 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 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, $0.00001 par value | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 34,655,810 | |
Entity Central Index Key | 0001661779 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Tax Identification Number | 00-0000000 | |
No Trading Symbol Flag | true | |
Entity Address, Postal Zip Code | 91505 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash | $ 15,829,806 | $ 15,460,469 |
Marketable securities | 1,856 | 1,856 |
Accounts receivable, net of allowance | 744,878 | 702,257 |
Other current assets | 2,164,690 | 1,953,756 |
Total current assets | 18,741,230 | 18,118,338 |
Property and equipment, net | 119,095 | 109,141 |
Investments - warrants | 1,497,442 | 1,496,701 |
Investments - stock | 8,654,081 | 6,479,340 |
Investments - Collectibles | 2,504,822 | 3,072,227 |
Investments - Real Estate | 2,136,628 | 2,136,628 |
Intangible assets | 23,492,269 | 20,000 |
Other assets | 67,107 | 66,603 |
Total assets | 57,212,674 | 31,498,978 |
Current liabilities: | ||
Accounts payable | 388,095 | 284,371 |
Accrued liabilities | 3,602,655 | 1,760,920 |
Deferred revenue | 3,595,858 | 2,715,422 |
Total current liabilities | 7,586,608 | 4,760,713 |
Total liabilities | 7,586,608 | 4,760,713 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, par value $0.00001, 75,000,000 shares authorized, 34,655,810 and 33,301,662 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively. | 342 | 332 |
Additional paid-in capital | 77,658,260 | 45,639,151 |
Noncontrolling interest | (13,251) | (13,251) |
Accumulated deficit | (35,996,342) | (26,865,024) |
Total stockholders' equity | 49,626,066 | 26,738,265 |
Total liabilities and stockholders' equity | 57,212,674 | 31,498,978 |
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 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | |
Preferred stock, shares authorized | 25,950,000 | |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 34,655,810 | 33,301,662 |
Common stock, shares outstanding | 34,655,810 | 33,301,662 |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 10,350,000 | 10,350,000 |
Preferred stock, shares issued | 9,272,044 | 9,272,044 |
Preferred stock, shares outstanding | 9,272,044 | 9,272,044 |
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 | 4,950,000 | 4,950,000 |
Preferred stock, shares issued | 482,104 | 482,211 |
Preferred stock, shares outstanding | 482,104 | 482,211 |
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 | 10,650,000 | 10,650,000 |
Preferred stock, shares issued | 10,240,536 | 10,247,938 |
Preferred stock, shares outstanding | 10,240,536 | 10,247,938 |
Preferred stock, liquidation preference | $ 1,707,990 | $ 1,707,990 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Revenues | $ 5,701,917 | $ 5,229,159 | $ 15,660,161 | $ 19,578,222 |
Cost of revenues | 1,715,915 | 1,753,004 | 4,623,131 | 5,451,888 |
Gross profit | 3,986,002 | 3,476,155 | 11,037,030 | 14,126,334 |
Operating expenses: | ||||
General and administrative | 2,766,779 | 2,639,351 | 6,692,247 | 9,936,537 |
Sales and marketing | 3,470,654 | 2,572,402 | 9,317,490 | 9,901,596 |
Research and development | 1,701,921 | 1,398,330 | 4,159,141 | 4,010,775 |
Impairment in value of shares received for fees | 21,863 | 21,863 | ||
Total operating expenses | 7,939,354 | 6,631,946 | 20,168,878 | 23,870,771 |
Operating income (loss) | (3,953,352) | (3,155,791) | (9,131,848) | (9,744,437) |
Other expense (income), net: | ||||
Other expense (income), net | (20,286) | (85,086) | (65,462) | (216,204) |
Total other expense (income), net | (20,286) | (85,086) | (65,462) | (216,204) |
Income (loss) before provision for income taxes | (3,933,066) | (3,070,705) | (9,066,386) | (9,528,233) |
Provision for income taxes | 39,466 | 4,161 | 64,932 | 62,345 |
Net income (loss) | (3,972,532) | (3,074,866) | (9,131,318) | (9,590,578) |
Less: net loss attributable to noncontrolling interest | (9,124) | |||
Net Income (loss) attributable to stockholders | $ (3,972,532) | $ (3,074,866) | $ (9,131,318) | $ (9,581,454) |
Weighted average loss per share - basic | $ (0.11) | $ (0.09) | $ (0.27) | $ (0.29) |
Weighted average loss per share - diluted | $ (0.11) | $ (0.09) | $ (0.27) | $ (0.29) |
Weighted average shares outstanding - basic | 34,614,795 | 33,086,652 | 33,946,962 | 33,086,652 |
Weighted average shares outstanding - diluted | 34,614,795 | 33,086,652 | 33,946,962 | 33,086,652 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Preferred Stock Series A Preferred Stock | Preferred Stock Series T Preferred Stock | Preferred Stock Series Seed Preferred Stock | Common Stock | Additional Paid-in Capital | Subscription Receivable | Noncontrolling Interest | Accumulated Deficit | Total |
Balance at the beginning at Dec. 31, 2021 | $ 5,286,667 | $ 983,852 | $ 1,707,990 | $ 328 | $ 39,246,724 | $ (367,831) | $ (4,127) | $ (18,938,969) | $ 27,914,633 |
Balance at the beginning (in shares) at Dec. 31, 2021 | 9,272,044 | 482,211 | 10,247,938 | 32,865,193 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Exercise of stock options | 18,521 | 18,521 | |||||||
Exercise of stock options (in shares) | 7,927 | ||||||||
Stock compensation expense | 1,979,475 | 1,979,475 | |||||||
Noncontrolling interest | (9,124) | 9,124 | |||||||
Net loss | (2,148,468) | (2,148,468) | |||||||
Balance at the end at Mar. 31, 2022 | $ 5,286,667 | $ 983,852 | $ 1,707,990 | $ 328 | 41,244,720 | (367,831) | (13,251) | (21,078,313) | 27,764,161 |
Balance at the end (in shares) at Mar. 31, 2022 | 9,272,044 | 482,211 | 10,247,938 | 32,873,120 | |||||
Balance at the beginning at Dec. 31, 2021 | $ 5,286,667 | $ 983,852 | $ 1,707,990 | $ 328 | 39,246,724 | (367,831) | (4,127) | (18,938,969) | $ 27,914,633 |
Balance at the beginning (in shares) at Dec. 31, 2021 | 9,272,044 | 482,211 | 10,247,938 | 32,865,193 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock (in shares) | 318,537 | ||||||||
Offering costs | $ (3,960,923) | ||||||||
Net loss | (9,581,454) | ||||||||
Balance at the end at Sep. 30, 2022 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 331 | 46,900,913 | (13,251) | (28,511,299) | 26,353,750 | |
Balance at the end (in shares) at Sep. 30, 2022 | 9,272,044 | 482,104 | 10,240,536 | 33,199,166 | |||||
Balance at the beginning at Mar. 31, 2022 | $ 5,286,667 | $ 983,852 | $ 1,707,990 | $ 328 | 41,244,720 | (367,831) | (13,251) | (21,078,313) | 27,764,161 |
Balance at the beginning (in shares) at Mar. 31, 2022 | 9,272,044 | 482,211 | 10,247,938 | 32,873,120 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock | $ 2 | 3,709,805 | (606,700) | 3,103,107 | |||||
Sale of common stock (in shares) | 206,023 | ||||||||
Stock compensation expense | 2,120,552 | 2,120,552 | |||||||
Offering costs | (3,456,142) | (3,456,142) | |||||||
Conversion to Common Stock | $ (218) | $ (1,234) | 1,452 | ||||||
Conversion to Common Stock (in shares) | (107) | (7,402) | 7,509 | ||||||
Net loss | (4,358,120) | (4,358,120) | |||||||
Balance at the end at Jun. 30, 2022 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 330 | 43,620,387 | (974,531) | (13,251) | (25,436,433) | 25,173,558 |
Balance at the end (in shares) at Jun. 30, 2022 | 9,272,044 | 482,104 | 10,240,536 | 33,086,652 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock | $ 1 | 1,513,575 | $ 974,531 | 2,488,107 | |||||
Sale of common stock (in shares) | 112,514 | ||||||||
Stock compensation expense | 2,271,732 | 2,271,732 | |||||||
Offering costs | (504,781) | (504,781) | |||||||
Net loss | (3,074,866) | (3,074,866) | |||||||
Balance at the end at Sep. 30, 2022 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 331 | 46,900,913 | (13,251) | (28,511,299) | 26,353,750 | |
Balance at the end (in shares) at Sep. 30, 2022 | 9,272,044 | 482,104 | 10,240,536 | 33,199,166 | |||||
Balance at the beginning at Dec. 31, 2022 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 332 | 45,639,151 | (13,251) | (26,865,023) | 26,738,265 | |
Balance at the beginning (in shares) at Dec. 31, 2022 | 9,272,044 | 482,104 | 10,240,536 | 33,301,662 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock | $ 1 | 1,124,508 | 1,124,509 | ||||||
Sale of common stock (in shares) | 59,235 | ||||||||
Exercise of stock options | $ 1 | 20,971 | 20,972 | ||||||
Exercise of stock options (in shares) | 113,080 | ||||||||
Stock compensation expense | 897,634 | 897,634 | |||||||
Offering costs | (770,651) | (770,651) | |||||||
Net loss | (2,059,918) | (2,059,917) | |||||||
