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Startengine Crowdfunding Inc.

09/11/2024 | Press release | Distributed by Public on 09/11/2024 12:47

Amendment to Annual Report Form 10 K/A

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 000-56415

StartEngine Crowdfunding, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		46-5371570
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

4100 West Alameda Avenue, 3^rdFloor, Burbank, CA		91505
Address of Principal Executive Offices		Zip Code

Registrant's telephone number, including area code (800) 317-2200

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.00001 par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all 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. Yes ☒No ☐

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). Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions 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 ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant 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 check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.

Note.-If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of December 31, 2023, the last business day of the registrant's most recently completed fourth fiscal quarter was $672,898,700 based upon the per share price in our most recent offering under Regulation A.

As of April 15, 2024, the registrant had 700,612,240 shares of Common Stock, 9,642,080 shares of Series T Preferred Stock, 204,810,720 shares of Series Seed Preferred Stock and 185,440,880 shares of Series A Preferred Stock*

*number of shares reflects the 20-for 1 forward split which occurred in May 2024.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

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EXPLANATORY NOTE

StartEngine Crowdfunding, Inc. (the "Company") is filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "Original Filing" and, together with this Amendment, the "Form 10-K Filings"), which was filed with the Securities and Exchange Commission (the "SEC") on April 15, 2024 (the "Original Filing Date"), to amend and restate disclosure regarding our subsidiary, StartEngine Private LLC, including its operations and accounting treatment of revenues and cost of revenues to Part I Item 1, Part II Item 7, and Part II Item 8 Note 2 ("Summary of Significant Accounting Policies") to the Audited Consolidated Financial Statements for the fiscal year ended December 31, 2023 ("2023 FYE Financial Statements"). The Company also herein amends and restates and Note 5 ("Intangible Assets") to the 2023 FYE Financial Statements with respect to disclosure concerning the Company's acquisition of SeedInvest assets. Additionally, the Company amends and restates its Audited Consolidated Financial Statement for the fiscal year ended December 31, 2022 ("2022 FYE Financial Statements"), in compliance with the SEC's "Statement on Issuer Disclosure and Reporting Obligations in Light of Rule 102(e) Order against BF Borgers CPA PC," dated May 3, 2024, and corresponding disclosure in Part II Item 7 regarding changes to the 2022 FYE Financial Statements as a result of the re-audit by our current independent registered accounting firm, Haynie and Company. In addition, the Company also amended Part II, Item 9A. Controls and Procedures was amended to reflect these restatements.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company is also including in this Amendment an amended and restated Part IV, Item 15 to include currently dated certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 ("SOX") from the Company's principal executive officer and principal financial officer.

On May 6, 2024, StartEngine Crowdfunding Inc. split its designated "Common Stock" and "Preferred Stock" on a 20 for 1 basis (the "Stock Split"). The total number of shares of Common Stock that the Company is authorized to issue was increased to 1,500,000,000 shares after the split. The total number of shares of Preferred Stock that the Company is authorized to issue was increased to 519,000,000 after the split. Accordingly, all share and per share amounts for all periods presented in this Amendment, the consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

This Amendment speaks as of the Original Filing Date of the Original Filing (unless otherwise noted or as the context otherwise requires). Unless expressly indicated, this Form 10-K/A does not reflect events occurring after the filing of the Original Filing or modify or update disclosures affected by subsequent events.

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StartEngine Crowdfunding, Inc.

AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 2023

TABLE OF CONTENTS

Explanatory Note

Note About Forward-Looking Statements


PART I		5
Item 1.	Business	5
PART II		16
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 8.	Financial Statements and Supplementary Data	F-1
Item 9A.	Controls and Procedures	26
PART IV		28
Item 15.	Exhibit and Financial Statement Schedules	28
	Signatures	29

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K/A contains forward-looking statements. All statements contained in this Annual Report on Form 10-K/A other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K/A. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Annual Report on Form 10-K/A may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms "StartEngine," "Company," "we," "us," and "our" in this document refer to StartEngine Crowdfunding, Inc., a Delaware corporation, and, where appropriate, its subsidiaries.

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PART 1

Item 1.Business

StartEngine Crowdsourcing Inc. was incorporated in the State of Delaware on March 19, 2014. On May 8, 2014, the company changed its name to StartEngine Crowdfunding, Inc.

StartEngine aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. In 2015, StartEngine Crowdfunding began operating under Title IV of the JOBS Act, allowing private companies to advertise the sale of their stock to both accredited and non-accredited investors under Regulation A, and under Title II of the JOBS Act, which permits offerings to accredited investors to be advertised under Rule 506(c) of Regulation D. StartEngine continues to expand the breadth of its offerings in order to better serve its mission. Operations expanded in 2016, as Regulation Crowdfunding, adopted in response to Title III of the JOBS Act, went into effect and we offered services to companies raising money under Regulation Crowdfunding. Beginning in December 2017, StartEngine began offering transfer agent services through one of its subsidiaries. In June 2019, StartEngine Primary LLC was approved for membership as a broker-dealer with FINRA and offers broker-dealer services to companies selling securities in Regulation A and Regulation D offerings and operates our alternative trading system.

StartEngine's most recent addition to its family of services is StartEngine Private. StartEngine Private provides accredited investors the opportunity to purchase membership interests in funds ("SE Funds") which own shares of venture capital backed, late-stage private companies.

StartEngine offers its services both through its website as well through its iOS application which launched in 2021.

StartEngine Crowdfunding performs much of its work through its subsidiaries, including the following six wholly owned direct operating subsidiaries:

●	StartEngine Capital LLC ("StartEngine Capital"), a funding portal registered with the SEC and a member of the Financial Industry Regulatory Authority ("FINRA"), operates under Title III of the JOBS Act, which introduced Regulation Crowdfunding.

●	StartEngine Secure LLC ("StartEngine Secure"), a transfer agent registered with the SEC that was formed on December 12, 2017.

●	StartEngine Primary LLC ("StartEngine Primary"), a company formed on October 12, 2017, a registered broker-dealer, which was approved to act as alternative trading system on April 16, 2020.

●	StartEngine Assets LLC ("StartEngine Assets"), a company formed on May 18, 2020, for the purpose of securitizing assets.

●	StartEngine Private Manager LLC ("StartEngine Private Manager"), a company formed on August 3, 2023 for the purpose of managing all StartEngine Private offerings.

●	StartEngine Adviser LLC ("StartEngine Adviser"), a company formed on August 3, 2023 for the purpose of being the organizer and Exempt Reporting Adviser to all StartEngine Private offerings.

On May 5, 2023, StartEngine Crowdfunding, Inc. ("StartEngine") completed an agreement to acquire substantially all of the assets of the SeedInvest business as conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, a Delaware limited liability company ("Pluto Holdings") and through SI Securities, LLC, a New York limited liability company ("SI Securities"), and SeedInvest Technology, LLC, a New York limited liability company, each a wholly-owned subsidiary of Pluto Holdings ("SeedInvest Technology," collectively, with the assets acquired from Pluto Holdings and SI Securities, "SeedInvest"). The total consideration for the purchase is 19,200,000 shares of StartEngine's common stock, which based on StartEngine's most recent Regulation A offering price of $1.25 per share would be valued at $24 million.

The assets of the SeedInvest business include SeedInvest Technology, LLC and substantially all the assets related to owning and operating the crowdfunding platform at www.seedinvest.com.

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The sellers will retain among other items: their broker-dealer regulatory approvals and licenses; equity interests, convertible notes, SAFEs and all other investment contracts received, and in certain cases to be received, in SeedInvest portfolio companies; and receivables related to current and certain contemplated offerings. For details, see Exhibit 10.3 in the Exhibit Index.

Principal Products and Services

Offerings: Depending on the type of offering being made, we currently operate as a technology platform connecting issuers and investors, as a broker-dealer and as a Regulation Crowdfunding funding portal. We facilitate the following types of offerings that are exempt from registration under the Securities Act:

●

Regulation A Offerings: Through StartEngine Primary we host Regulation A offerings on our platform. These companies are seeking to raise anywhere from $100,000 to $75 million and we provide an array of services, including acting as a broker-dealer, assisting with due diligence, custodial accounts and coordinating vendors.

●

Regulation Crowdfunding Offerings: Through StartEngine Capital, our funding portal registered with the SEC and FINRA, we host Regulation Crowdfunding offerings. These companies are seeking to raise anywhere from $10,000 to $5 million, and we also provide an array of services permitted by Regulation Crowdfunding, including campaign page design services, marketing consulting services, assisting with due diligence, custodial accounts, and coordinating vendors.

●

Rule 506(c) Offerings: Through StartEngine Crowdfunding and StartEngine Primary, we host offerings under Rule 506(c) of Regulation D. Accredited investors are allowed to invest in these offerings and we host these offerings either on a stand-alone basis or concurrently with a Regulation Crowdfunding offering. Under Rule 506(c), companies can use general solicitation to attract investors and there is no limit to the amount of money that can be raised. Therefore, companies engaged in a concurrent Regulation Crowdfunding offering can also raise additional funds from accredited investors providing they comply with the requirements of each exemption.

StartEngine Venture club (formerly OWNers bonus) : The general public can become members of the StartEngine Venture club program on StartEngine's website for $275 per year. The Venture club entitles members to 10% bonus shares on all investments they make in offerings on StartEngine where the issuer chooses to participate in the program. Issuers using our broker-dealer and funding portal services can choose to participate in our Venture club program with respect to the offerings they are making under Regulation A or Regulation CF. Those issuers will grant bonus shares in their offerings to members of the StartEngine Venture club program. The bonus shares are included in the offering statements filed with the SEC, and therefore offered and sold in reliance on Regulation A or Regulation CF, respectively.

StartEngine Secure: Through our wholly owned subsidiary, StartEngine Secure, we offer transfer agent services. These services include tracking each investor's account information and the amount of securities purchased and date purchased. Our goal is to provide a seamless service to our client companies. Our intent is for our transfer agent to have agreements with our various entities to allow it to collect information on investors and their investments through an API (application programming interface). Therefore, when a company raises money on StartEngine, our transfer agent will be notified and sent the investor information and the investment details. The transfer agent will then capture this information into its redundant and secure database hosted in the cloud and encrypt for security purposes.

StartEngine Premium: For our Regulation Crowdfunding campaigns, we offer marketing services branded under the name "StartEngine Premium". For an additional fee, our team will support companies with the design of their campaign pages, provide a designated account consultant to guide a company throughout the campaign creation process, and assist a company in developing a marketing strategy based on best practices and analytics from previous successful campaigns.

StartEngine Primary: By adding broker-dealer services to the mix of our offerings, we are able to take a more active role in the promotion and sale of securities in Regulation A, Regulation Crowdfunding and Regulation D offerings hosted on our platforms. Further, we are able to facilitate the secondary trades on StartEngine Secondary, see (-"StartEngine Secondary" below). StartEngine Primary received approval for a range of business lines to allow us to act as the broker-dealer for the private placements of securities (which includes securities sold under Regulation D), to effect transfers and sales on StartEngine Secondary, and to be able to receive referral fees and commissions for sales of securities. Further, to expend our services that we can offer our clients, we filed a continuing membership application with FINRA ("CMA") to be a clearing or "carrying" broker-dealer so in addition to handling a client's orders to buy and sell securities we can also maintain custody of a client's securities and other assets (e.g. cash in their account). Our broker-dealer

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registration became effective in June 2019, and our CMA for become a carrying broker-dealer was accepted at the end of September 2021.

StartEngine Secondary: The goal of the StartEngine Secondary platform is to increase liquidity for shares sold in Regulation A, Regulation Crowdfunding and Regulation D offerings. We facilitate the transfer and sale of these shares by creating an alternative trading system ("ATS") to allow for secondary trades. Sales of shares sold under Regulation A on the StartEngine platform are permitted to be quoted immediately, while holders of shares sold under Regulation Crowdfunding and Regulation D will need to wait one year in order to comply with the applicable transfer restrictions to participate on the platform. After receiving the requisite FINRA approval to operate as an ATS, StartEngine Primary launched its ATS, branded as "StartEngine Secondary" on May 18, 2020.

StartEngine Secondary has a limited operating history, and even though over 400 issuers have signed to be quoted on this platform, only twenty-five companies have been quoted on this platform to date, including the Company itself. 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 initial and annual quotation fees.

