UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
Or
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number:
(Exact Name of Registrant As Specified In Its Charter)
| ||
(Address of Principal Executive Offices) | (ZIP Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities to be registered under Section 12(b) of the Act:
None.
Securities to be registered under Section 12(g) of the Act:
(Title of Class)
Indicate by check mark whether the registrant has (1) filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the Company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 15, 2026, there were
STARTENGINE CROWDFUNDING, INC.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |||
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In this Form 10-Q, the term “StartEngine”, “we”, “us”, “our”, or “the Company” refers to StartEngine Crowdfunding, Inc. and our subsidiaries on a consolidated basis. The terms “StartEngine Capital” or “our funding portal” refers to StartEngine Capital LLC, the terms “StartEngine Secure” or “our transfer agent” refer to StartEngine Secure LLC, the terms “StartEngine Primary” or “our broker-dealer” refer to StartEngine Primary LLC, the term “StartEngine Private” refers to StartEngine Private LLC, the term “StartEngine Private Manager” refers to StartEngine Private Manager LLC, the term “StartEngine Adviser” refers to StartEngine Adviser LLC and the term “StartEngine Assets” refers to StartEngine Assets LLC.
THIS FILING MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
STARTENGINE CROWDFUNDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, | December 31, | |||||
2026 | | 2025 | ||||
Assets | |
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Current assets: | |
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Cash | $ | | $ | | ||
Marketable securities |
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Accounts receivable, net of allowance |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Investments - warrants |
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Investments - Stock |
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Investments - Private | | | ||||
Investments - Collectibles |
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Due from related party |
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Intangible assets, net | | | ||||
Other assets |
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Total assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued liabilities |
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Deferred revenue |
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Total current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders’ equity: |
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Series A Preferred Stock, par value $ |
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Series T Preferred Stock, par value $ |
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Series Seed Preferred Stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Noncontrolling interest |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | | ||
See accompanying notes to unaudited condensed consolidated financial statements
3
STARTENGINE CROWDFUNDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | ||||||||
| 2026 | | 2025 | | | |||
Revenues | $ | | $ | | ||||
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Cost of revenues |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Sales and marketing |
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Research and development |
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Impairment of shares received for fees |
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Total operating expenses |
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Operating income (loss) |
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Other income (expense) |
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Other income (expense), net |
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Total other income (expense), net |
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Income (loss) before provision for income taxes |
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Taxes - Other |
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Net income (loss) | $ | ( | $ | |
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Weighted average earnings per share - basic | $ | ( | $ | |
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Weighted average shares outstanding - basic |
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Weighted average earnings per share - diluted | $ | ( | $ | |
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Weighted average shares outstanding - diluted |
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See accompanying notes to unaudited condensed consolidated financial statements
4
STARTENGINE CROWDFUNDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)
Series A Preferred Stock | Series T Preferred Stock | Series Seed Preferred Stock | Common Stock | Additional | Noncontrolling | Accumulated | ||||||||||||||||||||||||||
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Paid-in Capital | Interest | | Deficit | | Total | ||||||||||
Balance at December 31, 2024 |
| | $ | |
| | $ | |
| | $ | |
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| $ | | $ | ( | $ | ( |
| $ | | ||||||
Sale of Common Stock | — | — | — | — | — | — | | | | — | — | | ||||||||||||||||||||
Offering Costs | — | — | — | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||
Stock compensation expense |
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Net income | — | — | — | — | — | — | — | — | — | — | | | ||||||||||||||||||||
Balance at March 31, 2025 | | | | | | | | | | ( | ( | | ||||||||||||||||||||
Series A Preferred Stock | Series T Preferred Stock | Series Seed Preferred Stock | Common Stock | Additional | Noncontrolling | Accumulated | ||||||||||||||||||||||||||
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Paid-in Capital | Interest | | Deficit | | Total | ||||||||||
Balance at December 31, 2025 |
| | $ | | | $ | | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||||||
Sale of common Stock |
| — | — | — | — | — |
| — | | | | — | — | | ||||||||||||||||||
Vinovest acquisition | — | — | — | — | — |
| — | | | | — | — | | |||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | | — | | — | — | | ||||||||||||||||||||
Offering Costs |
| — | — | — | — | — |
| — | — | — | ( | — | — | ( | ||||||||||||||||||
Stock compensation expense | — | — | — | — | — | — | — | — | | — | — | | ||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||
Balance at March 31, 2026 | | | | | | | | | | ( | ( | | ||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
5
STARTENGINE CROWDFUNDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, | |||||||
| 2026 | | 2025 | | |||
Cash flows from operating activities: |
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Net income (loss) | $ | ( | $ | | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Amortization | | | |||||
Bad debt expense |
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Fair value of investments - other received for fees |
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Impairment of investments - other received for fees |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Other current assets |
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StartEngine Private stock purchases | ( | ( | |||||
Proceeds from sale of StartEngine Private stock | | | |||||
Purchase of investments- collectibles | ( | — | |||||
Due from related parties | | — | |||||
Accounts payable |
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Accrued liabilities |
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Deferred revenue |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Cash proceeds from Vinovest | | — | |||||
Purchase of property and equipment |
| ( |
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Proceeds from sale of real estate | — | | |||||
Net cash provided by investing activities |
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Cash flows from financing activities: |
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Proceeds from sale of common stock |
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Offering costs |
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Proceeds from exercise of employee stock options |
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Net cash provided by financing activities |
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Increase (decrease) in cash and restricted cash |
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Cash and restricted cash, beginning of period |
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Cash and restricted cash, end of period | $ | | $ | | |||
Supplemental disclosures of cash flow information: |
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Cash paid for income taxes | $ | | $ | | |||
Non Cash Investing & Financing Activities | |||||||
Purchase of Vinovest, Inc., net of cash received | $ | | $ | — | |||
See accompanying notes to unaudited condensed consolidated financial statements
6
STARTENGINE CROWDFUNDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
StartEngine Crowdfunding, Inc. (the “Company”) was formed on March 19, 2014 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 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, StartEngine Primary LLC, StartEngine Private Manager LLC, StartEngine Inc., S.A. StartEngine and StartEngine Adviser 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. Since 2023, the Company has been providing accredited investors the opportunity to purchase membership interests in funds (“SE Funds”) which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC, an exempt reporting adviser. The Company’s mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years. On March 17, 2026, the Company acquired Vinovest, Inc. a premium wine and whisky investment platform, and was paid for by issuing
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.
The Company has unrestricted cash and cash equivalents of approximately $
On May 6, 2024, StartEngine Crowdfunding Inc. split its designated “Common Stock” and “Preferred Stock” on a
The Company’s 2025 Equity Incentive Plan became effective on June 4, 2025, authorizing up to
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2025. The condensed consolidated balance sheet as of December 31, 2025 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, 2026.
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, StartEngine Primary LLC, StartEngine Assets LLC StartEngine Adviser LLC, StartEngine Private Manager LLC and Vinovest Inc. 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 allocation of assets acquired, 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.
Cash and Restricted Cash
Cash of $
Cash and cash equivalents | $ | ||
Cash segregated under federal and other regulations | |||
$ |
Investment Securities
Marketable Securities
Our marketable securities consist of common stock equities that are tradable in an active market. Unrealized gains and losses on available-for-sale securities, net of applicable taxes, are reported as a component of other comprehensive income, net in the accompanying condensed consolidated statements of operations.
Non-Marketable and Other Securities
Non-marketable and other securities include investments in non-public equities. Our accounting for investments in non-marketable and other securities depends on several factors, including the level of ownership, power to control and the legal structure of the subsidiary
8
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.
Investments - Stock
In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) whether the issuer have made an offering in the current year, (ii) if so, the valuation of the stock in the offering, and (iii) if not, the Company will write down the stock value at a flat
Investments – Private
The Company purchases shares of venture capital backed, late-stage private companies and records the purchases at cost. The cost of the underlying asset includes the purchase price, and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, investigation, and acquisition of the underlying securities. The Company purchases the private company shares either directly or through other special purpose vehicles and after a certain period of time sells its investment to an SE Fund. Each time the company sells shares to the SE Funds, it reduces its holdings by the cost basis of the sale.
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Below is a breakdown of the StartEngine Private assets held by industry at the end of the reporting period, each of these investments are small minority stakes in the underlying companies.
Industry | March 31, 2026 | December 31, 2025 | ||||
AI Chips | $ | | $ | | ||
Sales Technology | | | ||||
AI Software | | | ||||
Software Development | | | ||||
Medical Technology | | | ||||
Blockchain Technology | | | ||||
Rare Earth Materials | | | ||||
Advanced Materials | | | ||||
Banking | | - | ||||
AI Vehicles | - | | ||||
Defense Technology | | | ||||
Prediction Markets | | | ||||
Robotics | | | ||||
Space Technology | | | ||||
Total | $ | $ | ||||
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:
Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2- Include other inputs that are directly or indirectly observable in the marketplace.
Level 3- Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2026. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets.
Level 1
Investments: Marketable securities are made up of mutual funds and shares of common stock that are valued based on quoted prices in active markets.
Non-Fungible Token (“NFT”): Blockchain based collectible images that are valued based on quoted prices in active markets.
Level 2
Investments - warrants (public portfolio): Fair value measurements of warrants of publicly traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable volatility assumptions based on comparable public company.