Balance at the end at Mar. 31, 2023 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 334 | 46,911,613 | (13,251) | (28,924,941) | 25,950,812 | |
Balance at the end (in shares) at Mar. 31, 2023 | 9,272,044 | 482,104 | 10,240,536 | 33,473,977 | |||||
Balance at the beginning at Dec. 31, 2022 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 332 | 45,639,151 | (13,251) | (26,865,023) | $ 26,738,265 | |
Balance at the beginning (in shares) at Dec. 31, 2022 | 9,272,044 | 482,104 | 10,240,536 | 33,301,662 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock (in shares) | 260,818 | ||||||||
Net loss | $ (9,131,318) | ||||||||
Balance at the end at Sep. 30, 2023 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 342 | 77,658,260 | (13,251) | (35,996,342) | 49,626,066 | |
Balance at the end (in shares) at Sep. 30, 2023 | 9,272,044 | 482,104 | 10,240,536 | 34,655,810 | |||||
Balance at the beginning at Mar. 31, 2023 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 334 | 46,911,613 | (13,251) | (28,924,941) | 25,950,812 | |
Balance at the beginning (in shares) at Mar. 31, 2023 | 9,272,044 | 482,104 | 10,240,536 | 33,473,977 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock | $ 1 | 1,900,454 | 1,900,455 | ||||||
Sale of common stock (in shares) | 85,145 | ||||||||
Exercise of stock options | 375 | 375 | |||||||
Exercise of stock options (in shares) | 100 | ||||||||
Stock compensation expense | 1,927,283 | 1,927,283 | |||||||
Offering costs | (802,248) | (802,248) | |||||||
SeedInvest Acquisition | $ 10 | 23,999,990 | 24,000,000 | ||||||
SeedInvest Acquisition (in shares) | 960,000 | ||||||||
Net loss | (3,098,869) | (3,098,869) | |||||||
Balance at the end at Jun. 30, 2023 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 341 | 73,937,467 | (13,251) | (32,023,810) | 49,877,805 | |
Balance at the end (in shares) at Jun. 30, 2023 | 9,272,044 | 482,104 | 10,240,536 | 34,519,222 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Sale of common stock | $ 1 | 2,617,698 | 2,617,698 | ||||||
Sale of common stock (in shares) | 116,238 | ||||||||
Exercise of stock options | 50,875 | 50,875 | |||||||
Exercise of stock options (in shares) | 20,350 | ||||||||
Stock compensation expense | 2,080,565 | 2,080,565 | |||||||
Offering costs | (1,028,345) | (1,028,345) | |||||||
Net loss | (3,972,532) | (3,972,532) | |||||||
Balance at the end at Sep. 30, 2023 | $ 5,286,667 | $ 983,634 | $ 1,706,756 | $ 342 | $ 77,658,260 | $ (13,251) | $ (35,996,342) | $ 49,626,066 | |
Balance at the end (in shares) at Sep. 30, 2023 | 9,272,044 | 482,104 | 10,240,536 | 34,655,810 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities: | ||
Net Income (loss) | $ (9,131,318) | $ (9,590,578) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 9,817 | 9,817 |
Amortization | 648,767 | |
Bad debt expense | 98,864 | |
Fair value of warrants received for fees | (741) | (367,385) |
Fair value of investments - other received for fees | (2,174,741) | (1,848,516) |
Impairment of investments - other received for fees | 21,863 | |
Unrealized gain on investments | (52,845) | |
Stock-based compensation | 4,905,482 | 6,371,759 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (42,621) | 182,610 |
Other current assets | (211,438) | 1,563,495 |
Accounts payable | 103,724 | (11,225) |
Accrued liabilities | 1,841,735 | (900,672) |
Deferred revenue | 880,436 | (1,720,163) |
Net cash used in operating activities | (3,170,898) | (6,242,976) |
Cash flows from investing activities: | ||
Investments - Marketable Securities | (74,353) | |
Investments - Collectibles purchases, gross | (1,691,880) | |
Investments - Collectibles sales, gross | 567,405 | |
Purchase of Intangible Assets | (121,037) | |
Purchase of property and equipment | (19,771) | (61,269) |
Net cash used in investing activities | 426,597 | (1,827,502) |
Cash flows from financing activities: | ||
Proceeds from sale of common stock | 5,642,663 | 5,223,383 |
Subscription Receivable | 367,832 | |
Offering costs | (2,601,245) | (3,960,923) |
Proceeds from exercise of employee stock options | 72,220 | 18,521 |
Non-controlling interest | 9,124 | |
Net cash provided by financing activities | 3,113,638 | 1,657,937 |
(Decrease) increase in cash and restricted cash | 369,337 | (6,412,541) |
Cash and restricted cash, beginning of period | 15,460,469 | 21,000,367 |
Cash and restricted cash, end of period | 15,829,806 | 14,587,826 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | 64,932 | 62,344 |
Non Cash Investing & Financing Activities | ||
Purchase of SeedInvest Intellectual Property with Common Stock | $ 24,000,000 | |
Subscription Receivable as part of Common Stock | $ 367,832 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Sep. 30, 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 condensed consolidated financial statements of StartEngine Crowdfunding, Inc. (the “Company” are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s headquarters are located in Burbank, California. The Company aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. StartEngine Crowdfunding Inc. has wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Assets LLC and StartEngine Primary LLC. StartEngine Capital LLC is a funding portal registered with the US Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA), StartEngine Secure LLC is a transfer agent registered with the SEC. StartEngine Assets LLC was formed in 2020 to buy, hold and manage assets in various asset classes such as real estate, automobiles, luxury goods and royalty-producing intangible assets. StartEngine Primary LLC was formed in October 2017 and received approval to operate as a registered broker-dealer in July 2019. On April 16, 2020, StartEngine Primary LLC received approval to operate as an alternative trading system. StartEngine Adviser LLC is a wholly owned subsidiary of StartEngine Crowdfunding. StartEngine Adviser LLC will file as an exempt reporting adviser that will advise StartEngine Private LLC and it’s related series. StartEngine Adviser LLC is not registered with the Securities and Exchange Commission as an investment adviser. StartEngine Private Manager LLC is a wholly owned subsidiary of StartEngine Crowdfunding - it is the manager of StartEngine Private and the Series’. The Company’s mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years. Management Plans The Company’s revenue producing activities commenced in 2015 with the approved start of Title IV of the JOBS Act, which created new rules for Regulation A, and increased since then with the start of Regulation Crowdfunding under Title III of the JOBS Act. Because this is a relatively new industry, there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. Because there is a level of uncertainty and because we are still in the early stages of these new regulations, the Company is expected to incur losses until such time that the volume of Regulation A, Regulation D and Regulation Crowdfunding campaigns and the investments in those campaigns is sufficient for revenues derived from those campaigns to cover its costs. These factors could indicate substantial doubt about the Company’s ability to continue as a going concern. The Company has cash and cash equivalents of approximately $15.8 million, which its management believes will cover losses for the foreseeable future. The Company’s management believes that any substantial doubt about the Company’s ability to continue as a going concern has been alleviated. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP. The condensed consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc., its subsidiaries where we have controlling financial interests, and any variable interest entities for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year ending December 31, 2023. Principles of Consolidation The condensed consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.’s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, and StartEngine Primary LLC and StartEngine Assets LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of expenses during the reporting periods. Significant estimates include the value of marketable securities, the value of stock and warrants received as compensation and collectability of accounts receivable. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value: Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2- Include other inputs that are directly or indirectly observable in the marketplace. Level 3- Unobservable inputs which are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2023. 