StartEngine Assets: The goal of StartEngine Assets is to provide retails investors the opportunity to invest in various asset classes - including real estate, wine, fine art, trading cards, watches, and comics. StartEngine Collectibles Fund I LLC is geared at securitizing collectible assets and selling shares to the public. As such, we previously sold securities under StartEngine Collectibles Fund I LLC , including shares in series for wine, fine art, trading cards, watches and comics, and as of September 6, 2023 is no longer selling securities. StartEngine Assets LLC had also purchased assets to securitize but does not intend to purchase anything further.

StartEngine Private:The Company provides accredited investors the opportunity to purchase membership interests in funds ("SE Funds") which own shares of venture capital backed, late-stage private companies (the "underlying securities") via itsStartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC. StartEngine Adviser LLC is an exempt reporting adviser under Rule 203(m)-1 under the Investment Advisers Act of 1940. The SE Funds sell their membership interests in offerings that are exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and specifically Regulation D promulgated thereunder. Such offerings are marketed to accredited investors by the Company's FINRA-member and SEC-registered broker-dealer subsidiary, StartEngine Primary LLC. The Company generates revenue to the extent it is able to sell underlying securities to an SE Fund. The Company treats the amount it receives for selling underlying securities as revenues, and the acquisition cost related such underlying securities as cost of revenues. There are several factors that are used in pricing the securities of an SE Fund, including but not limited to: the price (including transaction costs) the securities were purchased by the SE Fund's affiliate, the time spent and costs involved by the SE Fund's management team including those related to identifying, verifying, acquiring, and managing the investments, sales of the underlying securities on the secondary market, as well as considerations are given for the illiquidity of private investments compared to publicly traded securities and investor interest in the SE Fund's securities. The Company also believes that there is value added by allowing investors to have an economic interest in these companies with less hassle and smaller denominations than available in secondary markets. Additionally, consideration is also given to broader economic and market conditions that might impact the valuation of private companies, such as industry trends, regulatory changes, and economic cycles.

Support Services

Our Company is focused on our core competencies and therefore we surround ourselves with third party companies who help us accomplish our non-core tasks.

We rely on the following companies for outsourced services:

●	Bryn Mawr Trust Company: Escrow Services

●	Kingdom Trust Company: Escrow Services

●	Amazon AWS: Cloud hosting

●	Google Business: Cloud email and applications

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Market

Regulation A

Amended Regulation A became effective June 19, 2015. According to the SEC, the size of the Regulation A market slightly contracted to approximately $1.5 billion from July 1, 2022 to June 30, 2023 from approximately $1.8 billion for the period from July 1, 2021 to June 30, 2022.

As of April 15, 2024, we have hosted 75 Regulation A offerings, which have raised a total of approximately $282 million on our platforms, not including five offerings for StartEngine itself and 33 offerings of series of companies managed by StartEngine Assets, LLC. We believe the market for Regulation A will continue to grow as more companies become aware of the ability to raise capital through crowdfunding platforms. Because it permits a maximum raise of $75 million each 12 months, we believe this rule is well suited for small and midsize businesses. We have seen the demand increase significantly between 2019 and 2022, while contracting in 2023. Excluding offerings for StartEngine itself and its affiliates, we have hosted eight offerings in 2019, 13 offerings in 2020, 17 offerings in 2021, 22 offerings in 2022 and 13 offerings in 2023. The number of offerings hosted is based on the year launched and do not include offerings for StartEngine itself and the offerings of series for StartEngine Collectibles Fund I LLC. We believe the recent administrative change to increase the maximum offering amount from $50 million to $75 million and the change to permit SEC-reporting companies to make offerings in reliance on Regulation A has been and will continue to increase the size of the market and make Regulation A more appealing form of capital formation for some companies. We expect to continue to increase the number of companies who list their offerings on our platform, although we are likely to encounter competition from other platforms and from companies who seek to raise funds online without using a platform. Further, our broker-dealer capabilities will enable us to increase the scope of services offered to our clients.

Regulation Crowdfunding

Since its launch on May 16, 2016, we estimate that as of April 15, 2024, 1,318 offerings have raised over $589 million on StartEngine through Regulation Crowdfunding. According to the SEC, the size of the Regulation Crowdfunding market was approximately $352 million for the period from July 1, 2022 to June 30, 2023, compared with $368 million for the period from July 1, 2021 to June 30, 2022.

We believe Regulation Crowdfunding will grow year over year after a small contraction in the previous year as more startup companies become aware of this funding method and view Regulation Crowdfunding as a viable fundraising option and market conditions improve. We have seen the demand increase significantly between 2019 and 2020. And, with the 2021 increase on the annual cap to $5 million, we have seen an increase in interest in this form of funding from prospective issuers throughout 2021 and 2022. Regulation Crowdfunding makes it relatively inexpensive to make an offering of securities: legal, compliance and accounting costs can be less than $10,000, and offering costs can be even cheaper for companies who prepare the documentation internally. With a current maximum raise of $5 million per year, we believe that this funding method is perfect for early-stage companies.

We are working to increase awareness of the benefits of Regulation Crowdfunding through a lead generation program that includes advertising on social media, email marketing and other marketing support. We mainly focus on start-ups; however, our outreach will also include some companies further along in their development. We have and plan to continue to educate the market through the content we write and publish on our blog as well as being guest authors on other popular blogs.

Regulation D Offerings

Offerings under Regulation D include those under Rule 506(b), Rule 506(c), and Rule 504. According to the SEC, the size of the Rule 506(b) market was approximately $2.7 trillion, the Rule 506(c) market was approximately $169 billion and the Rule 504 market was approximately $258 million for the period from July 1, 2022 to June 30, 2023. The vast majority of Regulation D sales were through Rule 506(b), which does not allow for general solicitation and allows for some non-accredited investors as well as less stringent requirements for verifying accredited status. Based on this information, we believe there is large potential market for online sales under Rule 506(c).

Rule 506(c) offerings are an inexpensive way to raise capital from accredited investors with a low cost of entry. Further, recent expansion of the definition of an "accredited investor" may widen the pool of potential investors. We estimate it can cost under $10,000 to prepare an offering under Rule 506(c). There is no limitation on the amount raised, which makes this rule attractive to companies who just completed a Regulation Crowdfunding offering or are planning a Regulation A campaign in the near future. This exemption can be used

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together with Regulation A and Regulation Crowdfunding. For Regulation Crowdfunding offerings, this exemption provides companies an opportunity to extend an offering beyond Regulation Crowdfunding once the maximum $5 million has been reached. For Regulation A offerings, this exemption can be used as a fundraising option prior to the launch of the offering, because of the time it takes to get a Regulation A offering qualified. While this currently represents only a small part of our overall business for issuers that we do not control; the offerings of the membership interests in the SE Funds for StartEngine Private utilizes this exemption.

StartEngine Private

The Company provides accredited investors the opportunity to purchase membership interests in funds that own shares of venture capital backed, late-stage private companies (the "underlying securities") via its StartEngine Private product offering. The offerings are made in reliance on Rule 506(c) of Regulation D. The Company does not currently have a value on the potential market size for our membership interests; but in 2023, the SEC estimated there were approximately 19,444,975 accredited investor households in the United States. Additionally, we believe that the private equity and alternative investment markets are expected to grow significantly over the next several years. The Company believes that there is interest from accredited investors to have an economic interest in the underlying securities where they do not have an interest in investing directly themselves (e.g., they do not want to invest the high minimum amount often required for companies at this stage) and/or do not have the time, financial, legal, and/or technical expertise to source these investments themselves.

Transfer Agent

The exemptions provided by Regulation A and Regulation Crowdfunding include conditional exemptions from the registration requirements of the Securities Exchange Act of 1934. One of the conditions is that should the number of a company's securityholders and/or the value of a company's assets exceed a certain threshold, a company needs to use a registered transfer agent to avoid the requirement that the company become a fully-registered company with the SEC - an expensive proposition for many of these small companies. Therefore, the market for our transfer agent services includes all companies that have previously raised funds through Regulation A and Regulation Crowdfunding offerings. Currently, we mainly market our services to our current clients.

StartEngine Secondary

We believe that a portion of the owners of securities purchased under Regulation A, Regulation D and Regulation Crowdfunding will be interested in selling their securities to prospective buyers. There is no viable marketplace today for these securityholders to sell their securities unless the company seeks a quotation on an over-the-counter marketplace. Companies who use Tier 1 of Regulation A or Regulation Crowdfunding do not qualify for quotation on the leading over-the-counter marketplace. Further even if a company qualifies for that market, which would include issuers using Tier 2 of Regulation A, the quotation requirements are expensive. We believe StartEngine Secondary has the potential for success because there are limited trading forums for these securities.

Registered User Base

As of April 15, 2024, we have approximately 1,374,000 registered users. Of these, approximately 366,000 have made investments on our platform. We determine registered users by tracking unique email addresses from investor profiles that have not deactivated their profiles. As an individual could have multiple email addresses across multiple profiles, or may no longer be active, even if they have not deactivated their profile, registered users are an approximate gauge and could overstate the actual number of unique registered users. There is no fee associated with becoming a registered user. Of the users who have made investments the average number of investments is approximately 2.31 and the amount per investment is approximately $1,029. We are seeing week-over-week growth in registered users and expect to register more users as we add more companies to our platform.

Competition

With respect to offerings made under Regulation Crowdfunding, we compete with other intermediaries, including brokers and funding portals such as WeFunder, Republic and MicroVentures. We have also seen more market entrants due to the 2021 increase in the cap size from $1.07 million to $5 million.

With respect to offerings under Regulation A, we compete with other platforms, hosting services and broker-dealers. Some of our competitors include Dalmore, Dealmaker, Republic and Wefunder.

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With respect to offerings under Rule 506(c), or online offerings made under Regulation D (which includes non-solicited offerings), we compete with platforms such as AngelList, EquityNet, FundersClub and Fundable.

With respect to our transfer agent, we compete with transfer agents such as Computershare and VStock Transfer.

With respect to StartEngine Private, we compete with other companies such as Linqto, EquityZen and Microventures.

Strategy

Our Mission: Help entrepreneurs and investors achieve their dreams.

Our Strategy: We provide technology to allow the general public to invest in entrepreneurs.

Our Advantages

We believe that StartEngine is one of the leaders in the global crowdfunding nation. We aim to facilitate financial ignition of innovative companies led by determined, intelligent entrepreneurs who have the energy and talent to start and grow successful companies.

We harness the power and wisdom of "The Crowd" through the internet to release entrepreneurial creativity, thereby creating jobs, economic efficiency and ultimately economic growth. We believe we not only help entrepreneurs raise capital to start and grow their businesses, but we also help them build armies of committed, long-term brand ambassadors who, as investors, promote their companies to their friends, families and colleagues.

As one of the first movers in the equity crowdfunding industry, we are active in crowdfunding legal and regulatory affairs. Our position allows us to collaborate to establish industry-wide best practices and to improve the quality of listings. We believe our backend operating systems are highly efficient. Each function operates through documented procedures to ensure consistent, quality results. Knowing what it takes to successfully grow a company, we try to keep operating expenses to a minimum.

We believe that StartEngine's key asset is its team members. We are a group of talented people who have come together to democratize finance and investment in startup and growth companies. The hallmark of the Company is talented, respectful, enthusiastic and entrepreneurial people who understand and operate on the principles of dignity and respect.

Our mission is to help entrepreneurs and investors achieve their dreams. Our objective is that by 2029, we will facilitate funding of $10 billion for companies.

Research and Development

StartEngine invested approximately $5,779,920 in 2023 and $4,667,596 in 2022 in research and development, product development, and maintenance.

Employees

As of April 15, 2024, we had 81 employees. We also work with a large number of contractors for user-experience design, security controls, and testing, services and marketing.

Regulation

Having platforms that host Regulation A, Regulation Crowdfunding and Regulation D offerings, we are required to comply with a variety of state and federal securities laws as well as the requirements of FINRA, a national securities association of which our funding portal subsidiary and our broker-dealer are members. Further, as a registered transfer agent, we are required to comply with a variety of state and federal securities laws and laws that govern transfer agents, as well as laws aimed at preventing fraud, tax evasion and money laundering

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Regulation Crowdfunding

In order to act as an intermediary under Regulation Crowdfunding, our subsidiary is registered as a funding portal with the SEC and became a member of FINRA. In the future, we may be subject to additional rules issued by other regulators, such as the money-laundering rules proposed by FinCEN.