10
Level 3
Investments - warrants (private portfolio): Fair value measurements of warrants of private portfolio companies are priced based on a modified Black-Scholes option pricing model to estimate the asset value by using stated strike prices, warrant expiration dates modified to account for estimates to actual life relative to stated expiration, risk-free interest rates, and volatility assumptions based on comparable public companies. Option volatility assumptions used in the modified Black-Scholes model are based on public companies who operate in similar industries as companies in our private company portfolio. For these warrants, the fair value of the underlying stock is an unobservable input consistent with Investment - stocks noted above. Certain adjustments may be applied as determined appropriate by management for lack of liquidity.
Investments – stock: Fair value measurements of stocks of private portfolio companies are prices based on a combination of issuer activity and the price of new issuances. The Company, on an annual basis, will review any new offerings from issuers and compare the offering price of the stock in the new issuance compared to the original value of the stock held. The Company will mark the held stock to the new stock price and adjust the carrying value accordingly. If an issuer has not made an offering in the year in review, the company will apply a flat
The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of March 31, 2026:
| Level 1 | | Level 2 | | Level 3 | | Total | |||||
Marketable securities |
| — |
| |
| — |
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Investment - warrants |
| — |
| — |
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Investment - stock | | — | | | ||||||||
Non-Fungible Token ("NFT") | | — | — | | ||||||||
$ | | $ | | $ | | $ | | |||||
The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2025:
| Level 1 | | Level 2 | | Level 3 | | Total | |||||
Marketable securities |
| — |
| |
| — |
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Investment - warrants |
| — |
| — |
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Investment - stock | | — | |
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Non-Fungible Token ("NFT") | | — | — | | ||||||||
$ | | $ | | $ | | $ | | |||||
The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the three months ended March 31, 2026 and 2025 as it relates to Investments – warrants and Investments – stock, respectively:
| Investments- | ||
Warrants | |||
Fair value at December 31, 2025 |
| $ | |
Receipt of warrants |
| — | |
Change in fair value of warrants |
| — | |
Fair value at March 31, 2026 | $ | | |
| Investments- | ||
Stock | |||
Fair value at December 31, 2025 |
| $ | |
Receipt of stock |
| | |
| ( | ||
Fair value at March 31, 2026 | $ | | |
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The following range of variables were used in valuing Level 3 warrant assets during the three months ended March 31, 2026:
| 2026 | | ||
Expected life (years) |
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Risk-free interest rate |
| % | ||
Expected volatility |
| % | ||
Annual dividend yield | % | |||
Underlying share values | $ | |||
Strike Prices | $ | |||
For Investments — Warrants, the primary and most significant unobservable input relates to the underlying share value of the issuers for which we receive warrants. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.
For warrants, the Company also adjusts the expected life of certain warrants to account for potential liquidation events, as well as doubts regarding the ability for the issuer companies to continue as a going concern. The quantitative measure used is based upon Black-Scholes modeling. Significant judgment is required by Management in selecting unobservable inputs, and accordingly a change in the assumptions used for the valuation could cause the value to be significantly different. In general, increases in underlying share prices, expected life and volatility, increase the value of the warrants, whereas decreases would reduce the value.
For Investments – Stock, the primary and most significant unobservable input relates to the share value of the issuers. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets. The basis for writing down this stock is to evaluate if the issuer has performed a raise on the Company’s platform within the last year. If the Company has, the stock value is updated to the current issuance price. If there has not been a raise, the Company writes down the value of the shares by
Accounts Receivable
Accounts receivables are recorded at the invoiced amount and are non-interest-bearing. Bad debt expense for three months ended March 31, 2026 and 2025 was $
As of March 31, 2026 the Company had accounts receivable over 90 days totaling $
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.
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Acquisition expenses are typically paid for in advance by the Administrative Manager and are reimbursed by the Series from the proceeds of the offering in accordance with the offering circular. All such transactions are eliminated in consolidation.
The Company discontinued the offerings of Collectibles in Q3 2023 and is no longer offering purchases in these investments. The Company intends to sell its remaining held assets.
The below is a breakdown of the types of collectibles and their value held as of March 31, 2026 and December 31, 2025:
Period Ended March 31, | Period Ended December 31, | |||||
| 2026 | | 2025 | |||
Wine | $ | | $ | | ||
Trading Cards |
| |
| | ||
Artwork |
| |
| | ||
Comic Books |
| |
| | ||
NFT |
| |
| | ||
Watches |
| |
| | ||
Vinovest | | — | ||||
Total collectibles | $ | | $ | | ||
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 $
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 commission 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 onboarding to launch a campaign. The amount is non-refundable.
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The Company provides transfer agent services branded under the name “StartEngine Secure” through its registered transfer agent subsidiary, StartEngine Secure, LLC. The Company enters into an agreement with issuers for an annual term that commences from the date the issuers’ Regulation Crowdfunding or Regulation A offering launches and renews annually unless cancelled prior to renewal. Initial payment of services is paid from funds of the offering and is non-refundable. Renewals are invoiced on the first day of each annual period and are not subject to cancellation. The initial payment is paid from funds of the offering and is non-refundable. The transfer agent services represent a single performance obligation and is deferred over
The Company provides services to investors branded the StartEngine Venture club program. The general public can become members of the StartEngine Venture Club program on StartEngine’s website for $
The Company provides accredited investors the opportunity to purchase membership interests in funds (“SE Funds”), via StartEngine Private, which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Adviser LLC (“SE Adviser”), which is a subsidiary of the Company that is an investment adviser that qualifies as an Exempt Reporting Adviser under Rule 203(m)-1 under the Investment Advisers Act of 1940. The SE Funds sell their shares in offerings that are exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and specifically Regulation D promulgated thereunder. Such offerings are marketed to accredited investors by the Company’s FINRA-member and SEC-registered broker-dealer subsidiary, StartEngine Primary LLC (“SE Primary”). The Company purchases the private company shares either directly or through other special purpose vehicles and after a certain period of time sells its investment to an SE Fund. The Company takes principal risk in its acquisition of the private company shares and can recognize gross revenue from their sale to the SE Fund. Revenue can be recognized upon each such transaction with an SE Fund.
Vinovest provides investors the opportunity to invest and sell fine wine and whisky products on its platform. Vinovest will purchase and liquidate purchases of wine and whisky and will charge a transaction fee for this service. Additionally, the investors will be charged a recurring payment for storage, insurance and management, a portion of which is paid to Vinovest.
The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered.
In all instances, as a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
The Company’s contracts with customers generally have a term of
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During the three months ended March 31, 2026 and 2025, disaggregated revenue was made up of the following categories associated with the above-described services:
| Three Months | | Three Months | ||||
Ended March 31, | Ended March 31, | ||||||
| 2026 | | 2025 | ||||
Regulation Crowdfunding platform fees | $ | | $ | | |||
Regulation A commissions |
| |
| | |||
StartEngine Premium |
| |
| | |||
StartEngine Secure |
| |
| | |||
StartEngine Private |
| |
| | |||
Venture Club revenue |
| |
| | |||
Vinovest | | — | |||||
Other service revenue |
| |
| | |||
Total 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. Additionally, costs related to StartEngine Private, which includes the cost basis of the stock as well as the acquisition fees related to obtaining the stock included in the offerings.
Research and Development
We incur research and development costs during the process of researching and developing our technologies and future offerings. Our research and development costs consist primarily of non-capitalizable engineering fees for both employees and consultants related to our website and future product offerings, email and other tools that are utilized for client related services and outreach. During the three months ended March 31, 2026 and 2025, research and development costs were $
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 non-employee’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 three months ended March 31, 2026 as the effects would
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be anti-dilutive. See Note 6 for outstanding stock-options as of March 31, 2026. The weighted average shares outstanding – basic and diluted is calculated as follows for the period ended March 31, 2026 and 2025:
Three Months Ended March 31, | ||
| 2026 | |
Net income attributable to common shareholders | ( | |
Weighted average shares outstanding - basic and diluted | | |
Basic earnings per share | ||
Diluted earnings per share | ||
Three Months Ended March 31, | ||
| 2025 | |
Net income attributable to common shareholders | | |
Weighted average shares outstanding - basic | | |
Effect of dilutive stock options | | |
Effect of convertible preferred shares |
| |
Weighted average shares outstanding - diluted | | |
Basic loss per share | ||
Diluted loss per share |
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 $
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
Beginning in 2024 annual reporting, we adopted Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07) that was issued by the Financial Accounting Standards Board (FASB). This new standard requires an enhanced disclosure of significant segment expenses on an annual basis.
We manage our company as
Financial information and annual operating plans and forecasts are prepared and reviewed by the CODM at a entity level. The CODM assesses performance for the broker-dealer segment and decides how to better allocate resources based on revenue that is reported on the Statements of Operations. The Company's objective in making resource allocation decisions is to optimize the financial results. The accounting policies of our broker-dealer segment are the same as those described in the summary of significant accounting policies herein.
For single reportable segment-level financial information, total assets, and significant non-cash transactions, see attached financial statements.
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies the effective date of ASU 2024-03, which requires public business entities to provide disaggregated disclosures of certain income statement expense captions. ASU 2025-01 specifies that the requirements are effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027; early adoption is permitted. The adoption of ASU 2025-01 will not have a material effect on the Company's financial statements.