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 Cryptocurrency: Blockchain based currency that is valued based on quoted prices in active markets. Non-Fungible Token (“NFT”): Blockchain based collectible images that are valued based on quoted prices in active markets. Level 2 Investments: Marketable securities are made up of mutual funds and shares of common stock that are value based on quoted prices in active markets 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. The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of September 30, 2023: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 15,829,806 $ — $ — $ 15,829,806 Marketable securities — 1,856 — 1,856 Investment - warrants — — 1,497,442 1,497,442 Cryptocurrency 24,969 — — 24,969 Non-Fungible Token ("NFT") 730 — — 730 $ 15,855,505 $ 1,856 $ 1,497,442 $ 17,354,803 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 Cash and cash equivalents $ 15,460,469 $ — $ — $ 15,460,469 Marketable securities — 1,856 — 1,856 Investments - warrants — — 1,496,701 1,496,701 Cryptocurrency 16,604 — — 16,604 Non-Fungible Token ("NFT") 64,472 — — 64,472 $ 15,541,545 $ 1,856 $ 1,496,701 $ 17,040,102 The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the nine months ended September 30, 2023 and 2022 as it relates to Investments - warrants: Investments- Warrants Fair value at December 31, 2022 $ 1,496,701 Receipt of warrants 741 Change in fair value of warrants — Fair value at September 30, 2023 $ 1,497,442 Investments- Warrants Fair value at December 31, 2021 $ 1,130,133 Receipt of warrants 451,736 Change in fair value of warrants (84,351) Fair value at September 30, 2022 $ 1,497,518 The following range of variables were used in valuing Level 3 warrant assets during the nine months ended September 30, 2023 and 2022: 2023 2022 Expected life (years) 1 - 2.5 1 - 2.5 Risk-free interest rate 0.1% - 0.9 % 0.1% - 0.9 % Expected volatility 30% - 225 % 30% - 225 % 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. We may apply marketability discounts to private company warrants to account for a general lack of liquidity of 20% due to the private nature of the associated underlying company. The quantitative measure used is based upon various models. 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. Accounts Receivable Accounts receivables are recorded at the invoiced amount and are non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance for doubtful accounts as of September 30, 2023 and December 31, 2022 was $1,512,097 and $357,709, respectively. Bad debt expense for nine months ended September 30, 2023 and 2022 was $162,535 and $98,864, respectively. As of September 30, 2023 the Company had accounts receivable over 90 days totaling $458,197. 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 condensed consolidated statements of operations. Non-Marketable and Other Securities Non-marketable and other securities include investments in non-public equities. Our accounting for investments in non-marketable and other securities depends on several factors, including the level of ownership, power to control and the legal structure of the subsidiary making the investment. As further described below, we base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. Investments – Warrant Assets In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks, nor do we use other derivative instruments to hedge economic risks stemming from these warrants. We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a “cashless” exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our condensed consolidated balance sheet at the time they are obtained and remeasured each reporting period. The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt. Any changes in fair value from the grant date to fair value of warrants will be recognized as increases or decreases to investments on our condensed consolidated balance sheets and as a component of operating expenses on our condensed consolidated statements of operations. In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the condensed consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities. The fair value of the warrants portfolio is a critical accounting estimate and is reviewed each reporting period. We value our warrants using a modified Black-Scholes option pricing model, which incorporates the following significant inputs, in addition to certain adjustments for general lack of liquidity: · An underlying asset value, which is estimated based on current information available in valuation reports, including any information regarding subsequent rounds of funding or the performance of a company. · Stated strike price, which can be adjusted for certain warrants upon the occurrence of subsequent funding rounds or other future events. · Price volatility or risk associated with possible changes in the warrant price. The volatility assumption is based on historical price volatility of publicly traded companies within indices or companies similar in nature to the underlying client companies issuing the warrant. · 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) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, less adjustments for impairment in accordance with ASC 321-10-35-2. During the nine months ended September 30, 2023 and 2022, the Company received stock with a cost of $2,175,170 and $1,891,748, respectively, as payment for fees. During the nine months ended September 30, 2023 and 2022, impairment expense related to shares received amounted to $0 and $21,863 respectively. Investments – Collectibles The Company, through its subsidiary, purchases collectibles including art, wine, memorabilia, and other collectible assets, and are recorded at cost. The cost of the underlying asset includes the purchase price, including any deposits for the underlying asset and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, discovery, investigation, development and acquisition of the underlying assets. The Company treats the underlying assets as long-lived assets, and the underlying assets will be subject to an annual test for impairment and will not be depreciated or amortized. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. The underlying assets are purchased by our subsidiary, StartEngine Assets, LLC, (the “Administrative Manager”) and sold to our Series LLC subsidiary collectible funds for cash or a promissory note. The Series uses the proceeds of the offering to pay off the note. Acquisition expenses are typically paid for in advance by the Administrative Manager and are reimbursed by the Series from the proceeds of the offering in accordance with the offering circular. All such transactions are eliminated in consolidation. The below is a breakdown of the types of collectibles and their value held as of September 30, 2023 and December 31, 2022: Period Ended September 30, Period Ended December 31, 2023 2022 Wine $ 316,888 $ 476,115 Trading Cards 486,657 486,657 Artwork 1,182,942 1,287,378 Comic Books 464,477 704,477 NFT 730 64,472 Watches 53,128 53,128 Total collectibles $ 2,504,822 $ 3,072,227 Crypto Assets The Company holds crypto-denominated assets (“crypto assets”), which are included as other assets in the balance sheets. As of September 30, 2023 and December 31, 2022, cryptocurrencies were $24,969 and $16,604, which included one bitcoin and is recorded at cost less impairment. Unrealized loss during the nine months ended September 30, 2023 and 2022 were $38,773 and $0, respectively relating to NFT price decrease of $47,138 offset by Bitcoin price increase of $8,365. Investments – Real Estate Investments in real estate are stated at cost less accumulated depreciation and presented separately from Property and Equipment used for internal operating purposes. Real Estate purchased for investment includes the cost of the purchased property, including the building, and related land. The Company allocates certain capitalized title fees and relevant acquisition expenses to the capitalized costs of the building. All capitalized property costs, except for the value attributable to the land, are depreciated using the straight-line method over the estimated useful life of 27.5-39 years depending on the use of the building. Additions and property improvements in excess of $5,000 are capitalized and depreciated using the straight-line method over the estimated useful lives of 5 StartEngine has purchased a residential apartment building for $2,136,628 in December 2021, which it still holds as of September 30, 2023. We value the building at cost. 