SEC Requirements

As a funding portal, our subsidiary is prohibited from engaging in certain activities in order not to be regulated as a full-service broker-dealer. These activities are set out in Section 4(a)(6) of the Securities Act and in Regulation Crowdfunding. We have accordingly established internal processes to ensure that our subsidiary as well as its agents and affiliates do not engage in activities that funding portals are not permitted to undertake, including:

●	Providing investment advice or recommendations to investors for securities displayed on our platform;

●	Soliciting purchases, sales or offers to buy securities displayed on our platform;

●	Compensating employees, agents or other persons for solicitation or for the sale of securities displayed or listed on our platform; or

●	Holding, managing, processing or otherwise handling investors' funds or securities.

In addition, our funding portal has certain affirmative requirements that it is required to comply with to maintain its status. These affirmative obligations include:

●	Providing a communications channel to allow issuers to communicate with investors;

●	Having due diligence and compliance protocols and requirements in place so that the Company has a "reasonable basis" to believe that

●

its issuers are in compliance with securities laws, have established means to keep accurate records of the securities offered and sold, and that none of their covered persons (e.g., officers, directors and certain beneficial owners) are "bad actors" and therefore disqualified from participating in the offering;

●	its issuers and offerings do not present the potential for fraud or otherwise raise concerns about investor protection; and

●	its investors do not invest more than they are allowed to invest under the limitations set out in Regulation Crowdfunding; and

●	Creating procedures for its investors to notify them of risks regarding investing in securities hosted on its platform and providing them with required investor education and disclosure materials.

We are also required to set up protocols regarding payment procedures and recordkeeping.

FINRA Rules

As a member of FINRA, our funding portal is subject to their supervisory authority and is required to comply with FINRA's portal requirements. Some of those rules are also applicable to the Company as an entity associated with the portal. These requirements include rules regarding conduct, compliance and codes of procedure. For instance, FINRA's compliance rules require timely reporting of specified events, such as complaints and certain litigation against the portal or its associated persons as well as the provision of the portal's annual financials prepared on a U.S. GAAP basis. In addition, under the conduct rules, the portal is required to conduct its business in accordance with high standards of commercial honor and just and equitable principles of trade, is limited to certain types of communications with investors and issuers, and is prohibited from using manipulative, deceptive and other fraudulent devices.

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Liability

Under Section 4A(c) of the Securities Act, an issuer, including its officers and directors, may be liable to the purchaser of its securities in a transaction made under Section 4(a)(6) if the issuer makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in light of the circumstances under which there were made, not misleading; provided, however, that the purchaser does not know of the untruth or omission, and the issuer is unable to prove that it did not know, and in the exercise of reasonable care could not have known, of the untruth or omission.

Though not explicitly stated in the statute, this section may extend liability to funding portals, and the SEC has stated that, depending on the facts and circumstances, portals may be liable for misleading statements made by issuers. However, funding portals would likely have a "reasonable care" due diligence defense. "Reasonable care" would include establishing policies and procedures that are reasonably designed to achieve compliance with the requirements of Regulation Crowdfunding, including conducting a review of the issuer's offering documents before posting them to the platform to evaluate whether they contain materially false or misleading information. We have designed our internal processes and procedures with a view to establishing this defense, should the need arise.

We may also face liability from existing anti-fraud rules and statutes under the securities laws. For instance, under Section 9(a)(4) of the Exchange Act anyone who "willfully participates" in an offering could be liable for false or misleading statements made to induce a securities transaction. Further, the Supreme Court Lorenzo opinion in 2019 established liability for the "dissemination" of misleading statements under Rule 10b-5 under the Exchange Act.

In addition, FINRA imposes liability for certain conduct, including violations of commercial honor and just and equitable principles of trade and acts using manipulative, deceptive and other fraudulent devices.

Regulation A and Regulation D

Broker-Dealer Regulations

Our subsidiary, StartEngine Primary, is registered as a broker-dealer with the SEC and a member of FINRA. The registration process not only includes registering with the SEC, but also requires membership in a self-regulatory organization (in our case, we are a member of FINRA) and in the Securities Investor Protection Corporation ("SIPC"), compliance with state requirements and making sure that our associate persons satisfy all applicable qualification requirements.

SEC Requirements

Since StartEngine Primary became a broker-dealer, it has been required to comply with extensive SEC regulations with respect to its conduct and the processing of transactions. These include requirements related to conduct, financial responsibility, and other requirements such as those that relate to communications, anti-money laundering (AML) and ongoing internal controls and governance. In addition, StartEngine Primary has been approved to operate an alternative trading system for secondary trading of securities. StartEngine also need to comply with extensive SEC regulations with respect to its conduct and its execution and clearance of transactions.

FINRA Requirements

Since StartEngine Primary became a of FINRA as a broker-dealer, it has been subject to FINRA's supervisory authority and is required to comply with FINRA's rules and regulations. These rules and regulations include many similar requirements to those of the SEC, and in many cases are broader in scope and provide more specificity. FINRA also has rules regarding conduct, compliance and codes of procedure. For instance, FINRA members must comply with NASD's Rules of Fair Practice, which broadly speaking requires broker-dealers to observe high standards of commercial honor and just and equitable principles of trade in conducting their business. There are also rules that relate to use of manipulative, deceptive or other fraudulent devices, suitability, payments to unregistered persons, know your customer, supervision of our employees and responsibilities related to associated persons, financial soundness, recordkeeping, maintaining procedures, arbitration for customer disputes, AML and submitting to ongoing supervision. We are also required to undertake due diligence investigations with respect to Regulation A and Regulation D offerings.

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Conduct Requirements

In general, many of the rules that govern broker-dealers stem from antifraud provisions; these requirements are broad in scope and prohibit misstatements or misleading omissions of material facts, and fraudulent or manipulative acts and practices, in connection with the purchase or sale of securities. Specifically, the following rules apply:

●	Section 9(a) prohibits particular manipulative practices regarding securities registered on a national securities exchange.

●	Section 10(b) prohibits the use of "any manipulative or deceptive device or contrivance" in connection with the purchase or sale of any security.

●	Section 15(c)(1) prohibits broker-dealers from effecting transactions in, or inducing the purchase or sale of, any security by means of "any manipulative, deceptive or other fraudulent device" in over-the-counter markets

●	Section 15(c)(2) prohibits a broker-dealer from making fictitious quotes in over-the-counter markets

Antifraud specific requirements include those related to:

●	Duty of fair dealing (e.g., charging reasonable fees, promptness of executive orders, and disclosing specified material information as well as any conflict of interest);

●

Regulation Best Interest (e.g., a duty to act in the "best interests" of retail customer (defined as natural persons and their legal representatives), which includes certain disclosure and care obligation and compliance obligations as well as maintaining policies and procedures to minimize the effects, if any, of conflicts of interest);

●	Duty of best execution (e.g., a duty of execution requires that based on the circumstances requirement to find the most favorable terms for a customer;

●	Customer confirmation (e.g., at or before the completion of transaction certain information must be provided to customers, including specifics on the sale, the payment that the broker-dealer receives, etc.);

●	Disclosure of credit terms;

●	Restrictions on short sales;

●	Trading during an offering; and

●	Restrictions on insider trading.

Finally, broker-dealers are governed by requirements regulating employees and individuals associated with the broker-dealer.

Financial Responsibility Requirements

Financial responsibility and operations requirements include: net capital requirements, margin requirements, customer protection requirements (e.g., reserve account and segregation of customer assets), risk assessment requirements, financial reporting (including an independent audit), and recordkeeping requirements. The minimum net capital requirement for StartEngine Primary is $250,000. As a self-clearing broker-dealer StartEngine Primary is specifically obligated under net capital requirements to maintain a sufficient level of net capital to cover any open trades that fail to settle.

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Anti-Money Laundering

The Bank Secrecy Act, as amended by the USA PATRIOT ACT of 2001 (the "BSA/USA PATRIOT Act"), requires broker-dealers to develop anti-money laundering ("AML") programs to assist in the prevention and detection of money laundering and combating terrorism. Broker-dealers are also are subject to U.S. sanctions laws administered by the Office of Foreign Assets Control and are expected to have policies and procedures in place to comply with these laws.

Other Requirements

Broker-dealers are subject to a host of other rules and requirements including: mandatory arbitration, submitting for SEC and FINRA examinations, maintaining and reporting information on the broker-dealers affiliates (in our case, this includes the parent organization as well as the other subsidiaries), following electronic media and communication guidelines as well as maintaining an AML program.

Liability

Under our arrangements that do not use the services of our broker-dealer subsidiary, Section 12(a)(2) of the Securities Act, which applies to Regulation A, imposes liability for misleading statements not only on the issuers of securities but also on "sellers," which includes brokers involved in soliciting an offering. Rule 10b-5 under the Exchange Act generally imposes liability on persons who "make" or disseminate misleading statements. Currently, the information presented on our platform is driven by the issuers. Additional liability may arise from as-yet untested provisions such as Section 9(a)(4) of the Exchange Act, discussed above.

Broker-dealers are subject to heightened standards of liability. Not only do broker-dealers have potential liability under Section 12(a)(2) but we also are subject to liability under Rule 10b-5. Broker-dealers may also be subject to liability for failure to comply with SEC and FINRA requirements, including claims that we can be held liable for the behavior of our agents (control person liability), claims regarding unsuitable recommendations, violations of margin rules, breach of contract, common law claims of fraud and various claims under state laws.

Regulation S

Regulation S provides that the registration requirements of the Securities Act do not apply to offers and sales of securities that occur outside the United States. Regulation S is a safe harbor that specifies the conditions under which transactions will be deemed to occur outside the United States, including the imposition of "distribution compliance periods" during which securities may not be resold or transferred to "US persons". The distribution compliance periods vary accordingly to whether the issuer of securities is a domestic or foreign company and whether or not the issuer's securities are registered under the Exchange Act and subject to ongoing reporting obligations thereunder. The securities that we are most likely to host on our platform in Regulation S offerings are those of non-reporting US issuers, whose equity securities are subject to a one-year distribution compliance period, and whose non-equity securities are subject to a 40-day distribution compliance period. During the distribution compliance period, purchasers of the securities are required to certify that they are not US persons and agree to resell only to non-US persons. Securities professionals are required to deliver confirmations to buyers of securities stating that these resale restrictions apply to the buyers. Disclosure of these restrictions are also required to be made in selling materials and on the securities themselves. "US persons," are defined in Regulation S, which includes natural persons resident in the United States, partnerships and companies organized under US law, estates and trusts of which administrators, executors or trustees are US persons, discretionary accounts held by a US fiduciary for US persons, non-discretionary accounts held for the benefit of US persons, and certain foreign partnerships and companies created by US persons. These conditions may require limiting access to campaign pages to non-U.S. based internet addresses.

Issuers that rely on Regulation S are still required to comply with the requirements of the jurisdiction in which their securities are sold.

Operation of ATSs

The ATS must be operated by a broker-dealer. Our broker-dealer, StartEngine Primary, is governed by the rules regulating broker-dealer trading systems. Regulation ATS includes provisions that govern the operations an ATS such as those that relate to fees charged, fair access to the trading system, system requirements (capacity, integrity and security), display of orders and capacity to execute those orders, recordkeeping and reporting, and establishing procedures including related to confidentiality of trading information, among other things.

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Operating an ATS, means that we also need to ensure compliance with relevant state laws, referred to as blue sky requirements. While states are preempted from regulating many facets of initial offerings (e.g., in Regulation A and Regulation Crowdfunding), secondary offerings, the type that will occur on our ATS, are not pre-empted under state laws. Therefore, even though a security may be freely tradeable under federal laws, our ATS and issuers will need to comply with the blue sky requirements as well.

Transfer Agent Regulations

As a registered transfer agent, we are required to comply with all applicable SEC rules, which predominantly includes the rules under Section 17A(c) of the Exchange Act. The requirements for transfer agents include:

●	minimum performance standards regarding tracking, recording and maintaining the official record of ownership of securities of a company and related recordkeeping and reporting rules;

●	timely and accurate creation of records for security holders; and

●	related safeguards and data security requirements for fraud prevention.

In addition, we must comply with various state corporate and securities laws as well as provisions of the Anti-Money Laundering (AML) regulations, Office of Foreign Assets Regulations (OFAC) and the Foreign Account Tax Compliance Act (FATCA).