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In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update enhance the transparency and decision usefulness of income tax disclosures, primarily by requiring more detailed information about a reporting entity’s effective tax rate reconciliation and income taxes paid.
The standard requires public business entities to disclose, on an annual basis, a tabular rate reconciliation using both percentages and reporting currency amounts, with specific categories and additional detail for reconciling items that meet a quantitative threshold. The amendments also require disclosure of income taxes paid, disaggregated by federal (national), state, and foreign jurisdictions, as well as by individual jurisdictions that are significant.
ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted.
The Company has adopted ASU 2023-09 on its consolidated financial statements and related disclosures on a prospective basis.
NOTE 3 – MARKETABLE SECURITIES AND INVESTMENTS
Marketable Securities
Marketable securities consisted of the following as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | | December 31, 2025 | |||
Common stock | $ | | $ | | ||
$ | | $ | | |||
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.
NOTE 4 – PROPERTY AND EQUIPMENT
As of March 31, 2026 and December 31, 2025, property and equipment consisted of the following:
| March 31, 2026 | | December 31, 2025 | |||
Computer equipment | $ | | $ | | ||
Software |
| |
| | ||
Total property and equipment |
| |
| | ||
Accumulated depreciation |
| ( |
| ( | ||
Total property and equipment, net of depreciation | $ | | $ | | ||
Depreciation expense for the three months ended March 31, 2026 and 2025 was $
NOTE 5 – INTANGIBLE ASSETS
Intangibles – Seedinvest
On May 5, 2023, StartEngine Crowdfunding, Inc. (“StartEngine”) completed its purchase of substantially all of the assets of the SeedInvest business as conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, a Delaware limited liability company (“Pluto Holdings”) and through SI Securities, LLC, a New York limited liability company (“SI Securities”), and SeedInvest Technology, LLC, a New York limited liability company, each a wholly-owned subsidiary of Pluto Holdings (“SeedInvest Technology,” collectively, with the assets acquired from Pluto Holdings and SI Securities, “SeedInvest”). This agreement specifically
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does not include the registered broker-dealer or the Alternative Trading System (“ATS”) belonging to SeedInvest. The total consideration for the purchase is
In accordance with the guidance in FASB ASC 350-30-35-14, the Company evaluates the customer list for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess.
The Company considers various factors that may indicate impairment of the customer list, including but not limited to:
| ● | Declines in customer retention rates |
| ● | Reductions in revenue per customer |
| ● | Changes in market conditions affecting the value of the customer relationships |
| ● | Strategic shifts that alter the utility of the acquired customer list |
As of March 31, 2026, the gross carrying amount of the purchase was $
2026 | | |
2027 | | |
2028 | | |
2029 | | |
2030 | | |
Total | |
On March 17, 2026, StartEngine Crowdfunding, Inc. (“StartEngine”) completed its purchase of substantially all of the assets of the Vinovest business. The total consideration for this purchase is
In accordance with the guidance in FASB ASC 350-30-35-14, the Company evaluates the customer list for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess.
The Company considers various factors that may indicate impairment of the customer list, including but not limited to:
| ● | Declines in customer retention rates |
| ● | Reductions in revenue per customer |
| ● | Changes in market conditions affecting the value of the customer relationships |
| ● | Strategic shifts that alter the utility of the acquired customer list |
As of March 31, 2026, the gross carrying amount of the purchase was $
2026 | | |
2027 | | |
2028 | | |
2029 | | |
2030 | | |
Total | |
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Intangible assets of the Company at March 31, 2026 are summarized as follows:
March 31, 2026 | |||||||||||
Cost | Accumulated Amortization | Impairment | Net | ||||||||
Seedinvest customer list | $ | | $ | ( | $ | - | $ | | |||
Vinovest customer list | | ( | - | | |||||||
$ | | $ | ( | $ | - | $ | | ||||
NOTE 6 – COMMITMENTS AND CONTINGENCIES
The Company is currently not involved with and does not know of any pending or threatening litigation against the Company or any of its officers.
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
As of March 31, 2026, the Company has authorized the issuance of
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 $
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 $
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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 $
The following table summarizes the designation, shares authorized, and shares outstanding for the Company’s Preferred Stock:
Preferred Shares | Preferred Shares | Potentially Issuable | |||||||
Preferred Stock Series Designation | | Authorized | | Outstanding | | Preferred Shares | |||
Series Seed | |||||||||
Series A | | ||||||||
Series T | |||||||||
Common Stock
As of March 31, 2026 we had authorized the issuance of
During the three months ended March 31, 2026, the Company sold
During the three months period ended March 31, 2025, the Company sold
Stock Options
In 2015, the 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 common stock. Up to
The Company’s 2025 Equity Incentive Plan became effective on June 4, 2025, authorizing up to
The Company valued options granted under the 2015 Plan under ASC 718 using the Black-Scholes pricing model. The granted options in 2026 and 2025 have exercise prices of $
| 2026 | | |
Expected life (years) |
|
| |
Risk-free interest rate |
| % | |
Expected volatility |
| % | |
Annual dividend yield |
| % |
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The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s employee stock options.
The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.
The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public Company’s common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for options granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The Company currently recognizes option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates A summary of the Company’s stock option activity and related information is as follows
A summary of option activity under the 2015 Plan for three months ended March 31, 2026 is as follows:
Options | | Weighted- Average Exercise Price | | Aggregate Intrinsic Value | |||
Outstanding at December 31, 2025 | | | - | ||||
Granted | | | - | ||||
Exercised | ( | | | ||||
Forfeited | ( | | - | ||||
Expired | - | - | - | ||||
Outstanding at March 31, 2026 | | | ( | ||||
Exercisable at March 31, 2026 | | | ( | ||||
The intrinsic value used in the above calculation was $
Stock option expense for the periods ended March 31, 2026 and 2025 was $
Three Months Ended March 31, | ||||||
| 2026 | | 2025 | |||
Cost of revenues | $ | | $ | | ||
General and administrative |
| |
| | ||
Sales and marketing |
| |
| | ||
Research and development |
| |
| | ||
Total | $ | | $ | | ||
At March 31, 2026, the total compensation cost related to nonvested awards not yet recognized was approximately $
NOTE 8 – INCOME TAX
The Company recorded tax expense of $
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The Company’s effective tax rate for interim periods is based on the estimated annual effective tax rate, adjusted for discrete items occurring within the quarter. The Company continues to assess its valuation allowance position on deferred tax assets and determined that no material changes were necessary as of March 31, 2026.
As of March 31, 2026 and 2025, the Company has
NOTE 9 – ACQUISITION OF VINOVEST
Prior to the Closing, the Company entered into an agreement to purchase all voting equity interests of Vinovest, Inc. on March 17, 2026. The consideration for this purchase was the issuance of
As a result of the closing of the business combination the Company allocated the purchase price with the acquisition of Vinovest under the acquisition method of accounting. The final allocation of the purchase consideration for the mergers will be determined after the completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed, but in no event later than one year following the completion of the mergers.
As such the allocation of the purchase price is revised as follows:
Stock paid to Vinovest | $ | |
Total Consideration Paid | | |
Allocated to: | $ | |
Cash | | |
Receivables and other current assets | | |
Collectibles held | | |
Assets under management | | |
Fixed assets | | |
Intangible assets | | |
Accounts payable, accrued expenses and other current liabilities | ( | |
Customer deposits | ( | |
Net assets acquired | | |
Excess of purchase price over net liabilities assumed before allocation to identifiable intangible assets and goodwill | - |
Management has made the initial determination that all assets and liabilities to be acquired are primarily estimated to be stated at their fair values, which approximates their recorded cost. While a final determination of the value of the identifiable intangibles has not been completed, management has made an initial determination that approximately $
Estimated | ||
Useful Life | ||
Amount | (Years) | |
Customer Lists (a) | | |
Excess of purchase price | - | — |
Goodwill | - | — |
| (a) | The Vinovest customer relationships were valued using the Multi-Period Excess Earnings Method (“MPEEM”). The MPEEM reflects the present value of the operating cash flows generated by existing customer relationships after taking into account the cost to realize the revenue and an appropriate discount rate to reflect the time value and risk associated with the cash flows. |
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Pro Forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of Vinovest operations and StartEngine Crowdfunding’s operations, as though the acquisition of Vinovest had been completed as of the beginning of fiscal 2026 and 2025. The pro forma financial information for the three months ended March 31, 2026 and 2025 combines our results for these periods with that of Vinovest’s results for the three months ended March 31, 2026 and 2025. The amount of revenue and revenue of the acquiree since the acquisition date included in the consolidated income for the reporting period was $
The following table summarizes the unaudited pro forma financial information:
March 31, 2025 | March 31, 2026 | |||
Total revenue | | Total revenue | ||
Net income | | Net loss | ( | |
Weighted average shares | Weighted average shares | |||
Basic | | Basic | | |
Net loss per shares: | Net loss per shares: | |||
Basic | | Basic | ( | |
Weighted average shares | Weighted average shares | |||
Diluted | | Diluted | | |
Net loss per shares: | Net loss per shares: | |||
Diluted | | Diluted | ( |
The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition and the cost of financing the acquisition had taken place at the beginning of fiscal 2026. The financial information for the periods presented above includes pro forma adjustments as follows:
March 31, 2026 | |
Transaction cost | — |
Amortization of intangibles | |
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events that occurred after March 31, 2026.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2025 included in our most recent Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss certain factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q.