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 $1,028,345 and $2,601,245 and $504,781 and $3,960,923 were charged to stockholders’ equity during the three and nine months ended September 30, 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 2023 the rate was a percentage of the capital raised. Platform fees are paid to the Company from customers’ escrow accounts. For certain Regulation A offerings, the Company earns a portion of its platform fees in warrants or shares. The grant date fair values of shares and warrants received are recognized as revenue when earned. The Company’s performance obligations are satisfied as services are rendered throughout the duration of the campaign. Revenues from Regulation Crowdfunding platform fees are recognized at an agreed-upon rate based on the amount invested in an offering. Platform fees are due upon the disbursement of funds from escrow and are paid to the Company from customers’ escrow accounts. The Company’s performance obligations are satisfied as services are rendered throughout the duration of the campaign. The Company provides marketing services branded under the name “StartEngine Premium” for its Regulation Crowdfunding issuers as part of services offered. The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due. The Company provides transfer agent services branded under the name “StartEngine Secure” through its registered transfer agent subsidiary, StartEngine Secure, LLC. The Company enters into an agreement with issuers for an annual term that commences from the date the issuers’ Regulation Crowdfunding or Regulation A offering launches and renews annually unless cancelled prior to renewal. Initial payment of services is paid from funds of the offering and is non-refundable. Renewals are invoiced on the first day of each annual period and are not subject to cancellation. The initial payment is paid from funds of the offering and is non-refundable. The transfer agent services represent a single performance obligation and is deferred over 12 months, which is the period over which the Company’s performance obligations are to be satisfied. Fees for transfer agent services are charged based on a per investor basis, subject to certain maximums. The Company may also invoice customers for ancillary services such as but not limited to: recording of stock splits, change of address, or other services. These services are provided and earned at a point-in-time based on defined amounts in the agreement. Payment for StartEngine Secure services are generally paid via customers’ escrow account, in full, during the initial year and billed to the client for cash payment for subsequent years if the customer does not have a follow-on offering or to the extent amounts in escrow are not sufficient. There are no significant judgments related to this revenue stream. The Company provides services to investors branded the StartEngine OWNers bonus program. The general public can become members of the StartEngine OWNers bonus program on StartEngine’s website for $275 per year. The OWNers Bonus 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 OWNers bonus 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 OWNers bonus 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. Such revenues are included in OWNers Bonus revenue noted below. The Company hosts periodic events, such as summits, and recognizes revenues from ticket sales and sponsorships. Payments from event attendees and event sponsors received prior to each event are deferred and recognized in revenue once the event occurs. The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered. In all instances, as a practical expedient The Company’s contracts with customers generally have a term of one year During the three and nine months ended September 30, 2023 and 2022, revenue was made up of the following categories associated with the above-described services: Three Months Three Months Nine Months Nine Months Ended September 30, Ended September 30, Ended September 30, Ended September 30, 2023 2022 2023 2022 Regulation Crowdfunding platform fees $ 3,169,997 $ 1,984,061 $ 8,371,641 $ 8,108,518 Regulation A commissions 255,403 1,369,729 951,947 4,809,052 StartEngine Premium 739,380 452,500 2,238,625 1,634,999 StartEngine Secure 428,772 384,468 1,182,067 935,348 OWNers Bonus revenue 1,067,649 1,018,939 2,751,322 3,592,353 Other service revenue 40,716 19,462 164,559 497,952 Total revenues $ 5,701,917 $ 5,229,159 $ 15,660,161 $ 19,578,222 Cost of Revenues Cost of revenues consists of internal employees, hosting fees, processing fees, and certain software subscription fees that are required to provide services to our issuers. Research and Development We incur research and development costs during the process of researching and developing our technologies and future offerings. Our research and development costs consist primarily of non-capitalizable engineering fees for both employees and consultants related to our website and future product offerings, email and other tools that are utilized for client related services and outreach. During the three and nine months ended September 30, 2023 and 2022, research and development costs were $1,701,921 and $4,159,141, and $1,398,330 and $4,010,775 Stock-Based Compensation The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or canceled during the periods reported. Stock-based compensation is recognized as an expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The Company recognized a significant increase in Stock-Based Compensation year over year as both the fair value grant and the employee count increased, further increasing the a granted. 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 nine months ended September 30, 2023 as the effects would be anti-dilutive. See Note 6 for outstanding stock-options as of September 30, 2023. The weighted average shares outstanding – diluted is calculated as follows for the period ended September 30, 2023 and 2022: September 30, 2023 Beginning balance 33,301,662 Shares sold 645,300 Total common stock equivalents 33,948,985 September 30, 2022 Weighted average shares outstanding - basic 30,652,394 Preferred shares 20,910,222 Stock options 5,339,585 Weighted average shares outstanding - diluted 56,902,201 Concentration of Credit Risk The Company maintains its cash with a major financial institution located in the United States of America which it believes to be creditworthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits. At times, the Company may have certain vendors or customers that make up over 10% of the balance at any given time. However, the Company is not dependent on any single or group of vendors or customers, and accordingly, the loss of any such vendors or customers would not have a significant impact on the Company’s operations. Recent Accounting Pronouncements The FASB issues ASUs to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our condensed consolidated financial statements. |
MARKETABLE SECURITIES AND INVES
MARKETABLE SECURITIES AND INVESTMENTS | 9 Months Ended |
Sep. 30, 2023 | |
MARKETABLE SECURITIES AND INVESTMENTS | |
MARKETABLE SECURITIES AND INVESTMENTS | NOTE 3 – MARKETABLE SECURITIES AND INVESTMENTS Marketable Securities Marketable securities consisted of the following as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Common stock $ 1,856 $ 1,856 $ 1,856 $ 1,856 Investments – Warrant Assets Equity warrants, as described in Note 2, are equity warrants received for services provided. The warrants are valued on the date they are earned in accordance with revenue recognition criteria and again at each reporting date. Investments – Stock Investments - stock, as described in Note 2, consist of shares the Company holds in various companies that launched on its platform received in exchange for services provided. The shares are recorded at cost less any impairment. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2023 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT As of September 30, 2023 and December 31, 2022, property and equipment consisted of the following: September 30, 2023 December 31, 2022 Computer equipment $ 156,819 $ 137,048 Software 3,754 3,753 Total property and equipment 160,573 140,801 Accumulated depreciation (41,478) (31,660) $ 119,095 $ 109,141 Depreciation expense for the nine months ended September 30, 2023 and 2022 was $9,817 and $9,817, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 5 – 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 | 9 Months Ended |