Exempt Reporting Adviser

An exempt reporting adviser is an exemption from full registration with the SEC under the Investment Advisers Act of 1940., and specifically, we are the private fund adviser exemption, which is generally available to advisers that only manage private funds and have less than $150 million in assets under management. As an ERA, our subsidiary not only has to make and initial and ongoing public filing Form ADV Part 1, but also has compliance requirements including, record keeping requirements, requirements with respect to material nonpublic information and compliance with the Advisers Act's anti-fraud provisions. Currently, StartEngine Adviser LLC is the adviser for all the SE Funds.

Intellectual Property

We have a trademark for "StartEngine" in the United States. We do not own any patents; however, we have our own proprietary source code that we use in operating our platform. We also have a patent pending covering peer to peer trading.

Litigation

From time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. Other than discussed in Item 3. Legal Proceedings, we are currently not a party to any material legal proceeding.

Available Information and Reports to Security Holders

We are currently required to file annual, quarterly and current reports with the SEC, as well as proxy statements, information statements, and other information with the SEC. Our SEC filings will also be available to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov.

Our website address is http://www.startengine.com. Information contained on the website does not constitute part of this Registration Statement. We have included our website address in this Offering Statement solely as an inactive textual reference. We make available, through a link to the SEC's website, electronic copies of the materials we file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports.

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PART II

Item 7.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 in conjunction with the consolidated financial statements and the related notes included elsewhere herein and in our consolidated financial statements.

In addition to our consolidated financial statements, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See "Forward-Looking Statements" and "Item 1A. Risk Factors" for a discussion of the uncertainties, risks and assumptions associated with these statements.

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. Since StartEngine Primary became a broker-dealer, we have also been permitted to charge commissions on Regulation D offerings hosted on our platform. We received a minimal amount of revenues from services related to Regulation D offerings in the periods under discussion. 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. In addition, we charge additional fees to allow investors to use credit cards. We also generate revenue from services, which include a consulting package called StartEngine Premium priced at $10,000 to help companies who raise capital with Regulation Crowdfunding, as well as transfer agent services marketed as StartEngine Secure. 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 OWNers where we sell annual memberships of the StartEngine Venture Club (formerly OWNers bonus) program for $275 per year, and StartEngine Secondary. We launched StartEngine Secondary on May 18, 2020 and generate revenues by charging trade commissions to the sellers of the shares. To date, StartEngine Secondary has a limited operating history. Through year end 2023, the Company itself as well as twenty-four additional companies are quoted on this platform. 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.

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 introducing 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 volatility (such as we experienced during the COVID-19 pandemic), 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.

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On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA. Since our approval as a broker-dealer, we have experienced increased costs for payroll and training that we believe continue to increase relative to our revenue. We anticipate that this trend will continue into 2024 as the Company explores new avenues for revenue and growth. In addition, in April 2020 we received approval to operate an ATS. StartEngine Primary launched its ATS, branded as "StartEngine Secondary" on May 18, 2020. StartEngine Secondary has a limited operating history, and even though over 400 issuers have signed to be quoted on this platform, only twenty-five companies have been quoted on this platform to date, including the Company itself. 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. We expect increased costs due to technology and operations related to the operation of our ATS. We anticipate operating the ATS will initially increase our overall expenses by $50,000 per month. Further, we anticipate receiving increased revenue related to offerings under Regulation A.

In June 2022, we became a reporting company, for which we have incurred and will continue to incur higher internal costs related to the increased administrative burden as well as higher professional fees. 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.

We additionally have engaged and trained and anticipate having to engage and train further additional compliance personnel, to better ensure continued compliance with FINRA and SEC regulatory requirements, and also in order to expand our broker-dealer operations. Further we anticipate hiring additional sales and marketing personnel to help increase our customer base with respect to both issuers as well as investors.

Restatement

During preparation for financial reporting related to the year ended December 31, 2023, the Company discovered certain errors in previously reported financial statements for the year ended December 31, 2022. The Company's management conducted an investigation with the Company's independent auditors. As a result of this investigation, the Company determined that several accounts required correction to be in accordance with US GAAP. In addition, certain footnotes to such financial statements were required as a result of such changes. Accordingly, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2022, as more fully described below.

In May 2024, the Company engaged with their auditors to complete re-audit of its Audited Consolidated Financial Statement for the fiscal year ended December 31, 2022 in light of its anticipated capital raising activities to comply with the SEC's "Statement on Issuer Disclosure and Reporting Obligations in Light of Rule 102(e) Order against BF Borgers CPA PC," dated May 3, 2024. During this process, the Company discovered certain errors in previously reported financial statements for the year ended December 31, 2021, andthe Company determined that several accounts required correction to be in accordance with US GAAP, and certain footnotes to such financial statements were required as a result of such changes. Accordingly, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2021. These changes are reflected in the "Second Adjustment" column below.

The restatement also includes corrections for other errors identified as immaterial, individually and in aggregate, to our consolidated financial statements.

Description of Restatement Tables

The following tables present the impact of the restatements on our previously reported consolidated balance sheet, statement of operations for the year ended December 31, 2022 as well as the impact of correction to December 31, 2021 beginning balances. The changes are reflected in the consolidated statement of stockholders' equity.

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Balance Sheet:


	Year Ended December 31, 2022
	Previously
	Reported		Adjustment			As Restated
Assets
Current assets:
Cash	$	15,460,469		$	-		$	15,460,469
Marketable securities		1,856			-			1,856
Accounts receivable, net of allowance		702,257			(23,585)			678,672	(c)
Other current assets		1,953,756			(649,452)			1,304,304	(d) (f)
Total current assets	$	18,118,338		$	(673,037)		$	17,445,301

Property and equipment, net	$	109,141		$	-		$	109,141
Investments - warrants		1,496,701			(1,289,806)			206,895	(a)
Investments - stock		6,479,340			1,464,477			7,943,817	(b)
Investments - Collectibles		3,072,227			(87,528)			2,984,699	(g)
Investments - Real Estate		2,136,628			-			2,136,628
Intangible assets		20,000			-			20,000
Other assets		66,603			-			66,603
Total assets	$	31,498,978		$	(585,894)		$	30,913,084

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	284,371		$	-		$	284,371
Accrued liabilities		1,760,920			1,024,580			2,785,500	(e)
Deferred revenue		2,715,422			-			2,715,422
Total current liabilities	$	4,760,713		$	1,024,580		$	5,785,293

Stockholders' equity:
Series A Preferred Stock	$	5,286,667		$	-		$	5,286,667
Series T Preferred Stock		983,634			-			983,634
Series Seed Preferred Stock		1,706,756			-			1,706,756
Common Stock		6,660			-			6,660
Additional paid-in capital		45,632,823			(213,548)			45,419,275	(f)
Noncontrolling interest		(13,251)			-			(13,251)
Accumulated deficit		(26,865,024)			(1,396,928)			(28,261,952)
Total stockholders' equity	$	26,738,265		$	(1,610,476)		$	25,127,789
Total liabilities and stockholders' equity	$	31,498,978		$	(585,896)		$	30,913,082

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Statement of Operations:


	Year Ended December 31, 2022
	Previously
	Reported		Adjustment			Second Adjustment		As Restated

Revenue	$	24,360,685		$	-		$	(305,853)	$	24,054,832
Cost of Revenue		6,368,629			682,270			-		7,050,899	(e)
General and administrative		8,723,615			881,760			(927,247)		8,678,128	(c) (d)
Sales and marketing		12,478,887			7,571			(277,511)		12,208,947	(c) (e)
Research and development		4,667,593			-			3		4,667,596
Change in fair value of warrants received for fees		169,520			1,289,806			(957,804)		501,522	(a)
Change in fair value of shares received for fees		21,863			(1,464,477)			489,483		(953,131)	(b)
Other Expense (Income)		(188,684)			-			-		(188,684)
Taxes - Other		63,563		$	-		$	-	$	63,563
Net Loss	$	(7,944,301)			(1,396,930)			1,367,223		(7,974,008)
Weighted average loss per share - basic and diluted		0.01								0.01

Descriptions of Misstatements

Impairment of warrant compensation: While reviewing the Company's warrant assets, it was determined that the value of the warrants received as compensation had not been subjected to a Black-Scholes pricing model to compute the warrant's fair value. The Company had been impairing the warrants at a flat rate, which was not compliant with Generally Accepted Accounting Principles ("GAAP"). In reviewing the warrants using Black-Scholes modeling, the Company determined that an additional impairment based on a Black Scholes analysis was necessary as the value of the warrants at year end 2022 and 2021 were incorrectly valued. Additionally, an intercompany transaction for the transfer of assets between entities was reversed.

Investments in common stock - fair value and impairment adjustment: The Company had historically performed a flat 33% impairment of shares received as compensation. In reviewing the investments in common stock, however, it was determined that the certain stocks held had increased in value based on subsequent raises hosted by the Company. Using the updated offer price per share, the Company adjusted the prior stock value to the new market value of the investments - stock. Additionally, the Company performed a more comprehensive analysis of the impairment to investments of common stock held and adjusted the impairment to be in line with the 33% estimated impairment for stocks that did not host an additional capital raise with the Company.

c.	Correction of receivable accounts: The Company determined that balances included in the accounts receivable, advertising loan and other reimbursable expense asset accounts were uncollectible, and the asset accounts were overstated as of December 31, 2022.

d.	Correction of prepaid expense amortization: The Company determined that the expense for purchases of software licenses were incurred, but not properly expensed during 2022.

Correction of liability accounts: While reviewing the Company credit card expenses ("Ramp card"), payroll accrual and the bonus payable to employees it was determined that the liability accounts relating to the Company credit card expenses were not accrued for the correct amount at December 31, 2022.

Reclassification of contra balance accounts: While reviewing the year-end balance sheet accounts, it was determined that several liability accounts incorrectly held debit or "contra liability" balances from items that should have been expensed in 2022. Additionally, an asset account held a credit or "contra asset" balance at December 31, 2022. The result of this error was an understatement of liability accounts, specifically accrued liabilities - marketing, and an overstatement of equity accounts.

g.	Reclassification of Collectible assets: While testing December 31, 2021 of the StartEngine Collectibles assets held for sale, it was determined that artwork had been incorrectly classified as comics, and Wine assets were overstated, resulting in an overstatement of assets.

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Position and Adjusting Entries

The Company has determined that these transactions are not material in the years they occurred and conclude that prior financial reports can be relied upon. The Company's determination is based on the following: The adjustments do not cause any changes to the previously reported cash balances as of the end of the period in 2022. The Company has determined that the adjustments have had little effect on the trend of earnings over the last three years. The Company reported losses in 2021 and 2022 prior to the adjustments and maintained a loss position in 2023.

Although management concluded that the adjustments to prior years financial statements are not material, management concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934) and the Company's internal control over financial reporting (as defined by Sections 13a-15(f) and 15d-15(f) of the Exchange Act) were not effective as of December 31, 2023. Management has included a reporting on its assessment of internal control over financial reporting, including a description of identified material weaknesses, remediation efforts made, and plans for further remediation in Item 9A, "Controls and Procedures."

Operating Results

Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022

The following table summarizes the results of our operations for the fiscal year ended December 31, 2023 as compared to the fiscal year ended December 31, 2022.