Our Company
StartEngine Crowdfunding, Inc. was incorporated on March 19, 2014 in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc., but changed to the current name on May 8, 2014. The Company’s revenue-producing activities commenced in 2015 with the effectiveness of the amendments to Regulation A under the Securities Act adopted in response to Title IV of the JOBS Act. Operations expanded in 2016, as Regulation Crowdfunding, adopted in response to Title III of the JOBS Act, went into effect. On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA. The Company’s subsidiary, StartEngine Adviser LLC filed as an exempt reporting advisor with the SEC on January 8, 2024.
Business and Trends
For Regulation A offerings, our broker-dealer subsidiary is permitted to charge commissions to the companies that raise funds on our platform. Regulation A offerings are subject to a commission ranging between 4% and 7% and usually include warrants to purchase shares of the Company or the securities that are the subject of the offering. The amount of commission is based on the risks and other factors associated with the offering. Through StartEngine Primary, we can also charge commissions on Regulation D offerings hosted on our platform. During the periods covered in these financial statements we did not receive any Regulation D commissions. In Regulation Crowdfunding offerings, our funding portal subsidiary is permitted to charge commissions to the companies that raise funds on our platform. We typically charge 6% to 10% for Regulation Crowdfunding offerings on our platform. We also generate revenue from services, which include a consulting package for Regulation Crowdfunding issuers called StartEngine Premium priced at $20,000 to help companies who raise capital with Regulation Crowdfunding, as well as transfer agent services marketed as StartEngine Secure. In Q2 2024, the Company shifted the Secure billing from annual invoices at $10 per user to tiered service annual contract for $250 or $350 per month. We additionally charge a $1,000 fee for certain amendments we file on behalf of companies raising capital under Regulation Crowdfunding as well as fees to run the required bad actor checks for companies utilizing our services. The Company also receives revenues from other programs such as the StartEngine Venture club program and StartEngine Secondary. Our annual memberships for the StartEngine Venture Club bonus program are $275 per year.
We launched StartEngine Secondary on May 18, 2020 and generate revenues by charging trade commissions to the sellers of the shares. Through March 31, 2026, the Company itself as well as twenty-four additional companies have been quoted on this platform. Currently, for StartEngine Secondary, we generate revenues by charging trade commissions to the sellers of the shares and we intend to generate revenues by charging a 5% commission to the seller. In Q3 2023 the Company began providing accredited investors the opportunity to purchase membership interests in funds (“SE Funds”) which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC, an exempt reporting adviser.
The Company also provides a service named StartEngine Gold, which launched in July 2025. This service provides dedicated crowdfunding marketing support and access to licensed registered representatives who engage with leads and investors within an issuer’s proprietary funnel to help facilitate additional investments in the offering, where appropriate at a cost of $7,500 per month.
Trend Information
We are operating in a relatively new industry and there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. We continue to innovate and introduce new products to include in our current mix as well as continuing to improve our current services such as providing liquidity for our investors and issuers.
As we are a financial services company, our business, results of operations, and reputation are directly affected by elements beyond our control, such as economic and political conditions including unemployment rates, inflation and tax and interest rates, financial market
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volatility (including related to tariffs), war and fears of war (including the recent conflict with Iran), outbreaks of disease, broad trends in business and finance, and changes in the markets in which such transactions occur (such as the bear markets that developed for equities in the second and third quarter of 2022), we might be disproportionately affected by declines in investor confidence caused by adverse economic conditions.
On August 6, 2023, the Company launched “StartEngine Private”, a venture to provide accredited investors the opportunity to purchase membership interests in series which own shares of VC backed, and generally late-stage private companies(the “underlying securities”). The Company treats the amount it receives for selling underlying securities as revenues, and the acquisition cost related to such underlying securities as cost of revenues. StartEngine Private is currently our largest source of revenue. While StartEngine Private offerings have been successful in 2025 and the Company expects that it will continue as its largest revenue source in foreseeable future, the Company has experienced an expected slowdown in revenue from this line of business due to limited availability of stock for purchase of in demand companies, and limited purchase slots available for each offering. In both Q1 2025 and Q2 2025, the underlying securities for the offering were of the world’s largest privately held companies. Since then, including during Q1 2026, many of the companies on the Platform were smaller and lesser known. The Company continues to invest in this line of business and anticipate that expenses related to the purchases and sales of StartEngine Private securities will change in tandem with the revenue generated. Currently, the Company has 7 sales associates dedicated to selling investments in StartEngine Private offerings and will continue to evaluate necessary headcount as StartEngine Private grows.
As a Company, we are always reevaluating processes and procedures as it pertains to the success of the business. As such, the Company remains agile on changes in the market as well as the demand for services provided by the Crowdfunding industry. At the end of 2024, the Company determined that a reduction in workforce was necessary as the staffing required to support current issuer activity on the platform. This adjustment reflects the Company’s strategic focus on higher-growth business lines that require fewer personnel.
In 2024, the Company began hosting its new Regulation Crowdfunding issuances with the broker-dealer entity for regulatory and compliance reasons. As the legacy Regulation Crowdfunding raises complete their issuance, the remaining revenue from them will be booked to the current StartEngine Capital entity, which is not a broker-dealer. We expect that this transition to all Regulation A and Crowdfunding raises will be complete by the end of 2025. As of December 31, 2025, all of our current crowdfunding raises are conducted through our broker-dealer.
In March 2026, the company acquired Vinovest, Inc., a leading platform for fine wine and whiskey investment. Vinovest uses data and industry expertise to source, authenticate, and facilitate the storage of high-quality bottles in bonded warehouses. The platform supports portfolio management, including coordinating insurance, and logistics, while investors can track performance over time and choose to sell or take delivery of their holdings. Vinovest has also developed relationships in the wine industry, allowing top wineries from around the world to reach the next generation of collectors and investors in the company’s network. The Company has onboarded 4 employees from Vinovest to StartEngine and has begun integrating systems and customer lists. Vinovest will continue to operate independent of the Company to offer products to investors.
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Operating Results
Three Months Ended March 31, 2026 Compared with the Three Months Ended March 31, 2025
The following table summarizes the results of our operations for the three months ended March 31, 2026 (“Q1 2026”) as compared to the three months ended March 31, 2025 (“Q1 2025”) and includes Adjusted EBITDA. For discussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Non-U.S. GAAP Financial Measures” below.
| Three Months Ended March 31, | ||||||||
2026 | | 2025 | | $ Change | |||||
Revenues | $ | 25,049,691 | $ | 30,364,357 |
| $ | (5,314,666) | ||
Cost of revenues |
| 18,190,810 |
| 20,299,424 |
|
| (2,108,614) | ||
Gross profit |
| 6,858,881 |
| 10,064,933 |
|
| (3,206,052) | ||
Operating expenses: |
| |
| |
|
| |||
General and administrative |
| 4,019,366 |
| 3,328,479 |
|
| 690,887 | ||
Sales and marketing |
| 3,706,012 |
| 3,337,696 |
|
| 368,316 | ||
Research and development |
| 1,418,463 |
| 1,399,602 |
|
| 18,861 | ||
Change in fair value of shares received for fees |
| 442,030 |
| 298,945 |
|
| 143,085 | ||
Total operating expenses |
| 9,585,871 |
| 8,364,722 |
|
| 1,221,149 | ||
Operating income (loss) |
| (2,726,990) |
| 1,700,211 |
|
| (4,427,201) | ||
Other income (expense) |
| |
| |
|
| |||
Other income (expense), net |
| 513,820 |
| 25,580 |
|
| 488,240 | ||
Total other income (expense), net |
| 513,820 |
| 25,580 |
|
| 488,240 | ||
Income (loss) before provision for income taxes |
| (2,213,170) |
| 1,725,791 |
|
| (3,938,961) | ||
Taxes - Other |
| 21,734 |
| 8,340 |
|
| 13,394 | ||
Net income (loss) |
| (2,234,904) |
| 1,717,451 |
|
| (3,952,355) | ||
Less: net loss attributable to noncontrolling interest |
| — |
| — |
|
| — | ||
Net Income (loss) attributable to stockholders | $ | (2,234,904) | $ | 5,238,793 |
| $ | (7,473,697) | ||
Adjusted EBITDA | 1,525,655 | 5,238,793 | $ | (3,713,138) | |||||
Our revenues during the three months ended March 31 2026 were $25,049,691, compared to $30,364,357 for the three months ended March 31, 2025, which represented a decrease of $5,314,666 or 18%. The table below represents the major components of our revenues during the three month periods ended March 1, 2026 and 2025:
| Three Months | | Three Months | | |||||
Ended March 31, | | Ended March 31, | | ||||||
| 2026 |
| 2025 | $ Change | |||||
Regulation Crowdfunding platform fees | $ | 1,968,122 | $ | 1,802,197 | $ | 165,925 | |||
Regulation A commissions |
| 293,618 |
| 1,432,818 |
| (1,139,200) | |||
StartEngine Premium |
| 138,000 |
| 813,895 |
| (675,895) | |||
StartEngine Secure |
| 318,475 |
| 348,270 |
| (29,795) | |||
StartEngine Private |
| 20,492,314 |
| 24,620,809 |
| (4,128,495) | |||
Venture Club revenue |
| 1,381,762 |
| 1,343,208 |
| 38,554 | |||
Vinovest | 272,241 | — | 272,241 | ||||||
Other service revenue |
| 185,159 |
| 3,160 |
| 181,999 | |||
Total revenues | $ | 25,049,691 | $ | 30,364,357 | $ | (5,314,666) | |||
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The decrease in total revenues during the three months ended March 31, 2026 as compared to the same period in 2025 is primarily due to the decrease inStartEngine Private revenue of $4,128,495. The decrease in Private revenue is driven by less inventory for sale as well as delcininig interest in the Company’s current offerings. As such, the Company has begun taking measures to add new offerings and funds that will create higher interest in offerings for the remainder of 2026. There can be no assurance that these measure will be successful.