Sep. 30, 2023 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 6 – STOCKHOLDERS’ EQUITY Preferred Stock As of September 30, 2023, the Company has authorized the issuance of 25,950,000 shares of our preferred stock with par value of $0.00001. Of these authorized shares, 10,350,000 are designated as Series A, 4,950,000 are designated as Series T, and 10,650,000 are designated as Series Seed. Series A Preferred Stock The Series A has liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series A shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series T in proportion to its respective liquidation preference. Holders of Series A will receive an amount equal to $0.5727 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 $2.93 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 $2.93 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 $0.1667 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 $2.86 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 September 30, 2023 we had authorized the issuance of 25,000,000 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 75,000,000. During the nine months ended September 30, 2023, the Company sold 260,818 shares of common stock through its Regulation A offering for gross proceeds of $5,642,661 and incurred offering costs of $2,601,245. During the nine months period ended September 30, 2023, the company sold 960,000 shares of common stock for the purchase of SeedInvest’s intellectual property for a total of $24,000,000. During the nine months period ended September 30, 2022, the Company sold 318,537 shares of common stock through its Regulation A offering for gross proceeds of $5,223,383 and incurred offering costs of $3,960,923. 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 11,590,000 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. Stock option expense for the periods ended September 30, 2023 and 2022 was $4,905,482 and $6,371,760, respectively, and are included within the condensed consolidated statements of operations as follows: 2023 2022 Cost of revenues $ 424,736 $ 648,358 General and administrative 2,346,203 2,232,419 Sales and marketing 2,034,305 2,926,792 Research and development 100,238 564,191 Total $ 4,905,482 $ 6,371,760 At September 30, 2023, the total compensation cost related to nonvested awards not yet recognized was approximately $22,233,009 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 2.18 years. |
SEEDINVEST INTELLECTUAL PROPERT
SEEDINVEST INTELLECTUAL PROPERTY ACQUISITION | 9 Months Ended |
Sep. 30, 2023 | |
SEEDINVEST INTELLECTUAL PROPERTY ACQUISITION | |
SEEDINVEST INTELLECTUAL PROPERTY ACQUISITION | NOTE 7 - SEEDINVEST INTELLECTUAL PROPERTY ACQUISITION On May 5, 2023, the Company completed a transaction to acquire substantially all of the assets used or held for use by SI Securities, LLC (“SeedInvest”), including the intellectual property of SeedInvest. Specifically, the purchase includes the following items: URL’s, offering records, lists of investors, and other data relating to SeedInvest. This agreement specifically does not include the registered broker-dealer or the Alternative Trading System (“ATS”) belonging to SeedInvest. In determining the useful life of this purchase, the Company reviewed the useful life of such proprietary information and determined that the useful life of these intangible assets will be 15 years and will be amortized on a straight-line basis. This amortization will begin in Q3 2023 and continue until the end of Q2 2038. The Company issued SeedInvest 960,000 shares of common stock with a strike price of $25 per share for a total cost of $24 million in consideration for this purchase. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2023 | |
SUBSEQUENT EVENTS. | |
SUBSEQUENT EVENTS | NOTE 8 – SUBSEQUENT EVENTS The Company has evaluated subsequent events that occurred after September 30, 2023 through November 14, 2023. On October 10, 2023, the Company purchased shares of privately held stock, Attentive Mobile, Inc. The agreement was to purchase 66,667 shares of Series A-2 Preferred Stock for a total of $1,000,005. On October 18, 2023, the Company purchased shares of privately held stock, Formagrid Inc. dba Airtable. The agreement was to purchase 15,756 shares of Series B Preferred Stock for a total of $968,994. The Company plans to securitize these shares and sell to accredited investors as membership interests in series of StartEngine Private LLC. Each series will own shares of a single company. These investments are privately held stocks not readily available for sale in securities markets and create a new opportunity for revenue generation for the Company. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP. The condensed consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc., its subsidiaries where we have controlling financial interests, and any variable interest entities for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year ending December 31, 2023. |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.’s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, and StartEngine Primary LLC and StartEngine Assets LLC. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | 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 September 30, 2023. 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 Cryptocurrency: Blockchain based currency that is valued based on quoted prices in active markets. Non-Fungible Token (“NFT”): Blockchain based collectible images that are valued based on quoted prices in active markets. Level 2 Investments: Marketable securities are made up of mutual funds and shares of common stock that are value based on quoted prices in active markets 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. The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of September 30, 2023: Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 15,829,806 $ — $ — $ 15,829,806 Marketable securities — 1,856 — 1,856 Investment - warrants — — 1,497,442 1,497,442 Cryptocurrency 24,969 — — 24,969 Non-Fungible Token ("NFT") 730 — — 730 $ 15,855,505 $ 1,856 $ 1,497,442 $ 17,354,803 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 Cash and cash equivalents $ 15,460,469 $ — $ — $ 15,460,469 Marketable securities — 1,856 — 1,856 Investments - warrants — — 1,496,701 1,496,701 Cryptocurrency 16,604 — — 16,604 Non-Fungible Token ("NFT") 64,472 — — 64,472 $ 15,541,545 $ 1,856 $ 1,496,701 $ 17,040,102 The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the nine months ended September 30, 2023 and 2022 as it relates to Investments - warrants: Investments- Warrants Fair value at December 31, 2022 $ 1,496,701 Receipt of warrants 741 Change in fair value of warrants — Fair value at September 30, 2023 $ 1,497,442 Investments- Warrants Fair value at December 31, 2021 $ 1,130,133 Receipt of warrants 451,736 Change in fair value of warrants (84,351) Fair value at September 30, 2022 $ 1,497,518 The following range of variables were used in valuing Level 3 warrant assets during the nine months ended September 30, 2023 and 2022: 2023 2022 Expected life (years) 1 - 2.5 1 - 2.5 Risk-free interest rate 0.1% - 0.9 % 0.1% - 0.9 % Expected volatility 30% - 225 % 30% - 225 % 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. We may apply marketability discounts to private company warrants to account for a general lack of liquidity of 20% due to the private nature of the associated underlying company. The quantitative measure used is based upon various models. 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. |
Accounts Receivable | Accounts Receivable Accounts receivables are recorded at the invoiced amount and are non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance for doubtful accounts as of September 30, 2023 and December 31, 2022 was $1,512,097 and $357,709, respectively. Bad debt expense for nine months ended September 30, 2023 and 2022 was $162,535 and $98,864, respectively. As of September 30, 2023 the Company had accounts receivable over 90 days totaling $458,197. |
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 condensed consolidated statements of operations. Non-Marketable and Other Securities Non-marketable and other securities include investments in non-public equities. Our accounting for investments in non-marketable and other securities depends on several factors, including the level of ownership, power to control and the legal structure of the subsidiary making the investment. As further described below, we base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. |