	Year Ended December 31,
	2023		2022			$ Change
					(Restated)

Revenues	$	23,385,998		$	24,054,832		$	(668,834)

Cost of revenues		8,703,894			7,050,899			1,652,995

Gross profit		14,682,104			17,003,933			(2,321,829)

Operating expenses:
General and administrative		10,207,544			8,678,128			1,529,416
Sales and marketing		13,013,676			12,208,947			804,729
Research and development		5,779,920			4,667,596			1,112,324
Change in fair value of warrants received for fees		11,409			501,522			(490,113)
Impairment in value of shares received for fees		2,122,211			(953,131)			3,075,342
Total operating expenses		31,134,760			25,103,062			6,031,698

Operating income (loss)		(16,452,656)			(8,099,129)			(8,353,527)

Other expense (income), net:
Other expense (income), net		(144,290)			(188,684)			(44,394)
Total other expense (income), net		(144,290)			(188,684)			(44,394)

Income (loss) before provision for income taxes		(16,308,366)			(7,910,445)			(8,397,921)

Taxes - Other		67,112			63,563			3,549

Net income (loss)		(16,375,478)			(7,974,008)			(8,401,470)
Less: net loss attributable to noncontrolling interest		-			(9,124)			9,124
Net Income (loss) attributable to stockholders	$	(16,375,478)		$	(7,964,884)		$	(8,410,594)

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Revenues

Our revenues during the fiscal year ended December 31, 2023 were $23,385,998, which represented a decrease of $668,834, or 3%, from revenues in the same period in 2022. The following are the major components of our revenues during the year ended December 31, 2023 and 2022:


	Year Ended		Year Ended
	Ended December 31,		Ended December 31,
	2023		2022		$ Change
					(Restated)
Regulation Crowdfunding platform fees	$	11,115,372		$	11,160,511	$	(45,139)
Regulation A commissions		1,197,178			4,539,132		(3,341,954)
StartEngine Premium		2,740,337			2,289,999		450,338
StartEngine Secure		1,426,320			1,311,930		114,390
StartEngine Private		2,709,621			-		2,709,621
Venture Club (formerly OWNers Bonus) revenue		4,002,656			4,106,643		(103,987)
Other service revenue		194,514			646,617		(452,103)

Total revenues	$	23,385,998		$	24,054,832	$	(668,834)

The Company experienced mixed results depending on the service or products providing that particular stream of revenue during 2023. While we saw a decrease in a Regulation A commissions and other revenues, including related to the closing of StartEngine Assets, the decrease was muted by both continued growth in platform fees for Regulation CF as well as the introduction of the new StartEngine Private which began generating revenue in Q4 2023. Specifically, between the year-end December 31, 2023 as compared to the same period in 2022 we saw the following movements in revenue related to our products:

●

Decrease in Regulation Crowdfunding platform fees of $45,139 despite higher amounts raised by issuers in Regulation Crowdfunding offerings despite having fewer issuers. While raises in 2023 were higher than 2022, the Company recognizes revenue upon disbursement of funds to issuers, which can occur outside of the reporting period. Specifically, in 2023, the Company raised approximately $110 million from 277 issuers compared with 2022 raising approximately $102 million from 415 issuers.* Top 5 raises in 2023 raised $20.9 million of the $25 million maximum amount allowable to raise for 5 Regulation CF issuers vs $17.0 million in 2022.*

●	Decrease in Regulation A commissions of $3,341,954, due primarily to lower amounts raised in Regulation A offerings for its issuers. Specifically, in 2023, the Company raised approximately $15 million for issuers compared with 2022 raising approximately $60 million for issuers.*

●

Increase in revenues of $114,390 from StartEngine Secure, primarily due to a price increase for our services from $3 per investor to $10 per investor during Q4 2022, which compensated for a slight decrease in number of issuers utilizing the service. As of December 31, 2023, we had 539 companies compared with 570 companies as of December 31, 2022.

●	Increase in StartEngine Premium revenue of $450,338 due primarily to an increase in pricing of StartEngine Premium from $10,000 to $15,000 for issuers signed after Q2 2022.

●

Decrease in StartEngine Venture club (formerly OWNers bonus) revenue of $103,987 related to fewer sales of Venture club memberships during 2022 and continuing into 2023 compared to 2022. Venture club memberships are annual packages, which are recognized over 12 months, see Note 2 - "Revenue Recognition" to the accompanying financial statements, and therefore the performance of this product in terms of revenue recognition lags behind actual sales.

●	Decrease in other service revenue of $452,103. Other service revenue includes revenue from StartEngine Assets sales, which recorded sales of $47,773 in 2023 versus $397,715 in 2022.

●	Addition of StartEngine Private revenue of $2,709,621 due to the successful raise of 5 issuances in 2023, the service began in Q4 2023.

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*Offerings can span multiple periods and the amount raised during a period is based on the amounts closed on during that period.

Cost of Revenues

Our cost of revenues during the year ended December 31, 2023 was $8,703,894, which represented an increase of $1,652,996, or 23% from the amounts during the same period in 2022 due to: increased costs related to due diligence on new issuers; StartEngine no longer passing through credit card costs to new issuers as of Q2 2023; and the addition of selling costs related to StartEngine Private (which includes the cost basis (including transaction costs) of the private company shares sold into the offerings). Our gross margin in the year ended December 31, 2022 decreased to 63% compared to 71% in 2022. This decrease is due to an increase in employee headcount for further diligence on our issuers and investors, as well as higher transaction costs including escrow fees which the Company bears the cost on behalf of issuers as well as the addition of selling costs related to StartEngine Private, which commenced in Q4 2023. Specifically, the cost of revenues for StartEngine Private was $1,850,954 for the fiscal year ended December 31, 2023, and our gross margin for this product in 2023 was 32%.

Operating Expenses

Our total operating expenses during the year ended December 31, 2023 amounted to $31,134,760, which represented an increase of $6,031,698 or 24%, from the expenses in the same period in 2022. The increase in operating expenses is primarily due to the following:

●

Increase in general and administrative expenses of $1,529,416 primarily due to the inclusion of amortization expense for the SeedInvest acquisition, which totaled $2,248,963 in 2023. This increase was offset by the decrease in payroll expenses of $986,161 as the Company maintained a smaller G&A headcount in 2023.

●

Increase in sales and marketing expenses of $804,729 primarily due to an increase in stock based compensation of $1,950,956 which is granted at a higher strike price of $1.25 per share compared to prior stock option grants. This increase was offset by a $1,173,710 decrease in marketing advertising expense as the Company focused on reducing expenses.

●

Increase in research and development expenses of $1,112,324 due to increased headcount as the Company focused on enhancing its platform and technology which lead to an increase of payroll and bonus expenses related to research and development of $342,615. Additionally, stock-based compensation increased $719,864 which was granted at a higher strike price of $1.25 per share compared to prior stock option grants.

Other Expense (Income), net

Our other income, net during the year ended December 31, 2023 amounted to $144,290, which represented cashback earned from our credit cards during the period as well as dividends earn by the company's Vanguard account holdings and interest earned through the company's money market accounts. During the same period in 2022 our other income, net was $188,684 which primarily represented cashback earned from our credit cards during that period.

Net Loss (Income)

Net loss attributable to shareholders totaled $16,375,478 for the year ended December 31, 2023, an increase of $8,410,594 compared to a net loss of $7,964,884 recognized during the year ended December 31, 2022. The primary drivers of this increase include the impairment warrants and write down of stock received by the company as compensation of $2,573,820. Additionally, the Company increased stock based compensation for employees by $3,063,977 due to the higher strike price of $1.25, and amortized the purchase of SeedInvest intangible assets of $2,248,963.

Critical Accounting Policies

See Note 2 in the accompanying financial statements.

Use of Estimates

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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 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 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.

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 effect 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:


	Year Ended
	December 31,
	2023		2022		$ Change
					(Restated)
Net cash used in operating activities	$	(8,726,936)		$	(7,088,269)	$	(1,638,667)
Net cash (used in) provided by investing activities	$	393,684		$	(1,122,996)	$	1,516,680
Net cash provided by financing activities	$	5,529,081		$	3,067,749	$	2,461,332

Our net loss attributable to stockholders during the year ended December 31, 2023 was $16,375,478, as compared to a net loss of $7,964,884 during the year ended December 31, 2022.

Cash used by operating activities for the year ended December 31, 2023 was $8,726,936 as compared to cash used by operating activities of $7,088,269 for the same period in 2022. The increase in cash used by operating activities in 2023 was primarily due to the net loss in the period as well as an increase in impairment expense for investment received for fees of $2,682,055. This was offset by a $2,248,963 increase in amortization expense of the SeedInvest purchase, $3,063,978 increase in stock-based compensation, and finally $2,201,135 provided from deferred revenue not yet recognized.

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Cash received from investing activities for the year ended December 31, 2023 was $393,684, as compared to cash used in investing activities of $1,122,996 in the same period in 2022. The cash used in 2022 relates to the purchase or collectible assets that are sold in our StartEngine Assets offerings and cash received in 2023 relates to the sale of certain collectibles.

Cash provided by financing activities was $5,529,081 and $3,067,749 for the year ended December 31, 2023 and December 31, 2022, respectively. The increase of cash inflow is primarily due to the increase in proceeds from sale of common stock of $2,692,797.

Balance Sheet

The following table summarizes our assets and liabilities as of December 31, 2023 as compared as of December 31, 2022:


	December 31,		December 31,
	2023		2022
					(Restated)
Assets
Current assets:
Cash	$	12,656,298		$	15,460,469
Marketable securities		1,856			1,856
Accounts receivable, net of allowance		193,696			678,672
Other current assets		720,767			1,304,304
Total current assets		13,572,617			17,445,301

Property and equipment, net		119,723			109,142
Investments - warrants		195,487			206,895
Investments - stock		8,623,212			7,943,817
Investments - Private		4,357,083			-
Investments - Collectibles		2,446,121			2,984,699
Investments - Real Estate		2,136,628			2,136,628
Due from related party		209,190			-
Intangible assets		21,892,192			20,000
Other assets		42,138			66,600
Total assets	$	53,594,391		$	30,913,082

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	278,691		$	284,371
Accrued liabilities		4,456,756			2,785,500
Deferred revenue		3,520,150			2,715,422
Total current liabilities		8,255,597			5,785,293

Total liabilities		8,255,597			5,785,293

The Company's current assets decreased by $3,872,684 from December 31, 2022 to December 31, 2023. The decrease was primarily driven by a decrease in cash in the amount of $2,804,171 driven by its use in operating activities as well as a decrease in accounts receivable of $485,086 as the Company wrote off uncollectible receivables.

The Company's long-term assets increased by $26,553,990 from December 31, 2022 to December 31, 2023. This was driven primarily by:

●	A $679,395 increase in stock investments which we earn as part of compensation for raising funds for issuers.

●	A $21,872,192 increase in intangible assets from the purchase of SeedInvest assets less the amortization for the period.

●	A $4,357,083 increase in StartEngine Private assets held.

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Current liabilities increased by $2,470,304 which is primarily due to an increase in accrued liabilities of $1,671,256 due to an increase in investor deposits of $1,040,285 as well as an increase of deferred revenue of $804,728 for purchases of Venture club (formerly OWNers bonus) and StartEngine Secure.

Liquidity and Capital Resources

We do not currently have any significant loans or available credit facilities. As of December 31, 2023, the Company's current assets were $13,572,617. 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 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.

We believe we have the cash, marketable securities through future fundraising rounds, 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.

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Item 8.Financial Statements and Supplementary Data

Index of the Financial Statements

Report
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statement of Operations	F-4
Consolidated Statements of Stockholders' Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes To Consolidated Financial Statements	F-7

F-1

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of StartEngine Crowdfunding, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of StartEngine Crowdfunding, Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2023 and the related notes (collectively referred to as the financial statements). In our opinion, the

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

In our report dated April 15, 2024, regarding the audit of the consolidated financial statements of the Company as of December 31, 2023, and for the year then ended, we expressed an opinion which included our audit of adjustments described in Note 1 that were applied to restate the December 31, 2022 financial statements to correct certain errors. At that time, we were not engaged to audit, review, or apply any procedures to the December 31, 2022 financial statements of the Company other than with respect to the adjustments. As described in Note 9, on May 3, 2024, the SEC instituted settled administrative and cease-and-desist proceedings against the prior auditor of the December 31, 2022 consolidated financial statements. Subsequently, we were engaged to re-audit the consolidated financial statements of the Company as of December 31, 2022 and for the year then ended. Our opinion on the December 31, 2022, re-audit is included herein.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Haynie & Company

Haynie & Company (ID #457)

Salt Lake City, Utah

September 11, 2024

We have served as the Company's auditor since 2023

F-2

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StartEngine Crowdfunding, Inc.