For the three months ended March 31, 2026, compared to the same period in 2025, the Company observed the following revenue trends across its other product lines:
| ● | Increase in Regulation Crowdfunding platform fees of $165,925: The increase in Regulation Crowdfunding platform fees was primarily driven by higher raise totals for issuers within the period. In 2026, the Company hosted raises of more successful issuers that had increased demand from issuers compared to 2025. In addition, the Company had more live raises in Q1 2026 compared to Q1 2025, which increased investment and revenue for the period. |
| ● | Decrease in Regulation A commissions of $1,139,200: The decrease is due primarily to lower amounts raised in Regulation A offerings for its issuers. Regulation A revenue is more sensitive to revenue variance based on the limited number of Regulation A raises hosted on the platform, and as such will experience a higher rate of variance based on the success of these issuers. |
| ● | Decrease in StartEngine Premium revenue of $675,895: The increase is due to several factors, including shift in payment strategy and fewer issuers utilizing the services. |
| ● | Addition of Vinovest revenue of $272,241: The Company acquired Vinovest on March 17, 2026 and included revenue from acquisition date until the end of the period. |
| ● | Increase in other service revenue of $181,999: The increase is due to the addition of the StartEngine Gold service line which began in 2025 and posted $182,500 of revenue within the period. |
Cost of Revenues
Cost of revenues consists of internal employees, hosting fees, processing fees, certain software subscription fees that are required to provide services to our issuers, and for StartEngine Private acquisition costs related to underlying securities that it has sold to an SE Fund. Specifically, cost of revenues for StartEngine Private were $15,041,467 and $16,976,724 for the three months ended March 31, 2026 and 2025, respectively. Our total cost of revenues during the three months ended March 31, 2026 and 2025 was $18,190,810 and $20,299,424, respectively. The decrease was primarily due to the decrease in StartEngine Private revenue for the quarter.
Operating Expenses
Our total operating expenses during the three months ended March 31, 2026 amounted to $9,585,871, which represented an inecrease of $1,221,149, or 15%, from the expenses in the same period in 2025. The decrease in operating expenses is primarily due to the following:
| ● | Increase in general and administrative expenses of $690,887: Primarily due to an increase in compensation for employees related to the success of the Company in 2025, as well as the increase in software expenses as the Company began utilizing artificial intelligence applications for increased efficiency, and finally increased legal costs as the Company began exploring opportunity to increase the scope of some of our current offerings. |
| ● | Sales and marketing expenses increased by $368,316: Primarily due to higher headcount within the department which led to higher compensation and accrual for 2026 performance bonuses. Additionally, the Company increased market research and consulting cost as the Company worked towards reaching more potential investors in 2026. |
| ● | Impairment in fair value of shares received for fees expense increased $143,085 for the period based on review of the underlying value of the stock held by the Company. |
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Other Expense (Income), net
Our other income, net during the three months ended March 31, 2026 amounted to $513,820, which represented a gain on sale from the Company’s owned portion of Private investments, cashback earned from our credit cards during the period as well as interest earned in the Company’s money-market accounts. During the same period in 2025 our other income, net was $25,580 which was also related to cashback earned.
Net Loss (Income)
Net loss attributable to stockholders totaled $2,234,904 for the three months ended March 31, 2026, an decrease of $3,952,355 compared to the net income attributable to shareholders of $1,717,451 recognized during the three months ended March 31, 2025.
Adjusted EBITDA
Adjusted EBITDA totaled $1,525,655 for the three months ended March 31, 2026, a decrease of $3,713,138 compared to $5,238,793 in Adjusted EBITDA during the three months ended March 31, 2025.
Critical Accounting Policies
See Note 2 in the accompanying financial statements.
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.
A significant portion of the Company’s assets relate to investments in stock and previously warrants received as compensation from issuer companies undertaking Regulation Crowdfunding or Regulation A offerings. As described in Note 2, in the accompanying financial statements, stock and warrants require significant unobservable inputs, primarily related to the underlying stock price of the
security received which may include marketability discounts. Warrants have further unobservable inputs related to the estimated life. In all cases, there were sales of the stock to the public through Regulation Crowdfunding or Regulation A funding mechanism, but such sales are often not to the level that an active market existed or exists. Once the funding round is concluded it is difficult to ascertain the fair value of the issuer shares or the status of the issuer’s financial health, unless additional rounds of financing are undertaken in a public setting, or the issuer reports reliable and regular information publicly. Any change in the underlying shares would impact on the valuation of the related investments. Shares held are generally illiquid. Valuations require significant management judgment related to these unobservable inputs.
As many of the companies that undertaking Regulation Crowdfunding and Regulation A are considered emerging growth companies, require significant capital to maintain or commence operations, and often contain warnings regarding substantial doubt about the Company’s ability to continue as a going concern, it is reasonable to conclude that through the passage of time, a significant portion of the stock and warrants held by the Company will ultimately be deemed worthless, decline in value, or in the case of warrants, expire without exercise. Similar to traditional venture capital results, it is reasonable to conclude that only a small portion of each investment may ever increase in value.
Investments - Stock
n 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 three months ended March 31, 2026 and 2025, the Company received stock with a cost of $220,179 and $609,121, respectively, as payment for fees. During the three months ended March 31, 2026 and 2025, write down expense related to shares received amounted to $442,030 and $298,945, respectively.
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Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the estimated fair value of the award and recognized as expense over the requisite service period, which is generally the vesting period. The Company grants equity awards with a four-year vesting schedule, consisting of a 12-month cliff under which 25% of the award vests upon the first anniversary of the grant date, and the remaining 75% vests ratably over the subsequent 36 months. The fair value of stock-based awards is estimated using the Black-Scholes option pricing model, which requires the use of subjective assumptions, including expected volatility, expected term, risk-free interest rate, and expected dividend yield. These assumptions involve significant management judgment and may differ from actual results. Accordingly, the Company recognizes stock-based compensation expense on a straight-line basis over the service period, adjusted for estimated forfeitures, and revises its estimates as necessary if actual forfeitures differ from initial expectations.
Collectibles
The Company records collectibles at cost in accordance with the Company’s policy. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, we believe that we purchase these assets in arms-length transactions at fair value and such transactions are evidence of fair market value in the near term. For collectibles, over time, and as trends change and economic factors affect various markets for which we hold assets, the estimation of certain assets that do not trade in a regular market may be difficult to assess for fair value. Certain assets may be subject to market manipulation or overproduction that could affect the underlying value of like or similar items. The quality of authentication bodies may affect future valuation. If there are limited data points to assess fair value, especially for one-of-a-kind collectibles, we may not identify impairments in a timely manner. Many of the collectibles have value that is in the eye of the beholder. Accordingly, there is significant uncertainty to what these assets would be valued at in subsequent arms-length transactions.
Liquidity and Capital Resources
Statement of Cash Flows
The following table summarizes, for the periods indicated, selected items in our condensed Statements of Cash Flows:
Three Months Ended | ||||||||||
March 31, | ||||||||||
| 2026 | | 2025 | | $ Change | | ||||
Net cash provided by (used in) operating activities | $ | (2,351,559) | $ | 5,884,277 | $ | (8,235,836) | ||||
Net cash provided by investing activities | $ | 3,525,206 | $ | 1,475,446 | $ | 2,049,760 | ||||
Net cash provided by financing activities | $ | 1,024,108 | $ | 680,271 | $ | 343,837 | ||||
Cash used in operating activities for the three months ended March 31, 2026 was $2,351,559 as compared to cash provided by operating activities of $5,884,277 for the same period in 2025. This decrease was driven by a change from net income to net loss from Q1 2025 to Q1 2026, an increase in accounts receivable for the period ended March 31, 2026 compared to 2025 as well as a decrease in accrued liabilities in 2026 related to the Company paying accrued year-end performance bonuses.
Cash provided by investing activities for the three months ended March 31, 2026 was $3,525,206, as compared $1,475,446 in the same period in 2025. The increase was driven by the cash proceeds from the acquisition of Vinovest in March 2026.
Cash provided by financing activities for the three months ended March 31, 2026 was $1,024,108, as compared to cash provided by investing activities of $680,271 in the same period in 2025. This relates to our Regulation A raises during both these periods.