Investments - Warrant Assets | Investments – Warrant Assets In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks, nor do we use other derivative instruments to hedge economic risks stemming from these warrants. We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a “cashless” exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our condensed consolidated balance sheet at the time they are obtained and remeasured each reporting period. The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt. Any changes in fair value from the grant date to fair value of warrants will be recognized as increases or decreases to investments on our condensed consolidated balance sheets and as a component of operating expenses on our condensed consolidated statements of operations. In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the condensed consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities. The fair value of the warrants portfolio is a critical accounting estimate and is reviewed each reporting period. We value our warrants using a modified Black-Scholes option pricing model, which incorporates the following significant inputs, in addition to certain adjustments for general lack of liquidity: · An underlying asset value, which is estimated based on current information available in valuation reports, including any information regarding subsequent rounds of funding or the performance of a company. · Stated strike price, which can be adjusted for certain warrants upon the occurrence of subsequent funding rounds or other future events. · Price volatility or risk associated with possible changes in the warrant price. The volatility assumption is based on historical price volatility of publicly traded companies within indices or companies similar in nature to the underlying client companies issuing the warrant. · 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) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, less adjustments for impairment in accordance with ASC 321-10-35-2. During the nine months ended September 30, 2023 and 2022, the Company received stock with a cost of $2,175,170 and $1,891,748, respectively, as payment for fees. During the nine months ended September 30, 2023 and 2022, impairment expense related to shares received amounted to $0 and $21,863 respectively. |
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 September 30, 2023 and December 31, 2022: Period Ended September 30, Period Ended December 31, 2023 2022 Wine $ 316,888 $ 476,115 Trading Cards 486,657 486,657 Artwork 1,182,942 1,287,378 Comic Books 464,477 704,477 NFT 730 64,472 Watches 53,128 53,128 Total collectibles $ 2,504,822 $ 3,072,227 |
Crypto Assets | Crypto Assets The Company holds crypto-denominated assets (“crypto assets”), which are included as other assets in the balance sheets. As of September 30, 2023 and December 31, 2022, cryptocurrencies were $24,969 and $16,604, which included one bitcoin and is recorded at cost less impairment. Unrealized loss during the nine months ended September 30, 2023 and 2022 were $38,773 and $0, respectively relating to NFT price decrease of $47,138 offset by Bitcoin price increase of $8,365. |
Investments - Real Estate | Investments – Real Estate Investments in real estate are stated at cost less accumulated depreciation and presented separately from Property and Equipment used for internal operating purposes. Real Estate purchased for investment includes the cost of the purchased property, including the building, and related land. The Company allocates certain capitalized title fees and relevant acquisition expenses to the capitalized costs of the building. All capitalized property costs, except for the value attributable to the land, are depreciated using the straight-line method over the estimated useful life of 27.5-39 years depending on the use of the building. Additions and property improvements in excess of $5,000 are capitalized and depreciated using the straight-line method over the estimated useful lives of 5 StartEngine has purchased a residential apartment building for $2,136,628 in December 2021, which it still holds as of September 30, 2023. We value the building at cost. |
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 $1,028,345 and $2,601,245 and $504,781 and $3,960,923 were charged to stockholders’ equity during the three and nine months ended September 30, 2023 and 2022, respectively. |
Revenue Recognition | Revenue Recognition The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 contains a framework for analyzing potential revenue transactions by identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the Company satisfies a performance obligation. The Company recognizes revenues from Regulation A and Regulation D platform fees at an agreed-upon rate. In 2023 the rate was a percentage of the capital raised. Platform fees are paid to the Company from customers’ escrow accounts. For certain Regulation A offerings, the Company earns a portion of its platform fees in warrants or shares. The grant date fair values of shares and warrants received are recognized as revenue when earned. The Company’s performance obligations are satisfied as services are rendered throughout the duration of the campaign. Revenues from Regulation Crowdfunding platform fees are recognized at an agreed-upon rate based on the amount invested in an offering. Platform fees are due upon the disbursement of funds from escrow and are paid to the Company from customers’ escrow accounts. The Company’s performance obligations are satisfied as services are rendered throughout the duration of the campaign. The Company provides marketing services branded under the name “StartEngine Premium” for its Regulation Crowdfunding issuers as part of services offered. The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due. The Company provides transfer agent services branded under the name “StartEngine Secure” through its registered transfer agent subsidiary, StartEngine Secure, LLC. The Company enters into an agreement with issuers for an annual term that commences from the date the issuers’ Regulation Crowdfunding or Regulation A offering launches and renews annually unless cancelled prior to renewal. Initial payment of services is paid from funds of the offering and is non-refundable. Renewals are invoiced on the first day of each annual period and are not subject to cancellation. The initial payment is paid from funds of the offering and is non-refundable. The transfer agent services represent a single performance obligation and is deferred over 12 months, which is the period over which the Company’s performance obligations are to be satisfied. Fees for transfer agent services are charged based on a per investor basis, subject to certain maximums. The Company may also invoice customers for ancillary services such as but not limited to: recording of stock splits, change of address, or other services. These services are provided and earned at a point-in-time based on defined amounts in the agreement. Payment for StartEngine Secure services are generally paid via customers’ escrow account, in full, during the initial year and billed to the client for cash payment for subsequent years if the customer does not have a follow-on offering or to the extent amounts in escrow are not sufficient. There are no significant judgments related to this revenue stream. The Company provides services to investors branded the StartEngine OWNers bonus program. The general public can become members of the StartEngine OWNers bonus program on StartEngine’s website for $275 per year. The OWNers Bonus 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 OWNers bonus 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 OWNers bonus 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. Such revenues are included in OWNers Bonus revenue noted below. The Company hosts periodic events, such as summits, and recognizes revenues from ticket sales and sponsorships. Payments from event attendees and event sponsors received prior to each event are deferred and recognized in revenue once the event occurs. The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered. In all instances, as a practical expedient The Company’s contracts with customers generally have a term of one year During the three and nine months ended September 30, 2023 and 2022, revenue was made up of the following categories associated with the above-described services: Three Months Three Months Nine Months Nine Months Ended September 30, Ended September 30, Ended September 30, Ended September 30, 2023 2022 2023 2022 Regulation Crowdfunding platform fees $ 3,169,997 $ 1,984,061 $ 8,371,641 $ 8,108,518 Regulation A commissions 255,403 1,369,729 951,947 4,809,052 StartEngine Premium 739,380 452,500 2,238,625 1,634,999 StartEngine Secure 428,772 384,468 1,182,067 935,348 OWNers Bonus revenue 1,067,649 1,018,939 2,751,322 3,592,353 Other service revenue 40,716 19,462 164,559 497,952 Total revenues $ 5,701,917 $ 5,229,159 $ 15,660,161 $ 19,578,222 |