Consolidated Balance Sheets

December 31, 2023 and 2022


	December 31,		December 31,
	2023		2022
					(Restated)
Assets
Current assets:
Cash	$	12,656,298		$	15,460,469
Marketable securities		1,856			1,856
Accounts receivable, net of allowance		193,696			678,672
Other current assets		720,767			1,304,304
Total current assets		13,572,617			17,445,301

Property and equipment, net		119,723			109,142
Investments - warrants		195,487			206,895
Investments - stock		8,623,212			7,943,817
Investments - Private		4,357,083			-
Investments - Collectibles		2,446,121			2,984,699
Investments - Real Estate		2,136,628			2,136,628
Due from related party		209,190			-
Intangible assets		21,892,192			20,000
Other assets		42,138			66,600
Total assets	$	53,594,391		$	30,913,082

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	278,691		$	284,371
Accrued liabilities		4,456,756			2,785,500
Deferred revenue		3,520,150			2,715,422
Total current liabilities		8,255,597			5,785,293

Total liabilities	$	8,255,597		$	5,785,293

Commitments and contingencies

Stockholders' equity:
Series A Preferred Stock, par value $0.00001, 207,000,000shares authorized, 185,440,880and 185,440,880shares issuedand outstandingat December 31, 2023 and December 31, 2022, respectfully, liquidation preference of $5,310,409and $5,310,409at December 31, 2023 and December 31, 2022, respectively.		5,286,667			5,286,667
Series T Preferred Stock, par value $0.00001, 99,000,000shares authorized, 9,642,080and 9,642,080shares issuedand outstandingat December 31, 2023 and December 31, 2022, respectively, liquidation preference of $1,414,172and $1,414,486at December 31, 2023 and December 31, 2022, respectively.		983,634			983,634
Series Seed Preferred Stock, par value $0.00001, 213,000,000shares authorized, 204,810,720and 204,810,720and shares issuedand outstandingat December 31, 2023 and December 31, 2022, respectfully, liquidation preference of $1,707,990and $1,707,990at December 31, 2023 and December 31, 2022, respectively.		1,706,756			1,706,756
Common stock, par value $0.00001, 1,500,000,000shares authorized, 697,053,980and 666,033,240shares issuedand outstandingat December 31, 2023 and December 31, 2022, respectively.		6,971			6,660
Additional paid-in capital		82,005,447			45,419,275
Noncontrolling interest		(13,251)			(13,251)
Accumulated deficit		(44,637,430)			(28,261,952)
Total stockholders' equity		45,338,794			25,127,789
Total liabilities and stockholders' equity	$	53,594,391		$	30,913,082

See accompanying notes to consolidated financial statements

F-3

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StartEngine Crowdfunding, Inc.

Consolidated Statement of Operations

December 31, 2023 and 2022


		Year Ended December 31,
		2023	2022
				(Restated)
Revenues	$	23,385,998	$	24,054,832

Cost of revenues		8,703,894		7,050,899

Gross profit		14,682,104		17,003,933

Operating expenses:
General and administrative		10,207,544		8,678,128
Sales and marketing		13,013,676		12,208,947
Research and development		5,779,920		4,667,596
Change in fair value of warrants received for fees		11,409		501,522
Change in fair value of shares received for fees		2,122,211		(953,131)
Total operating expenses		31,134,760		25,103,062

Operating income (loss)		(16,452,656)		(8,099,129)

Other Expense (Income)
Other expense (income), net		(144,290)		(188,684)
Total other expense (income), net		(144,290)		(188,684)

Income (loss) before provision for income taxes		(16,308,366)		(7,910,445)

Taxes - Other		67,112		63,563

Net loss		(16,375,478)		(7,974,008)
Less: net loss attributable to noncontrolling interest		-		(9,124)
Net loss attributable to stockholders		(16,375,478)	$	(7,964,884)

Weighted average loss per share - basic and diluted	$	(0.02)	$	(0.01)
Weighted average shares outstanding - basic and diluted		677,344,569		660,765,225

See accompanying notes to consolidated financial statements

F-4

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StartEngine Crowdfunding, Inc.

Consolidated Statements of Stockholders' Equity

December 31, 2023 and 2022


	Series A Preferred Stock	Series T Preferred Stock		Series Seed Preferred Stock		Common Stock			Additional		Subscription		Noncontrolling		Accumulated
	Shares	Amount		Shares		Amount		Shares		Amount		Shares		Amount		Paid-in Capital		Receivable		Interest	Deficit		Total
Balance at December 31, 2021	185,440,880	$	5,286,667		9,644,220		$	983,852		204,958,760		$	1,707,990		657,303,860		6,573		$	39,240,479	$	(367,831)		$	(4,127)	$	(18,938,969)	27,914,634
Impact of restatement	-		-		-			-		-			-		-		-			(515,911)		-			-		(1,367,223)	(1,883,134)
Balance at December 31, 2021 (Restated)	185,440,880	$	5,286,667		9,644,220		$	983,852		204,958,760		$	1,707,990		657,303,860	$	6,573		$	38,724,568	$	(367,831)		$	(4,127)	$	(20,306,192)	26,031,500
Sale of common stock	-		-		-			-		-			-		8,032,900		80			7,101,353		367,831			-		-	7,469,264
Offering costs (Restated)	-		-		-			-		-			-		-		-			(4,439,550)		-			-		-	(4,439,550)
Conversion of Preferred Stock to Common Stock	-		-		(2,140)			(218)		(148,040)			(1,234)		537,940		5			1,447		-			-		-	-
Exercise of stock options	-		-		-			-		-			-		158,540		2			38,033		-			-		-	38,035
Stock compensation expense	-		-		-			-		-			-		-		-			3,993,424		-			-		-	3,993,424
Noncontrolling interest	-		-		-			-		-			-		-		-			-		-			(9,124)		9,124	-
Net loss (Restated)	-		-		-			-		-			-		-		-			-		-			-		(7,964,884)	(7,964,884)
Balance at December 31, 2022 (Restated)	185,440,880	$	5,286,667		9,642,080		$	983,634		204,810,720		$	1,706,756		666,033,240	$	6,660		$	45,419,275	$	-		$	(13,251)	$	(28,261,952)	25,127,789


	Series A Preferred Stock	Series T Preferred Stock		Series Seed Preferred Stock		Common Stock			Additional		Subscription		Noncontrolling		Accumulated
	Shares	Amount		Shares		Amount		Shares		Amount		Shares		Amount		Paid-in Capital		Receivable		Interest	Deficit		Total
Balance at December 31, 2022	185,440,880	$	5,286,667		9,642,080		$	983,634		204,810,720		$	1,706,756		666,033,240	$	6,660		$	45,419,275	$	-		$	(13,251)	$	(28,261,952)	25,127,789
Sale of common stock	-		-		-			-		-			-		9,105,220		91			10,161,973		-			-		-	10,162,064
Offering Costs	-		-		-			-		-			-		-		-			(4,719,370)		-			-		-	(4,719,370)
Exercise of stock options	-		-		-			-		-			-		2,715,520		28			86,362		-			-		-	86,390
Stock compensation expense	-		-		-			-		-			-		-		-			7,057,402		-			-		-	7,057,402
SeedInvest Acquisition	-		-		-			-		-			-		19,200,000		192			23,999,805		-			-		-	23,999,997
Net loss	-		-		-			-		-			-		-		-			-		-			-		(16,375,478)	(16,375,478)
Balance at December 31, 2023	185,440,880	$	5,286,667		9,642,080		$	983,634		204,810,720		$	1,706,756		697,053,980	$	6,971		$	82,005,447	$	-		$	(13,251)	$	(44,637,430)	45,338,794

See accompanying notes to consolidated financial statements

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StartEngine Crowdfunding, Inc.

Consolidated Statements of Cash Flows

December 31, 2023 and 2022


	Year Ended December 31,
	2023		2022
					(Restated)
Cash flows from operating activities:
Net loss attributable to stockholders	$	(16,375,478)		$	(7,964,884)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		13,155			13,090
Amortization		2,248,965			-
Bad debt expense		722,932			582,009
Fair value of warrants received for fees		-			(536,087)
Fair value of investments - other received for fees		(2,801,296)			(2,577,415)
Change in fair value of warrant investments		11,409			501,522
Impairment of investments - other received for fees		2,121,901			(953,131)
Stock-based compensation		7,057,402			3,993,424
Changes in operating assets and liabilities:
Accounts receivable		(237,956)			217,206
Other current assets		607,999			1,466,665
StartEngine Private stock purchases		(4,357,083)			-
Due from related parties		(317,007)			-
Accounts payable		(5,680)			(1,330,403)
Accrued liabilities		1,779,073			646,735
Deferred revenue		804,728			(1,147,000)
Net cash received (used) in operating activities		(8,726,936)			(7,088,269)

Cash flows from investing activities:
Investments - Collectibles purchases, gross		-			(1,058,305)
Investments - Collectibles sales, gross		417,421			-
Purchase of property and equipment		(23,737)			(64,691)
Net cash received (used) in investing activities		393,684			(1,122,996)

Cash flows from financing activities:
Proceeds from sale of common stock		10,162,061			7,469,264
Offering costs		(4,719,370)			(4,439,550)
Proceeds from exercise of employee stock options		86,390			38,035
Net cash provided by financing activities		5,529,081			3,067,749

(Decrease)in cash and restricted cash		(2,804,171)			(5,143,516)
Cash and restricted cash, beginning of period		15,460,469			20,603,985
Cash and restricted cash, end of period	$	12,656,298		$	15,460,469

Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	67,112		$	62,344
Non Cash Investing & Financing Activities
Purchase of SeedInvest Intellectual Property with Common Stock	$	23,999,997		$	-
Subscription Receivable as part of Common Stock	$	-		$	367,832

See accompanying notes to consolidated financial statements

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STARTENGINE CROWDFUNDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

StartEngine Crowdfunding, Inc. was formed on March 19, 2014 ("Inception") in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc. and changed to the current name on May 8, 2014. The consolidated financial statements of StartEngine Crowdfunding, Inc. (the "Company") are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company's headquarters are located in Burbank, California.

The Company aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. StartEngine Crowdfunding Inc. has wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Assets LLC and StartEngine Primary LLC. StartEngine Capital LLC is a funding portal registered with the US Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA), StartEngine Secure LLC is a transfer agent registered with the SEC. StartEngine Assets LLC was formed in 2020 to buy, hold and manage assets in various asset classes such as real estate, automobiles, luxury goods and royalty-producing intangible assets. StartEngine Primary LLC was formed in October 2017 and received approval to operate as a registered broker-dealer in July 2019. On April 16, 2020, StartEngine Primary LLC received approval to operate as an alternative trading system. The Company has been providing accredited investors the opportunity to purchase membership interests in funds ("SE Funds") which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC, an exempt reporting adviser. The Company's mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years.

Stock Split

On May 5, 2024, StartEngine Crowdfunding Inc. split its designated "Common Stock" and "Preferred Stock" on a 20for 1 basis. The total number of shares of Common Stock that the Company is authorized to issue was increased to 1,500,000,000 shares after the split. The total number of shares of Preferred Stock that the Company is authorized to issue was increased to 519,000,000 after the split. Accordingly, all share and per share amounts for all periods presented in the consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

Business Condition

The Company's revenue producing activities commenced in 2015 with the approved start of Title IV of the JOBS Act, which created new rules for Regulation A, and increased since then with the start of Regulation Crowdfunding under Title III of the JOBS Act. Because this is a relatively new industry, there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. Because there is a level of uncertainty and because we are still in the early stages of these new regulations, the Company is expected to incur losses until such time that the volume of Regulation A and Regulation Crowdfunding campaigns and the investments in those campaigns is sufficient for revenues derived from those campaigns to cover its costs. These factors could indicate substantial doubt about the Company's ability to continue as a going concern.

The Company has cash and cash equivalents of approximately $13 million, which its managements believes will cover losses for the foreseeable future. The Company's management believes that any substantial doubt about the Company's ability to continue as a going concern has been alleviated.

Restatement

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The restatement also includes corrections for other errors identified as immaterial, individually and in the aggregate, to our consolidated financial statements.