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Balance Sheet
The following table summarizes our assets and liabilities as of March 31, 2026 as compared as of December 31, 2025:
| March 31, | | December 31, | | |||
2026 | 2025 | ||||||
Assets |
| |
| |
| ||
Current assets: |
| |
| |
| ||
Cash | $ | 30,585,016 | $ | 28,387,261 | |||
Marketable securities |
| 1,856 |
| 1,856 | |||
Accounts receivable, net of allowance |
| 1,847,100 |
| 1,108,093 | |||
Other current assets |
| 1,248,404 |
| 929,326 | |||
Total current assets |
| 33,682,376 |
| 30,426,536 | |||
Property and equipment, net |
| 142,315 |
| 125,213 | |||
Investments - warrants |
| 54,021 |
| 54,021 | |||
Investments - stock |
| 8,921,144 |
| 9,142,997 | |||
Investments - Private | 14,140,085 | 13,990,161 | |||||
Investments - Collectibles |
| 3,953,042 |
| 2,362,083 | |||
Investments - Real Estate |
| 196,890 |
| 233,890 | |||
Due from related party | 26,760,638 | 15,035,049 | |||||
Intangible assets |
| — |
| — | |||
Other assets |
| 33,847 |
| 33,847 | |||
Total assets | $ | 87,884,358 | $ | 71,403,797 | |||
Liabilities |
| |
| | |||
Current liabilities: |
| |
| | |||
Accounts payable | $ | 1,497,191 | $ | 990,993 | |||
Accrued liabilities |
| 10,355,379 |
| 10,196,824 | |||
Deferred revenue |
| 3,757,788 |
| 3,569,450 | |||
Total current liabilities |
| 15,610,358 |
| 14,757,267 | |||
| |||||||
Total liabilities | $ | 15,610,358 | $ | 14,757,267 | |||
The Company’s current assets increased by $3,255,840 from December 31, 2025 to March 31, 2026. The increase was primarily driven by an increase in cash in the amount of $2,197,755, driven by the sale of additional StartEngine Private investments. Additionally, Accounts Receivable increased by $739,007 from December 31, 2025 to March 31, 2026.
The Company’s long-term assets increased by $13,224,721 from December 31, 2025 to March 31, 2026, primarily due to acquisition of Vinovest, Inc. for $14 million in Q1 2026, including an intangible asset of $12,653,239.
Current liabilities increased by $853,091 which is primarily due to the increase of accounts payable as of March 31, 2026.
Liquidity and Capital Resources
We do not currently have any significant loans or available credit facilities. As of March 31, 2026, the Company’s current assets were $33,682,376. To date, our activities have been funded from our revenues, investments from our founders, the previous sale of Series Seed Preferred Shares, Series A Preferred Shares, Series T Preferred Shares, and our Common Stock in our Regulation A and Regulation CF offerings.
We have no off-balance sheet arrangements, including arrangements that would affect the liquidity, capital resources, market risk support, and credit risk support or other benefits.
The Company currently has no material commitments for capital expenditures.
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We believe we have the cash, marketable securities through our open Regulation A offering, other current assets available, revenues, and access to funding that will be sufficient to fund operations until the Company starts generating positive cash flows from normal operations.
Non-U.S. GAAP Financial Measures
We are presenting a non-GAAP financial measure “Adjusted EBITDA”, which is a measure adjusted for the impact of specified items and are not in accordance with GAAP.
We define Adjusted EBITDA as net income (loss) calculated in accordance with GAAP, plus interest expense, interest income, income taxes, depreciation, and amortization. We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. We believe Adjusted EBITDA provides useful information to investors regarding our operational performance and our ability to generate cash flows. Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP financial measures presented by other companies.
The following table reconciles net income (loss), the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:
Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | |||
Net Income (Loss) | $ | (2,234,904) | $ | 1,717,451 |
Interest Income | (29,092) | (27) | ||
Income Taxes | 21,734 | 8,340 | ||
Depreciation and Amortization | 929,658 | 861,949 | ||
Stock Based Compensation | 2,838,267 | 2,651,080 | ||
Adjusted EBITDA | $ | 1,525,663 | $ | 5,238,793 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).
ITEM 4. CONTROLS AND PROCEDURES
Limitations on Effectiveness of Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact there are resource constraints and management are required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded our disclosure controls and procedures were not effective as of March 31, 2026.
31
Changes in Internal Control Over Financial Reporting
As disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2025, during preparation for financial reporting related to the year ended December 31, 2025, and based on communication from the auditors, the Company discovered certain material weaknesses described above. Management continues to evaluate the material weakness discussed above, has created a remediation plan that we have already begun implementing and continue to finalize that plan's implementation. Specifically, management is in the process of developing and implementing a plan to review offering results of the Company’s current and prior clients as well as their agreements to confirm the accuracy and amount of investment shares received as compensation. Going forward, the Company intends to implement a more stringent review process and notes that such investment shares are no longer a standard component of its compensation arrangements with clients. With respect to segregation of duties in the reporting and posting of journal entries, the Company is evaluating options and processes to enhance and strengthen its current control structure.
However, assurance as to when all remediation efforts will be complete cannot be provided and the material weakness cannot be considered remedied until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management cannot provide assurances that the measures that have been taken to date, and are continuing to be implemented, will be sufficient to remediate the material weakness identified or to avoid potential future material weaknesses.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. Except as described below, the Company is not currently involved in any material litigation or threatened litigation.
Item 1A. Risk Factors
Risk Factors Related to the Company and its Business
Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected.
We are engaged in an industry that continues to develop and rapidly change, which requires our company to be flexible in executing its business plans. We have not consistently been profitable and may not do so in the near future.
StartEngine was formed in 2014 and is still working on fine tuning its business plan to one that will enable it to consistently generate profits on an annual basis and to maintain profitability. Though we have been operating for over a decade, we are still evolving aspects of business model, including modifying our revenue models, adding additional products (e.g., StartEngine Secondary, StartEngine Private), and modifying our current offerings in light of regulatory changes and/or interactions with regulators. Over the past year, our StartEngine Private has surpassed our previous products in terms of revenue generation and profitability we may not be able to maintain that. For instance, we were not profitable over the past quarter. Accordingly, the Company’s operating history may not be indicative of future prospects. Our current and proposed operations are subject to all the business risks associated businesses in industries that are developing and rapidly changing. These include likely fluctuations in operating results as the Company reacts to developments in its market, manages its growth, and develops new services as well as the entry of competitors into the market. We will only be able to pay dividends on any shares once our directors determine that we are financially able to do so. Since inception, StartEngine has not generated sufficient revenues to cover operational expenses. There is no assurance that we will be consistently profitable in the next three years or generate sufficient annual revenues to pay dividends to the holders of our shares.
We operate in a regulatory environment that is evolving and uncertain.
The regulatory framework for online capital formation or crowdfunding is relatively new. The regulations that govern our operations have been in existence for a limited period. Further, there are constant discussions among legislators and regulators with respect to changing the regulatory environment. New laws and regulations could be adopted in the United States and abroad. Further, existing laws
32
and regulations may be interpreted in ways that would impact our operations, including how we communicate and work with investors and the companies that use our platform’s services and the types of securities that our clients can offer and sell on our platform. For instance, in prior years, there have been several attempts to modify the current regulatory regime. Some of those suggested reforms could make it easier for anyone to sell securities (without using our services). Any such changes would have a negative impact on our business.
We operate in a highly regulated industry.
We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Our subsidiaries include: StartEngine Primary LLC is registered as a broker-dealer and operates an alternative trading system under the brand “StartEngine Secondary”, StartEngine Secure LLC is registered as a transfer agent; and our subsidiary StartEngine Adviser LLC is registered as an Exempt Reporting Adviser; and our subsidiary. . As a funding portal and broker-dealer, we have to comply with stringent regulations, and the operation of our funding portal, broker-dealer and alternative trading system services exposes us to a significant amount of liability. Furthermore, new lines of business may subject us to other regulatory regimes, such those regulating investment advisers, including the Investment Advisers Act of 1940, if we fail to remain in compliance with certain exemptions. Further we have seen increased regulations in this industry from regulators (both federal and state) and FINRA as well as private rights of actions and threatened litigation in the industry. In light of this, we expect increased compliance costs as well as potential subjecting us to additional liabilities. In addition, some of the restrictions and rules applicable to our subsidiaries could adversely affect and limit some of our business plans of other parts of our business.
We were approved as a broker-dealer in 2019, launched our alternative trading system in 2020, became a “carrying” broker-dealer in 2021, became an exempt reporting adviser in 2024, and are still in the process of adapting our business model and pricing structure.
As a broker-dealer, we not only are subjected to federal and state requirements but also have need to comply with the requirements of FINRA, the self-regulatory organization, that apply to broker-dealers and the regulations that apply to the operation of alternative trading systems. In addition, we have expanded the scope of our operation including launching our alternative trading system in May 2020, and became a “carrying” broker-dealer at the end of September 2021, which increased our net capital requirements. In 2023, we launched StartEngine Private, which required us to file as an exempt reporting adviser in early 2024 and may require us to become a registered investment adviser in the future. We are still in the process of adapting to these changes, but there have been and will be increased costs, including the need to hire personnel with specific qualifications and pay them in accordance with their experience. We are subjected to periodic examinations and we will be required to change aspects of our business processes and communications in response to the findings of those examinations. Becoming a broker-dealer and/or reporting adviser has and will continue to lead to increases in our compliance costs as well as increases in our exposure to liabilities, including subjecting us to liability for misstatements made by issuers utilizing our services.