Cost of Revenues | Cost of Revenues Cost of revenues consists of internal employees, hosting fees, processing fees, and certain software subscription fees that are required to provide services to our issuers. |
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 three and nine months ended September 30, 2023 and 2022, research and development costs were $1,701,921 and $4,159,141, and $1,398,330 and $4,010,775 |
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 canceled during the periods reported. Stock-based compensation is recognized as an expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The Company recognized a significant increase in Stock-Based Compensation year over year as both the fair value grant and the employee count increased, further increasing the a granted. |
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 nine months ended September 30, 2023 as the effects would be anti-dilutive. See Note 6 for outstanding stock-options as of September 30, 2023. The weighted average shares outstanding – diluted is calculated as follows for the period ended September 30, 2023 and 2022: September 30, 2023 Beginning balance 33,301,662 Shares sold 645,300 Total common stock equivalents 33,948,985 September 30, 2022 Weighted average shares outstanding - basic 30,652,394 Preferred shares 20,910,222 Stock options 5,339,585 Weighted average shares outstanding - diluted 56,902,201 |
Concentration of Credit Risk | September 30, 2023 Beginning balance 33,301,662 Shares sold 645,300 Total common stock equivalents 33,948,985 September 30, 2022 Weighted average shares outstanding - basic 30,652,394 Preferred shares 20,910,222 Stock options 5,339,585 Weighted average shares outstanding - diluted 56,902,201 |
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 condensed consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of assets and liabilities that are measured at fair value | Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 15,829,806 $ — $ — $ 15,829,806 Marketable securities — 1,856 — 1,856 Investment - warrants — — 1,497,442 1,497,442 Cryptocurrency 24,969 — — 24,969 Non-Fungible Token ("NFT") 730 — — 730 $ 15,855,505 $ 1,856 $ 1,497,442 $ 17,354,803 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 15,460,469 $ — $ — $ 15,460,469 Marketable securities — 1,856 — 1,856 Investments - warrants — — 1,496,701 1,496,701 Cryptocurrency 16,604 — — 16,604 Non-Fungible Token ("NFT") 64,472 — — 64,472 $ 15,541,545 $ 1,856 $ 1,496,701 $ 17,040,102 |
Schedule of range of variables used in valuing Level 3 warrant assets | 2023 2022 Expected life (years) 1 - 2.5 1 - 2.5 Risk-free interest rate 0.1% - 0.9 % 0.1% - 0.9 % Expected volatility 30% - 225 % 30% - 225 % 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 breakdown of the types of collectibles and their value held | Period Ended September 30, Period Ended December 31, 2023 2022 Wine $ 316,888 $ 476,115 Trading Cards 486,657 486,657 Artwork 1,182,942 1,287,378 Comic Books 464,477 704,477 NFT 730 64,472 Watches 53,128 53,128 Total collectibles $ 2,504,822 $ 3,072,227 |
Schedule of disaggregation of revenues | Three Months Three Months Nine Months Nine Months Ended September 30, Ended September 30, Ended September 30, Ended September 30, 2023 2022 2023 2022 Regulation Crowdfunding platform fees $ 3,169,997 $ 1,984,061 $ 8,371,641 $ 8,108,518 Regulation A commissions 255,403 1,369,729 951,947 4,809,052 StartEngine Premium 739,380 452,500 2,238,625 1,634,999 StartEngine Secure 428,772 384,468 1,182,067 935,348 OWNers Bonus revenue 1,067,649 1,018,939 2,751,322 3,592,353 Other service revenue 40,716 19,462 164,559 497,952 Total revenues $ 5,701,917 $ 5,229,159 $ 15,660,161 $ 19,578,222 |
Schedule of calculation of weighted average shares outstanding - diluted | September 30, 2023 Beginning balance 33,301,662 Shares sold 645,300 Total common stock equivalents 33,948,985 September 30, 2022 Weighted average shares outstanding - basic 30,652,394 Preferred shares 20,910,222 Stock options 5,339,585 Weighted average shares outstanding - diluted 56,902,201 |
Investments - warrants [Member] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
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 $ 1,496,701 Receipt of warrants 741 Change in fair value of warrants — Fair value at September 30, 2023 $ 1,497,442 Investments- Warrants Fair value at December 31, 2021 $ 1,130,133 Receipt of warrants 451,736 Change in fair value of warrants (84,351) Fair value at September 30, 2022 $ 1,497,518 |
MARKETABLE SECURITIES AND INV_2
MARKETABLE SECURITIES AND INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
MARKETABLE SECURITIES AND INVESTMENTS | |
Schedule of marketable securities | September 30, 2023 December 31, 2022 Common stock $ 1,856 $ 1,856 $ 1,856 $ 1,856 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | September 30, 2023 December 31, 2022 Computer equipment $ 156,819 $ 137,048 Software 3,754 3,753 Total property and equipment 160,573 140,801 Accumulated depreciation (41,478) (31,660) $ 119,095 $ 109,141 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
STOCKHOLDERS' EQUITY | |
Schedule of stock option expense | 2023 2022 Cost of revenues $ 424,736 $ 648,358 General and administrative 2,346,203 2,232,419 Sales and marketing 2,034,305 2,926,792 Research and development 100,238 564,191 Total $ 4,905,482 $ 6,371,760 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
NATURE OF OPERATIONS | ||
Cash and cash equivalents | $ 15,829,806 | $ 15,460,469 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Hierarchy (Details) - Recurring - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | $ 17,354,803 | $ 17,040,102 |
Cash and cash equivalents | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 15,829,806 | 15,460,469 |
Marketable securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,856 | 1,856 |
Investments - warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,497,442 | 1,496,701 |
Cryptocurrency | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 24,969 | 16,604 |
Non-Fungible Token ("NFT") | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 730 | 64,472 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 15,855,505 | 15,541,545 |
Level 1 | Cash and cash equivalents | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 15,829,806 | 15,460,469 |
Level 1 | Cryptocurrency | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 24,969 | 16,604 |
Level 1 | Non-Fungible Token ("NFT") | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 730 | 64,472 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,856 | 1,856 |
Level 2 | Marketable securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,856 | 1,856 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | 1,497,442 | 1,496,701 |
Level 3 | Investments - warrants | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Asset | $ 1,497,442 | $ 1,496,701 |
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) - Investments - warrants - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Transfers in and out of Level 3 assets measured at fair value | ||
Fair value at Beginning balance | $ 1,496,701 | $ 1,130,133 |
Receipt of warrants | 741 | 451,736 |
Change in fair value of warrants | (84,351) | |
Fair value at Ending balance | $ 1,497,442 | $ 1,497,518 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Range of variables were used in valuing Level 3 warrant assets (Details) | Sep. 30, 2023 item $ / shares Y | Sep. 30, 2022 Y item $ / shares |
Expected life (years) | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | Y | 1 | 1 |
Expected life (years) | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | Y | 2.5 | 2.5 |
Risk-free interest rate | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 0.001 | 0.001 |
Risk-free interest rate | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 0.009 | 0.009 |
Expected volatility | Minimum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 0.30 | 0.30 |
Expected volatility | Maximum | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | 2.25 | 2.25 |
Annual dividend yield | ||
Range of variables were used in valuing Level 3 warrant assets | ||
Warrant assets | item | 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 ($) | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Allowance for doubtful accounts | $ 1,512,097 | $ 357,709 | |