Description of Restatement Tables

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Balance Sheet:


	Year Ended December 31, 2022
	Previously
	Reported		Adjustment			As Restated
Assets
Current assets:
Cash	$	15,460,469		$	-		$	15,460,469
Marketable securities		1,856			-			1,856
Accounts receivable, net of allowance		702,257			(23,585)			678,672	(c)
Other current assets		1,953,756			(649,452)			1,304,304	(d) (f)
Total current assets	$	18,118,338		$	(673,037)		$	17,445,301

Property and equipment, net	$	109,141		$	-		$	109,141
Investments - warrants		1,496,701			(1,289,806)			206,895	(a)
Investments - stock		6,479,340			1,464,477			7,943,817	(b)
Investments - Collectibles		3,072,227			(87,528)			2,984,699	(g)
Investments - Real Estate		2,136,628			-			2,136,628
Intangible assets		20,000			-			20,000
Other assets		66,603			-			66,603
Total assets	$	31,498,978		$	(585,894)		$	30,913,084

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	284,371		$	-		$	284,371
Accrued liabilities		1,760,920			1,024,580			2,785,500	(e)
Deferred revenue		2,715,422			-			2,715,422
Total current liabilities	$	4,760,713		$	1,024,580		$	5,785,293

Stockholders' equity:
Series A Preferred Stock	$	5,286,667		$	-		$	5,286,667
Series T Preferred Stock		983,634			-			983,634
Series Seed Preferred Stock		1,706,756			-			1,706,756
Common Stock		6,660			-			6,660
Additional paid-in capital		45,632,823			(213,548)			45,419,275	(f)
Noncontrolling interest		(13,251)			-			(13,251)
Accumulated deficit		(26,865,024)			(1,396,928)			(28,261,952)
Total stockholders' equity	$	26,738,265		$	(1,610,476)		$	25,127,789
Total liabilities and stockholders' equity	$	31,498,978		$	(585,896)		$	30,913,082

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Statement of Operations:


	Year Ended December 31, 2022
	Previously
	Reported		Adjustment			Second Adjustment		As Restated

Revenue	$	24,360,685		$	-		$	(305,853)	$	24,054,832
Cost of Revenue		6,368,629			682,270			-		7,050,899	(e)
General and administrative		8,723,615			881,760			(927,247)		8,678,128	(c) (d)
Sales and marketing		12,478,887			7,571			(277,511)		12,208,947	(c) (e)
Research and development		4,667,593			-			3		4,667,596
Change in fair value of warrants received for fees		169,520			1,289,806			(957,804)		501,522	(a)
Change in fair value of shares received for fees		21,863			(1,464,477)			489,483		(953,131)	(b)
Other Expense (Income)		(188,684)			-			-		(188,684)
Taxes - Other		63,563		$	-		$	-	$	63,563
Net Loss	$	(7,944,301)			(1,396,930)			1,367,223		(7,974,008)
Weighted average loss per share - basic and diluted		0.01								0.01

Descriptions of Misstatements

Investments in common stock - fair value and impairment adjustment: The Company had historically performed a flat 33%impairment of shares received as compensation. In reviewing the investments in common stock, however, it was determined that the certain stocks held had increased in value based on subsequent raises hosted by the Company. Using the updated offer price per share, the Company adjusted the prior stock value to the new market value of the investments - stock. Additionally, the Company performed a more comprehensive analysis of the impairment to investments of common stock held and adjusted the impairment to be in line with the 33%estimated impairment for stocks that did not host an additional capital raise with the Company.

c.	Correction of receivable accounts: The Company determined that balances included in the accounts receivable, advertising loan and other reimbursable expense asset accounts were uncollectible, and the asset accounts were overstated as of December 31, 2022.

d.	Correction of prepaid expense amortization: The Company determined that the expense for purchases of software licenses were incurred, but not properly expensed during 2022.

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g.	Reclassification of Collectible assets: While testing December 31, 2021 of the StartEngine Collectibles assets held for sale, it was determined that artwork had been incorrectly classified as comics, and Wine assets were overstated, resulting in an overstatement of assets.

Position and Adjusting Entries

The Company has determined that these transactions are not material in the years they occurred and conclude the prior financial reports can be relied upon. The Company's determination is based on the following: The adjustments do not cause any changes to the previously reported cash balances as of the end of the period in 2022. The Company has determined that the adjustments have had little effect on the trend of earnings over the last three years. The Company reported losses in 2021 and 2022 prior to the adjustments and maintained a loss position in 2023.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying audited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission. The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc., its subsidiaries where we have controlling financial interests, and any variable interest entities for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated.

Principles of Consolidation

The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.'s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Primary LLC, StartEngine Assets LLC, StartEngine Advisor LLC and StartEngine Private Manager LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of expenses during the reporting periods. Significant estimates include the value of marketable securities, the value of stock and warrants received as compensation and collectability of accounts receivable. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2- Include other inputs that are directly or indirectly observable in the marketplace.

Level 3- Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

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Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2023 and 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets.

Level 1

Investments: Marketable securities are made up of mutual funds and shares of common stock that are valued based on quoted prices in active markets.

Level 2

Investments - warrants (public portfolio): Fair value measurements of warrants of publicly traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable volatility assumptions based on comparable public companies.

Level 3

Investments - warrants (private portfolio): Fair value measurements of warrants of private portfolio companies are priced based on a modified Black-Scholes option pricing model to estimate the asset value by using stated strike prices, warrant expiration dates modified to account for estimates to actual life relative to stated expiration, risk-free interest rates, and volatility assumptions based on comparable public companies. Option volatility assumptions used in the modified Black-Scholes model are based on public companies who operate in similar industries as companies in our private company portfolio. For these warrants, the fair value of the underlying stock is an unobservable input consistent with Investment - stocks noted above. Certain adjustments may be applied as determined appropriate by management for lack of liquidity.

Investments - stock: Fair value measurements of stocks of private portfolio companies are prices based on a combination of issuer activity and the price of new issuances. The Company, on an annual basis, will review any new offerings from issuers and compare the offering price of the stock in the new issuance compared to the original value of the stock held. The Company will mark the held stock to the new stock price and adjust the carrying value accordingly. If an issuer has not made an offering in the year in review, the company will apply a flat 33% write down to the stock carrying value as a means of estimating the volatility and illiquidity of a privately held stock.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2023:


	Level 1		Level 2		Level 3	Total
Marketable securities		1,856			-		-		1,856
Investment - warrants		-			-		195,487		195,487
Investment - stock		381,897			-		8,241,315		8,623,212
Non-Fungible Token ("NFT")		730			-		-		730
	$	384,483		$	-	$	8,436,802	$	8,821,285

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2022:


	Level 1		Level 2		Level 3	Total
Marketable securities		1,856			-		-		1,856
Investment - warrants (Restated)		-			-		206,895		206,895
Investment - stock (Restated)		-			-		7,943,817		7,943,817
Cryptocurrency		16,604			-		-		16,604
Non-Fungible Token ("NFT")		47,868			-		-		47,868
	$	66,328		$	-	$	8,150,712	$	8,217,040

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The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the year ended December 31, 2023 and 2022 as it relates to Investments - warrants and Investments - stocks:


	Investments-
	Warrants
Fair value at December 31, 2022	$	206,895
Receipt of warrants		-
Change in fair value of warrants		(11,409)
Fair value at December 31, 2023	$	195,487


	Investments-
	Warrants
Fair value at December 31, 2021 (Restated)	$	172,330
Receipt of warrants (Restated)		536,087
Change in fair value of warrants (Restated)		(501,522)
Fair value at December 31, 2022 (Restated)	$	206,895


	Investments-
	Stock
Fair value at December 31, 2022	$	7,943,817
Receipt of stock		2,801,296
Change in fair value of stock		(2,121,901)
Fair value at December 31, 2023	$	8,623,212


	Investments-
	Stock
Fair value at December 31, 2021 (Restated)	$	4,413,271
Receipt of stock (Restated)		2,577,415
Change in fair value of stock (Restated)		953,131
Fair value at December 31, 2022 (Restated)	$	7,943,817

The following range of variables were used in valuing Level 3 warrant assets during the years ended December 31, 2023 and 2022:


	2023		2022
Expected life (years)		1.42 - 3.58			2.42 - 4.58
Risk-free interest rate		3.84 - 3.84	%		3.99	%
Expected volatility		36.0 - 102.0	%		25.0 - 89.0	%
Annual dividend yield		0	%		0	%
Underlying share values	$	0.30 - $100.00		$	0.30 - $100.00
Strike Prices	$	0.30 - $100.00		$	0.30 - $100.00

For Investments - Warrants, the primary and most significant unobservable input relates to the underlying share value of the issuers for which we receive warrants. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.

For warrants, the Company also adjusts the expected life of certain warrants to account for potential liquidation events, as well as doubts regarding the ability for the issuer companies to continue as a going concern. The quantitative measure used is based upon Black-Scholes modeling. Significant judgment is required by Management in selecting unobservable inputs, and accordingly a change in the assumptions used for the valuation could cause the value to be significantly different. In general, increases in underlying share prices, expected life and volatility, increase the value of the warrants, whereas decreases would reduce the value.

For Investments - Stock, the primary and most significant unobservable input relates to the share value of the issuers. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in

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valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.

Accounts Receivable

Accounts receivable are recorded at the recognized amount and are non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance for doubtful accounts as of December 31, 2023 and December 31, 2022 was $179,388 and $357,709, respectively. Bad debt expense for the year ended December 31, 2023 and 2022 was $722,932 and $582,009, respectively.

As of December 31, 2023 the Company had accounts receivable over 90 days totaling $0.

Investment Securities

Marketable Securities

Our marketable securities consist of mutual funds and common stock equities that are tradable in an active market. Unrealized gains and losses on available-for-sale securities, net of applicable taxes, are reported as a component of other income, net in the accompanying consolidated statements of operations.

Non-Marketable and Other Securities

Non-marketable and other securities include investments in non-public equities. Our accounting for investments in non-marketable and other securities depends on several factors, including the level of ownership, power to control and the legal structure of the subsidiary making the investment. As further described below, we base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting.

Investments - Warrant Assets

In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks nor do we use other derivative instruments to hedge economic risks stemming from these warrants.

We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a "cashless" exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our consolidated balance sheet at the time they are obtained, and remeasured each reporting period.

The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt.

Any changes in fair value from the grant date fair value of warrants will be recognized as increases or decreases to investments on our consolidated balance sheets and as a component of operating expenses on our consolidated statements of operations.

In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities.

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The fair value of the warrants portfolio is a critical accounting estimate and is reviewed each reporting period. We value our warrants using a modified Black-Scholes option pricing model, which incorporates the following significant inputs, in addition to certain adjustments for general lack of liquidity:

·	An underlying asset value, which is estimated based on current information available in valuation reports, including any information regarding subsequent rounds of funding or performance of a company.

·	Stated strike price, which can be adjusted for certain warrants upon the occurrence of subsequent funding rounds or other future events.

·	Price volatility or risk associated with possible changes in the warrant price. The volatility assumption is based on historical price volatility of publicly traded companies within indices or companies similar in nature to the underlying client companies issuing the warrant.

·	The expected remaining life of the warrants in each financial reporting period.

·	The risk-free interest rate is derived from the Treasury yield curve and is calculated based on the risk-free interest rates that correspond closest to the expected remaining life of the warrant on the date of assessment.

Investments - Stock

In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment in our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) whether the issuer has made an offering in the current year, (ii) if so, the valuation of the stock in the offering, and (iii) if not, the Company will write down the stock value at a flat 33% rate. As the stock received from customers has no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, plus adjustments for gross up, less write downs in accordance with ASC 321-10. During the year ended December 31, 2023 and 2022, the Company received stock with a cost of $2,801,296 and $2,577,415, respectively, as payment for fees. During the year ended December 31, 2023 and 2022, write down expense related to shares received amounted to $2,121,901 for 2023, and gross up adjustment related to shares received amounted to $953,131, respectively.

Investments - Private

The Company purchases shares of venture capital backed, late-stage private companies and records the purchases at cost. The cost of the underlying asset includes the purchase price and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, investigation, and acquisition of the underlying securities. The Company purchases the private company shares either directly or through other special purpose vehicles and after a certain period of time sells its investment to an StartEngine Fund. Each time the company sells shares to the StartEngine Funds, it reduces its holdings by the cost basis of the sale.

Below is a breakdown of the StartEngine Private assets by industry held at the end of the reporting period, each of these investments are small minority stakes in the underlying companies.


Industry	Investment
Video Games	643,558
Fintech	901,784
AI Hardware	1,040,039
Sales Technology	754,868
Messaging Platforms	403,495
Software Development	613,339
Total	4,357,083

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Investments - Collectibles

The Company, through its subsidiary, purchases collectibles including art, wine, memorabilia, and other collectible assets, and are recorded at cost. The cost of the underlying asset includes the purchase price, including any deposits for the underlying asset and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, discovery, investigation, development and acquisition of the underlying assets.

The Company treats the underlying assets as long-lived assets, and the underlying assets will be subject to an annual test for impairment and will not be depreciated or amortized. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The underlying assets are purchased by our subsidiary, StartEngine Assets, LLC, (the "Administrative Manager") and sold to our Series LLC subsidiary collectible funds for cash or a promissory note. The Series uses the proceeds of the offering to pay off the note. Acquisition expenses are typically paid for in advance by the Administrative Manager and are reimbursed by the Series from the proceeds of the offering in accordance with the offering circular. All such transactions are eliminated in consolidation.