We may be liable for misstatements made by issuers.
Under the Securities Act and the Exchange Act, issuers making offerings through our funding portal may be liable for including untrue statements of material facts or for omitting information that could make the statements misleading. This liability may also extend in Regulation Crowdfunding offerings to funding portals, such as our subsidiary. Further, as a broker-dealer, we may be liable for statements by issuers utilizing our services in connection with Regulation A and Regulation D offerings. Even though due diligence defenses may be available; there can be no assurance that if we were sued, we would prevail. Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to such actions may cause us reputational harm that would negatively impact our business. Moreover, even if we are not liable or a party to a lawsuit or enforcement action, some of our clients have been and will be subject to such proceedings. Any involvement we may have, including responding to document production requests, may be time-consuming and expensive as well.
We have identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets and cause the price of our common stock to decline and subject us to regulatory penalties.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we maintain internal control over financial reporting that meets applicable standards. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no assurance that all control issues have been or will be detected. If we are unable, or are perceived
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as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction and a decrease in our stock price.
In the past we have had to restate our financial statements, and during preparation for financial reporting related to the year ended December 31, 2025, the Company discovered certain errors in the preparation of the financial statements. The Company’s management conducted an investigation with the Company’s independent auditors. As a result of this investigation, the Company determined that several accounts required correction to be in accordance with US GAAP. Accordingly, the Company made certain corrections to the financial statements for the year ended December 31, 2025.
Management concluded that the Company’s internal control over financial reporting, as defined by Sections 13a-15(f) and 15d-15(f) of the Exchange Act, was not effective as of December 31, 2025, including due to the following identified material weaknesses:
| - | Lack of segregation of duties in the recording and posting of journal entries; |
| - | Control deficiency in revenue recognition, relating to investments received as compensation; and |
| - | Failure to properly reconcile investment shares the Company has received as compensation. |
Management has included a report on its assessment of internal control over financial reporting, including a description of identified material weaknesses, remediation efforts resulting in changes to internal control over financial reporting, and plans for further remediation in Item 9A, “Controls and Procedures” of our Form 10-K.
If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business, and would have a material adverse effect on our business, financial condition and results of operations.
Our compliance is focused on U.S. laws and we have not analyzed foreign laws regarding the participation of non-U.S. residents.
Some of the investment opportunities posted on our platform are open to non-U.S. residents. We have not researched all the applicable foreign laws and regulations, and we have not set up our structure to be compliant with foreign laws. It is possible that we may be deemed in violation of those laws, which could result in fines or penalties as well as reputational harm. This may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulations may limit our business operations and plans for future expansion.
StartEngine’s product offerings are relatively new in an industry that is still quickly evolving.
The principal securities regulations that we work with, Rule 506(c), Regulation A and Regulation Crowdfunding, have only been in effect in their current form since 2013, 2015 and 2016, respectively. StartEngine’s ability to continue to penetrate the market remains uncertain as potential issuer companies may choose to use different platforms or providers (including, in the case of Rule 506(c) and Regulation A, using their own online platform), or determine alternative methods of financing. Investors may decide to invest their money elsewhere. Further, our potential market may not be as large, or our industry may not grow as rapidly, as anticipated, for instance, according to the SEC, the size for the Regulation A market retracted in 2023 and remained about the same in 2024. With a smaller market than expected, we may have fewer customers. Success will likely be a factor of investing in the development and implementation of marketing campaigns, subsequent adoption by issuer companies as well as investors, and favorable changes in the regulatory environment. Finally, as more competitors enter the market, it will become more difficult to obtain business.
We have an evolving business model.
Our business model is one of innovation, including continuously working to expand our product lines and services to our clients, such as our expansion into the transfer agent and broker-dealer space as well as our foray into becoming an alternative trading system and acting as an exempt investment adviser for companies. It is unclear whether these services will be successful. Further, we continuously try to offer additional types of services, and we cannot offer any assurance that any of them will be successful. From time to time we may also modify aspects of our business model relating to our service offerings, for instance we are no longer focused on StartEngine
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Assets and securitizing collectibles in the Regulation A market and have turned our focus to the opportunity to purchase membership interests in funds (“SE Funds”) which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offerings. StartEngine Private, which started in the 3rd quarter in 2023, has been our main source of revenue for the prior two year. We recently acquired another business which rather than invests in securities facilities investors purchasing fine wines and whiskeys. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage this evolution effectively, which could damage our reputation, limit our growth, and negatively affect our operating results.
Our subsidiaries have facilitated the ownership, transfer, or administration of significant assets on behalf of clients and affiliated parties, we may be exposed to claims, liabilities, disputes, or regulatory scrutiny relating to such assets.
Our subsidiary, Vinovest, Inc. has facilitated the storage and ownership of nearly $100 million in fine wine and whisky held in third-party bonded warehouses, licensed warehouses, and licensed distilleries in multiple jurisdictions. Further, StartEngine Private has securitize hundreds of millions of dollars in securities of other companies. These activities could subject us to allegations involving recordkeeping errors, unauthorized transfers, valuation disputes, cybersecurity incidents, fraud, compliance failures, or breaches of fiduciary, contractual, or other duties. In certain circumstances, we may be required to defend claims or incur costs even where we are not ultimately found liable. Any such claims, liabilities, investigations, or disputes could result in substantial legal expenses, reputational harm, operational disruption, regulatory penalties, or financial losses, which could materially adversely affect our business, financial condition, and results of operations.
As we grow our business, we may not be able to manage our growth successfully.
If we are able to increase the scope of our business offerings, our customer base, the volume of our transactions and grow our business, we will face business risks commonly associated with rapidly growing companies, including the risk that existing management, information systems and financial and internal controls may be inadequate to support our growth. We cannot predict whether we will be able to respond on a timely basis, or at all, to the changing demands that our growth may impose on our existing management and infrastructure. For example, increasing demands on our infrastructure and management could cause any of the following to occur or increase:
· | inadequate internal controls required for a regulated entity; |
· | inadequate financial controls needed as we transition to become a reporting company; |
· | delays in our ability to handle the volume of customers, including issuers; and |
· | failure to properly review and supervise personnel to make sure we are compliant with our duties as regulated entities. |
This risk is illustrated by the fact that, during preparation for financial reporting related to the year ended December 31, 2025 and 2024, and based on review from the auditors, the Company discovered certain deficiencies as well as errors (specifically in revenue recognition, including related to investments received as compensation) in its previously reported quarterly financial statements for 2025. The Company’s management has concluded that, in light of these deficiencies and errors, the Company’s disclosure controls and procedures and internal control over financial reporting as of December 31, 2025 was not effective. To address these material weaknesses, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of the Company’s internal control over financial reporting. Management’s report on internal control over financial reporting, a description of the material weaknesses identified, resulting changes to internal control over financial reporting, and continued plans for remediation can be found in Item 9A “Controls and Procedures” of our Form 10-K. See also the above risk factor, “We have identified material weaknesses in our internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets and cause the price of our common stock to decline and subject us to regulatory penalties.”If we continue to have issues and/or fail to adapt our management, information systems and financial and internal controls to our growth, or if we encounter other unexpected difficulties, our business, financial condition and operating results will suffer.
A majority of our gross profits is attributable to StartEngine Private.
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A substantial majority of our gross profit is derived from a single line of business, Start Engine Private. As a result, our operating results are highly dependent on the continued performance and viability of this line. If we were to experience disruptions affecting this business—including, but not limited to, adverse regulatory developments, changes in applicable laws or interpretations, licensing or compliance issues, or market or competitive pressures—we may be required to modify, curtail, or discontinue such operations. Any such event could materially and adversely affect our business, financial condition, and results of operations.
We depend on key personnel and face challenges recruiting needed personnel.
Our future success depends on the efforts of a small number of key personnel, including our founder and Chief Executive Officer, Howard Marks, and our compliance, engineering and marketing teams. Expanding our compliance team in response to the growth in our business and the regulatory issues we have faced to date, is essential to our success, and recruiting and training compliance personnel will place demands on financial and management resources. Our software engineer team, as well as our marketing team led by Johanna Cronin, are critical to continually innovate and improve our products while operating in a highly regulated industry. In addition, due the specialized expertise required, we may not be able to recruit the individuals needed for our business needs. There can be no assurance that we will be successful in attracting and retaining the personnel we require to operate and be innovative.
StartEngine and its providers are vulnerable to hackers and cyber attacks.
As an internet-based business, we may be vulnerable to hackers who may access the data of our investors and the issuer companies that utilize our platform. Further, any significant disruption in service on the StartEngine platform or in its computer systems could reduce the attractiveness of the StartEngine platform and result in a loss of investors and companies interested in using our platform. Further, we rely on a third-party technology provider to provide some of our back-up technology as well as act as our escrow agent. Any disruptions of services or cyber attacks either on our technology provider or on StartEngine could harm our reputation and materially negatively impact our financial condition and business.
StartEngine currently relies on one vendor for escrow services.
We currently rely on Bryn Mawr Trust Company to provide escrow services. Any change in this relationship will require us to find another escrow agent and escrow bank. This may cause us delays as well as additional costs in transitioning our technology.
We are dependent on general economic conditions.