Bad debt expense | 162,535 | $ 98,864 | |
Accounts receivable over 90 days | 458,197 | ||
Cost of stock received as payment for fees | 2,175,170 | 1,891,748 | |
Impairment charge related to shares received | $ 0 | $ 21,863 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - A breakdown of the types of collectibles and their value held (Details) | 9 Months Ended | ||
Sep. 30, 2023 USD ($) item | Sep. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Wine | $ 316,888 | $ 476,115 | |
Trading Cards | 486,657 | 486,657 | |
Artwork | 1,182,942 | 1,287,378 | |
Comic Books | 464,477 | 704,477 | |
NFT | 730 | 64,472 | |
Watches | 53,128 | 53,128 | |
Total collectibles | 2,504,822 | 3,072,227 | |
Cryptocurrencies | $ 24,969 | $ 16,604 | |
Number of bitcoins held | item | 1 | ||
Unrealized gain (loss) on investments | $ 38,773 | $ 0 | |
Decrease in NFT price | 47,138 | ||
Increase in bitcoin price | $ 8,365 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Investments - Real Estate, Seedinvest and Equity Offering Costs (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||
Additions and property improvements | $ 5,000 | $ 5,000 | |||||||
Investments - Real Estate | 2,136,628 | $ 2,136,628 | $ 2,136,628 | $ 2,136,628 | |||||
Equity offering costs stockholders' equity | $ 1,028,345 | $ 802,248 | $ 770,651 | $ 504,781 | $ 3,456,142 | $ 3,960,923 | |||
Minimum | |||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||
Estimated useful life of Real estate investments (in years) | 27 years 6 months | ||||||||
Estimated useful life of additions and property improvements (in years) | 5 years | ||||||||
Maximum | |||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||
Estimated useful life of Real estate investments (in years) | 39 years | ||||||||
Estimated useful life of additions and property improvements (in years) | 7 years |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | 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 | $ 3,595,858 | $ 3,595,858 | $ 2,715,422 | ||
Total revenues | 5,701,917 | $ 5,229,159 | $ 15,660,161 | $ 19,578,222 | |
Regulation Crowdfunding platform fees | |||||
Revenue Recognition | |||||
Revenue remaining performance obligation expected timing of satisfaction period | 12 months | ||||
Total revenues | 3,169,997 | 1,984,061 | $ 8,371,641 | 8,108,518 | |
Regulation A commissions | |||||
Revenue Recognition | |||||
Total revenues | 255,403 | 1,369,729 | 951,947 | 4,809,052 | |
StartEngine Premium | |||||
Revenue Recognition | |||||
Total revenues | 739,380 | 452,500 | 2,238,625 | 1,634,999 | |
StartEngine Secure | |||||
Revenue Recognition | |||||
Total revenues | 428,772 | 384,468 | 1,182,067 | 935,348 | |
Owners Bonus revenue | |||||
Revenue Recognition | |||||
Total revenues | 1,067,649 | 1,018,939 | 2,751,322 | 3,592,353 | |
Other service revenue | |||||
Revenue Recognition | |||||
Total revenues | $ 40,716 | $ 19,462 | $ 164,559 | $ 497,952 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Research and Development, Calculation of weighted average shares outstanding - diluted (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||
Research and development costs | $ 1,701,921 | $ 1,398,330 | $ 4,159,141 | $ 4,010,775 | |
Balances are insured by the federal deposit insurance corporation | $ 250,000 | ||||
Calculation of weighted average shares outstanding - diluted | |||||
Beginning balance | 33,301,662 | ||||
Weighted average shares outstanding - basic | 645,300 | 30,652,394 | |||
Preferred shares | 20,910,222 | ||||
Stock options | 5,339,585 | ||||
Weighted average shares outstanding - diluted | 56,902,201 | ||||
Total Common Stock Equivalents | 33,948,985 |
MARKETABLE SECURITIES AND INV_3
MARKETABLE SECURITIES AND INVESTMENTS - Marketable securities (Details) - USD ($) | Sep. 30, 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 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
PROPERTY AND EQUIPMENT | ||
Total property and equipment | $ 160,573 | $ 140,801 |
Accumulated depreciation | (41,478) | (31,660) |
Property and equipment, net | 119,095 | 109,141 |
Computer equipment | ||
PROPERTY AND EQUIPMENT | ||
Total property and equipment | 156,819 | 137,048 |
Software | ||
PROPERTY AND EQUIPMENT | ||
Total property and equipment | $ 3,754 | $ 3,753 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
PROPERTY AND EQUIPMENT | ||
Depreciation | $ 9,817 | $ 9,817 |
STOCKHOLDERS' EQUITY - Preferre
STOCKHOLDERS' EQUITY - Preferred Stock (Details) | 9 Months Ended | |
Sep. 30, 2023 USD ($) $ / shares shares | Dec. 31, 2022 $ / shares shares | |
Preferred stock, shares authorized | shares | 25,950,000 | |
Preferred stock, par value (in dollars per share) | $ 0.00001 | |
Series A Preferred Stock | ||
Preferred stock, shares authorized | shares | 10,350,000 | 10,350,000 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Per share amount available for distribution on liquidation | $ 0.5727 | |
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 | 4,950,000 | 4,950,000 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Per share amount available for distribution on liquidation | $ 2.93 | |
Stock split conversion ratio | 1 | |
Maximum offering price per share for conversion | $ 2.93 | |
Maximum aggregate gross proceeds for conversion | $ | $ 15,000,000 | |
Series Seed Preferred Stock | ||
Preferred stock, shares authorized | shares | 10,650,000 | 10,650,000 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Per share amount available for distribution on liquidation | $ 0.1667 | |
Stock split conversion ratio | 1 | |
Maximum offering price per share for conversion | $ 2.86 | |
Maximum aggregate gross proceeds for conversion | $ | $ 15,000,000 |
STOCKHOLDERS' EQUITY - Common S
STOCKHOLDERS' EQUITY - Common Stock (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | Sep. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | Jul. 07, 2021 | |
Common stock | |||||||||
Common stock, shares authorized | 75,000,000 | 75,000,000 | 75,000,000 | 25,000,000 | |||||
Common stock shares authorized to issue after split | 75,000,000 | 75,000,000 | |||||||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||||
Sale of common stock (in shares) | 260,818 | 318,537 | |||||||
Proceeds from sale of common stock | $ 5,642,663 | $ 5,223,383 | |||||||
Offering costs | $ 1,028,345 | $ 802,248 | $ 770,651 | $ 504,781 | $ 3,456,142 | 3,960,923 | |||
SeedInvest Acquisition | $ 24,000,000 | ||||||||
SI Securities, LLC | |||||||||
Common stock | |||||||||
SeedInvest Acquisition (in shares) | 960,000 | ||||||||
SeedInvest Acquisition | $ 24,000,000 | ||||||||
Common Class A | |||||||||
Common stock | |||||||||
Proceeds from sale of common stock | $ 5,223,383 |
STOCKHOLDERS' EQUITY - Addition
STOCKHOLDERS' EQUITY - Additional Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
STOCKHOLDERS' EQUITY | ||
Stock option expense | $ 4,905,482 | $ 6,371,760 |
Compensation cost related to nonvested awards not yet recognized | $ 22,233,009 | |
Compensation cost related to nonvested awards not yet recognized, expected weighted-average period for recognition | 2 years 2 months 4 days | |
2015 Equity Incentive Plan | ||
STOCKHOLDERS' EQUITY | ||
Maximum number of shares authorized to issue | 11,590,000 |
STOCKHOLDERS' EQUITY - Stock op
STOCKHOLDERS' EQUITY - Stock option expense (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | $ 4,905,482 | $ 6,371,760 |
Cost of revenues | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | 424,736 | 648,358 |
General and administrative | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | 2,346,203 | 2,232,419 |
Sales and marketing | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | 2,034,305 | 2,926,792 |
Research and development | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | ||
Stock option expense | $ 100,238 | $ 564,191 |
SEEDINVEST INTELLECTUAL PROPE_2
SEEDINVEST INTELLECTUAL PROPERTY ACQUISITION - Narrative (Details) - SI Securities, LLC $ / shares in Units, $ in Millions | May 05, 2023 USD ($) $ / shares shares |
Property Acquisition | |
Number of common stock shares issuable | shares | 960,000 |
Share price | $ / shares | $ 25 |
Consideration on acquisition | $ | $ 24 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent events - USD ($) | Oct. 18, 2023 | Oct. 10, 2023 |
Attentive Mobile, Inc. | ||
SUBSEQUENT EVENTS | ||
Number of shares purchased | 66,667 | |
Payments to acquire investments | $ 1,000,005 | |
Formagrid Inc. | ||
SUBSEQUENT EVENTS | ||
Number of shares purchased | 15,756 | |
Payments to acquire investments | $ 968,994 |