Our business model is dependent on investors investing in the companies presented on our platforms. Investment dollars are disposable income. Our business model is thus dependent on national and international economic conditions. Adverse national and international economic conditions may reduce the future availability of investment dollars, which would negatively impact our revenues and possibly our ability to continue operations. It is not possible to accurately predict the potential adverse impacts on the Company, if any, of current economic conditions on its financial condition, operating results and cash flow.
We face significant market competition.
We facilitate online capital formation and private securities transactions. Though online capital formation is a relatively new market, we compete against a variety of entrants in the market as well likely new entrants into the market. Some of these follow a regulatory model that is different from ours and might provide them competitive advantages. New entrants could include those that may already have a foothold in the securities industry, including some established broker-dealers. Further, online capital formation is not the only way to address helping start-ups raise capital, and the Company has to compete with a number of other approaches, including traditional venture capital investments, loans and other traditional methods of raising funds and companies conducting crowdfunding raises on their own websites. Additionally, some competitors and future competitors may be better capitalized than us, which would give them a significant advantage in marketing and operations.
Moreover, as we continue to expand our offerings, including providing administrative services to issuers, securitizing various asset classes and transfer agent services, we will continue to face headwinds and compete with companies that are more established and/or have more financial resources than we do and/or new entrants bringing disruptive technologies and/or ideas.
Finally, the Company faces increasing competition via StartEngine Private, which the Company provides accredited investors the opportunity to purchase membership interests in funds (“SE Funds”) which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. As new competitors enter the market, acquisition of shares will become more difficult.
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We may not be able to protect all of our intellectual property.
Our profitability may depend in part on our ability to effectively protect our proprietary rights, including obtaining trademarks for our brand names, protecting our products and websites, maintaining the secrecy of our internal workings and preserving our trade secrets, as well as our ability to operate without inadvertently infringing on the proprietary rights of others. There can be no assurance that we will be able to obtain future protections for our intellectual property or defend our current trademarks and future trademarks and patents. Further, policing and protecting our intellectual property against unauthorized use by third parties is time-consuming and expensive, and certain countries may not even recognize our intellectual property rights. There can also be no assurance that a third party will not assert infringement claims with respect to our products or technologies. Any litigation for both protecting our intellectual property or defending our use of certain technologies could have material adverse effect on our business, operating results and financial condition, regardless of the outcome of such litigation.
Our revenues and profits (if any) are subject to fluctuation.
It is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors. These factors may include adverse changes in: number of investors and amount of investors’ dollars, the success of world securities markets, general economic conditions, our ability to market our platform to companies and investors, headcount and other operating costs, and general industry and regulatory conditions and requirements. The Company’s operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant and could impact our ability to operate our business.
Natural disasters and other events beyond our control could materially adversely affect us.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services.
Risk Factors Related to the Common Stock
Voting control is in the hands of a few large stockholders.
Voting control is concentrated in the hands of a small number of stockholders. Our CEO and Chairman currently hold approximately 26% of our voting shares in aggregate, including shares of our Common Stock and (on an as-converted basis) shares of our Series Seed Preferred Stock, Series A Preferred Stock and Series Seed Preferred Stock; and two other shareholders, SE Agoura Investment LLC and The Lee Miller Trust UA 09/05/2020, own approximately 17% and 7%, respectively, of our voting shares in aggregate. None of SE Agoura Investments LLC, The Lee Miller Trust UA 09/05/2020 or their beneficial owners serve on our Board or are employees of our Company. The trust, held on behalf of Mr. Marks’ family, which he does not control or beneficially own, owns approximately 2%. Those five shareholders in aggregate control approximately 53% of our voting shares and approximately 52% of our preferred stock. Those five shareholders in aggregate control approximately 52% of our voting shares and approximately 52% of our preferred stock. Holders of our Common Stock are generally not be able to influence our policies or any other corporate matter, including the election of directors, changes to our Company’s governance documents, expanding the employee option pool, and any merger, consolidation, sale of all or substantially all of our assets, or other major action requiring stockholder approval. Some of the larger stockholders include, or have the right to designate, executive officers and directors of our Board. These few people and entities make all major decisions regarding the Company.
Future fundraising may affect the rights of investors.
In order to expand, the Company is likely to raise funds again in the future, either by offerings of securities or through borrowing from banks or other sources. The terms of future capital raising, such as loan agreements, may include covenants that give creditors greater rights over the financial resources of the Company.
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Holders of our Preferred Stock are entitled to potentially significant liquidation preferences over holders of our Common Stock if we are liquidated, including upon a sale of our Company.
Holders of our outstanding Preferred Stock have liquidation preferences over holders of Common Stock. This liquidation preference is paid if the amount a holder of Preferred Stock would receive under the liquidation preference is greater than the amount such holder would have received if such holder’s shares of Preferred Stock had been converted to Common Stock immediately prior to the liquidation event. Holders of Series A Preferred Stock and Series T Preferred Stock are entitled to liquidation preferences superior to Series Seed Preferred Stock. If a liquidation event, including a sale of our Company, were to occur that resulted in a distribution of less than approximately $8 million, the holders of our Preferred Stock could be entitled to all proceeds of cash distributions.
There is a limited current market for our Common Stock.
Currently, the only marketplace for our Common Stock is and will be our alternative trading system or “ATS” branded as “StartEngine Secondary.” To date, we only have limited experience selling our shares on StartEngine Secondary; and trading of our securities will only be available on StartEngine Secondary during limited periods, including periods where we do not have an open offering. To date, there has not been frequent enough trading to establish a market price. The limited volume of trading means that investors should assume that they may not be able to liquidate their investment for some time or to liquidate at their desired price. Further, it is unlikely that they will be able to pledge their shares as collateral.
Investors will need to keep records of their investment for tax purposes.
As with all investments in securities, investors who sell the Common Stock will probably need to pay tax on the long- or short-term capital gains that you realize if sold at a profit or set any loss against other income. If investors do not have a regular brokerage account, or their regular broker will not hold the Common Stock for them (and many brokers refuse to hold Regulation A securities for their customers) there will be nobody keeping records for investors for tax purposes and they will have to keep their own records, and calculate the gain on any sales of any securities they sell.
The price for our Common Stock may be volatile.
To date, there has not been enough trading of our shares to establish a market price. The market price of our Common Stock may be highly volatile, if and when any trading begins again in the future and there is sufficient volume of trading to establish a market price, is likely to continue to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
· | We may not be able to compete successfully against current and future competitors. |
· | Our ability to obtain working capital financing. |
· | Additions or departures of key personnel. |
· | Sales of our shares. |
· | Our ability to execute the business plan. |
· | Operating results that fall below expectations. |
· | Regulatory developments. |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our securities. As a result, investors may be unable to resell your securities at a desired price.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
| ● | From January 1, 2026 through May 20, 2026, the Company sold and issued 2,980,922 shares of Common Stock for a total of $4,769,475, in addition another 745,230 shares of Common Stock was sold for a total of $1,192,369 by selling shareholders under Regulation A. No commissions were paid in connection with these issuances of securities. |
| ● | On March 17, 2026, we acquired a company and issued a total of 8,750,000 shares of our common stock, valued at approximately $14 million based on our stock price in our most recent Regulation A offering of $1.60. 1,750,000 shares are held back for potential indemnification obligations and if not needed will be released to the sellers on the 12-month anniversary of the closing. The securities were issued in a transaction not involving a public offering pursuant to an exemption from registration set forth in Section 4(a)(2) of the Securities Act (and Regulation D promulgated thereunder). |
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended March 31, 2026, none of the Company’s officers or directors have entered into a contract, established a plan, or issued instructions that provides for the purchase or sale of any equity securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act.
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Item 6. Exhibits.
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
Exhibit No. | Title of Document | Form | File No. | Exhibit | Filing Date | Filed Herewith |
3.1 | 8-K | 000-56415 | 3.1 | May 10, 2024 | ||
3.2 | 8-K | 000-56415 | 3.2 | May 10, 2024 | ||
4.1 | 1-A | 024-11177 | 3.1 | March 12, 2020 | ||
10.1 | 1-A | 024-11806 | 6.1 | February 13, 2023 | ||
10.2+* | Employment Agreement effective as of January 1, 2024 (Howard Marks) | 10-K | 000-56415 | 10.2 | March 31, 2025 | |
10.3 | 8-K | 000-56415 | 99.2 | November 28, 2022 | ||
10.4 | 10-Q | 000-56415 | 10.4 | May 15, 2025 | ||
10.5 | 8-K | 000-56415 | 10.1 | March 23, 2026 | ||
19.1 | 10-Q | 000-56415 | 19.1 | August 6, 2025 | ||
31.1 | X | |||||
31.2 | X | |||||
32.1 # | X | |||||
32.2 # | X |
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
+ | Management contract or compensatory plan or arrangement. |
* | Portions of this exhibit have been omitted pursuant to the instructions to Item 601(a) of Regulation S-K. |
# | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
STARTENGINE CROWDFUNDING, INC. | ||
|
| (Registrant) |
Date: May 20, 2026 |
| |
By: | /s/ Howard Marks | |
|
| Howard Marks |
| Chief Executive Officer | |
Date: May 20, 2026 |
| |
By: | /s/ Hunter Strassman | |
|
| Hunter Strassman |
| Chief Financial Officer and Principal Accounting Officer | |
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