The below is a breakdown of the types of collectibles and their value held as of December 31, 2023 and 2022:


	Period Ended December 31,		Period Ended December 31,
	2023		2022
					(Restated)
Wine	$	278,360		$	388,587
Trading Cards		466,484			486,657
Artwork		1,322,942			1,287,378
Comic Books		324,477			704,477
NFT		730			64,472
Watches		53,128			53,128

Total collectibles	$	2,446,121		$	2,984,699

Investments - Real Estate

The Company has invested $2,136,628 to purchase a membership interest in an LLC that owns one residential apartment building in California as of December 31, 2023. The company values this interest via the adjusted cost measurement alternative per ASC 321-10-35-2, noting it records the initial measurement at fair value, and in subsequent reporting periods, reports changes in the fair value of such equity investments in net income. As the underlying building does not have a readily available fair market value, the company alternatively measures the investment at cost, minus impairment, if any, plus or minus adjustments through income for observable price changes. To date, the investment has not had any observable price changes, and as such, has not been impaired.

Intangible Assets

Intangible assets are stated at gross cost less accumulated amortization and presented separately from other long-term assets in accordance with ASC 350-30-50-2.

Noncontrolling Interest

The Company presents third party minority interests in subsidiaries in accordance with ASC 810, Consolidation. Under that topic, such minority interests are presented on the Company's balance sheet within the equity section as noncontrolling interest.

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Equity Offering Costs

The Company accounts for offering costs in accordance with ASC 340, Other Assets and Deferred Costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders' equity upon the completion of an offering or to expense if the offering is not completed. Offering costs of $4,719,370 and $4,439,550 were charged to stockholders' equity during the year ended December 31, 2023 and 2022, respectively.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 contains a framework for analyzing potential revenue transactions by identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the Company satisfies aperformance obligation.

The Company recognizes revenues from Regulation A and Regulation D platform fees at an agreed-upon rate. In 2021 the rate was a percentage of the capital raised. Platform fees are paid to the Company from customers' escrow accounts. For certain Regulation A offerings, the Company earns a portion of its platform fees in warrants or shares. The grant date fair values of shares and warrants received are recognized as revenue when earned. The Company's performance obligations are satisfied as services are rendered through the duration of the campaign.

Revenues from Regulation Crowdfunding platform fees are recognized at an agreed-upon rate based on the amount invested in an offering. Platform fees are due upon the disbursement of funds from escrow and are paid to the Company from customers' escrow accounts. The Company's performance obligations are satisfied as services are rendered through the duration of the campaign.

The Company provides marketing services branded under the name "StartEngine Premium.". The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due.

The Company provides transfer agent services branded under the name "StartEngine Secure" through its registered transfer agent subsidiary, StartEngine Secure, LLC. The Company enters into an agreement with issuers for an annual term that commences from the date the issuers Regulation Crowdfunding or Regulation A offering launches. The transfer agent services represent a single performance obligation and is deferred over 12 months which is the period over which the Company's performance obligations are to be satisfied. Fees for transfer agent services are charged based on a per investor basis, subject to certain maximums. The Company may also invoice customers for ancillary services such as but not limited to: recording of stock splits, change of address, or other services. These services are provided and earned at a point-in-time based on defined amounts in the agreement. Payment for StartEngine Secure services are generally paid via customers' escrow account, in full, during the initial year and billed to the client for cash payment for subsequent years if the customer does not have a follow-on offering or to the extent amounts in escrow are not sufficient. There are no significant judgments related to this revenue stream.

The Company previously offered campaign advertising services branded under the name "StartEngine Promote." Under these services, we assist issuer campaigns through creating, designing, purchasing and organizing media across digital marketing channels. Promote services represent a single performance obligation. The term of the services commences upon the agreement being signed and through the closing of the related campaign. The revenues are earned based on a percentage of additional investments attributable to the campaign advertising services, and recognized monthly to the issuer throughout the campaign. The Company may also earn a commission on placing television advertisements on behalf of the issuer. StartEngine Promote fees are charged to the issuers and are paid to the Company from customers' escrow accounts. The Company's performance obligations are satisfied as services are rendered. There are no significant judgments related to this revenue stream. The Company has ceased conducting these services in 2022.

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The Company provides services to investors branded the StartEngine Venture club (formerly OWNers bonus) program. The general public can become members of the StartEngine Venture club program on StartEngine's website for $275 per year. The Venture club entitles members to 10% bonus shares on all investments they make in offerings on StartEngine where the issuer chooses to participate in the program. Issuers using our broker-dealer and funding portal services can choose to participate in our Venture program with respect to the offerings they are making under Regulation A or Regulation CF. Those issuers will grant bonus shares in their offerings to members of the StartEngine Venture club program. The bonus shares are included in the offering statements filed with the SEC, and therefore offered and sold in reliance on Regulation A or Regulation CF, respectively. The OWNers program provides member priority access to certain collectibles being offered through one of our subsidiary Series LLC offerings, notification of new bonus eligible launches and the ability to move to the front of the line on investment waitlists, and lower trading fees on StartEngine Secondary. The Company recognizes the revenue associated with memberships over 12 months, which is the term of the membership. There are no significant judgments related to this revenue stream.

The Company provides accredited investors the opportunity to purchase membership interests in funds ("SE Funds") which own shares of venture capital backed, late-stage private companies (the "underlying securities") via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC ("SE Adviser"), which is a subsidiary of the Company that is an investment adviser that qualifies as an Exempt Reporting Adviser under Rule 203(m)-1 under the Investment Advisers Act of 1940. The SE Funds sell their membership interests in offerings that are exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and specifically Regulation D promulgated thereunder. Such offerings are marketed to accredited investors by the Company's FINRA-member and SEC-registered broker-dealer subsidiary, StartEngine Primary LLC. The Company purchases the underlying securities either directly or through other special purpose vehicles and after a certain period of time sells the underlying securities to an SE Fund. The Company can recognize gross revenue to the extent it is able to sell underlying securities to an SE Fund. The Company treats the amount it receives for selling underlying securities as revenues, and the acquisition cost related such underlying securities as cost of revenues. There are several factors that are used in pricing the securities of an SE Fund, including but not limited to: the price (including transaction costs) the securities were purchased by the SE Fund's affiliate, the time spent and costs involved by the SE Fund's management team including those related to identifying, verifying, acquiring, and managing the investments, sales of the underlying securities on the secondary market, as well as considerations are given for the illiquidity of private investments compared to publicly traded securities and investor interest in the SE Fund's securities. The Company also believes that there is value added by allowing investors to have an economic interest in these companies with less hassle and smaller denominations than available in secondary markets. Additionally, consideration is also given to broader economic and market conditions that might impact the valuation of private companies, such as industry trends, regulatory changes, and economic cycles. The Company takes principal risk in its acquisition of the private company shares and can recognize gross revenue to the extent it is able to sell underlying securities to an SE Fund. The Company treats the amount it receives for selling underlying securities as gross revenues, and the acquisition cost related such underlying securities as cost of revenues. Revenue can be recognized upon each such transaction with an StartEngine Fund. The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered.

In all instances, as a practical expedient, the Company 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 one year or less. As of December 31, 2023 and 2022, the Company had deferred revenue of $3,520,150 and $2,715,422, respectively, related to performance obligations yet to be fulfilled. The Company had no other customer contract assets.

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During the year ended December 31, 2023 and 2022, revenue was made up of the following categories associated with the above described services:


	Year		Year
	Ended December 31,		Ended December 31,
	2023		2022
					(Restated)
Regulation Crowdfunding platform fees	$	11,115,372		$	10,278,596
Regulation A commissions		1,197,178			5,421,047
StartEngine Premium		2,740,337			2,289,999
StartEngine Secure		1,426,320			1,311,930
StartEngine Private		2,709,621			-
Venture Club (formerly OWNers Bonus) revenue		4,002,656			4,106,643
Other service revenue		194,514			646,617

Total revenues	$	23,385,998		$	24,054,832

Cost of Revenues

Cost of revenues consists of internal employees, hosting fees, processing fees, certain software subscription fees that are required to provide services to our issuers, and for StartEngine Private acquisition costs related to underlying securities that it has sold to an SE Fund. Our cost of revenues during the fiscal years ended December 31, 2023 and December 31, 2022 was $8,703,894 and $7,050,899, respectively. The cost of revenues for StartEngine Private was $1,850,954 and $0 for the fiscal year ended December 31, 2023 and 2022.

Research and Development

We incur research and development costs during the process of researching and developing our technologies and future offerings. Our research and development costs consist primarily of non-capitalizable engineering fees for both employees and consultants related to our website and future product offerings, email and other tools that are utilized for client related services and outreach. During the year ended December 31, 2023 and 2022, research and development costs were $5,779,920 and $4,667,596, respectively.

Stock-Based Compensation

The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee's requisite vesting period and over the nonemployee's period of providing goods or services.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") Topic 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

The Company also evaluates tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more likely than not" of being sustained upon examination by the tax authorities. The Company recognizes the effect of any uncertain tax positions in its financial statements in accordance with ASC 740. Penalties and interest related to unrecognized tax benefits are recorded in Other Expense.

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Income tax expense includes U.S. federal, state, and local income taxes. Current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year.

Tax returns are subject to examination by taxing authorities, and the Company is currently under examination for certain jurisdictions. The Company's current open tax years are calendar year 2023 and 2022. Any adjustments resulting from such examinations may affect the Company's provision for income taxes and its effective tax rate. The Company regularly evaluates the adequacy of tax-related reserves based on developments in the various jurisdictions in which it operates.

Earnings per Common and Common Equivalent Share

The computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus common stock equivalents which would arise from the exercise of securities outstanding using the treasury stock method and the average market price per share during the period. Options and convertible preferred stock which are common stock equivalents are not included in the diluted earnings per share calculation for the year ended December 31, 2023 and 2022 as the effects would be anti-dilutive. See Note 7 for outstanding stock-options as of December 31, 2023 and 2022. The weighted average shares outstanding - diluted is calculated as follows for the period ended December 31, 2023 and 2022:


		December 31,
		2023
Weighted average shares outstanding - basic		677,344,569
Weighted average shares outstanding - diluted		677,344,569

		December 31,
		2022
Weighted average shares outstanding - basic		660,765,225
Weighted average shares outstanding - diluted		660,765,225

Concentration of Credit Risk

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.

At times, the Company may have certain vendors or customers that make up over 10% of the balance at any given time. However, the Company is not dependent on any single or group of vendors or customers, and accordingly, the loss of any such vendors or customers would not have a significant impact on the Company's operations.

Recent Accounting Pronouncements

The FASB issues ASUs to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

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NOTE 3 - MARKETABLE SECURITIES AND INVESTMENTS

Marketable Securities

The Company's marketable securities are classified as either available-for-sale, trading, or held-to-maturity in accordance with ASC 320, Investments-Debt and Equity Securities. These securities are recorded at fair value, with unrealized gains and losses recognized in accordance with the guidance outlined in ASC 320-10.

Marketable securities consisted of the following as of December 31, 2023 and December 31, 2022:


	December 31, 2023		December 31, 2022
Common stock	$	1,856		$	1,856
	$	1,856		$	1,856

Unrealized gain during the year ended December 31, 2023 and 2022 were $0 and $0, respectively.

Investments - Warrant Assets

Equity warrants, as described in Note 2, are equity warrants received for services provided. The warrants are valued on the date they are earned in accordance with revenue recognition criteria and again at each reporting date.


	Beginning balance	Received for fees	Change in fair value	Ending balance
2022	172,330	536,087	(501,522)	206,895
2023	206,895	741	(12,149)	195,487

Investments - Stock

Investments - stock, as described in Note 2, consist of shares the Company holds in various companies that launched on its platform received in exchange for services provided. The shares are recorded at cost and adjusted to the value of the stock price in an issuance within the current year or written down 33% if there is no issuance in the current year.


	Beginning balance	Received for fees	Change in fair value	Ending balance
2022	4,413,271	2,577,415	953,131	7,943,817
2023	7,943,817	2,801,296	(2,121,901)	8,623,212

NOTE 4 - PROPERTY AND EQUIPMENT

As of December 31, 2023 and December 31, 2022, property and equipment consisted of the following:


	December 31, 2023		December 31, 2022
Computer equipment	$	160,784		$	137,048
Software		3,753			3,753
Total property and equipment		164,537			140,801
Accumulated depreciation		(44,814)			(31,659)
	$	119,723		$	109,142

Depreciation expense for the year ended December 31, 2023 and 2022 was $13,155 and $13,090, respectively.

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NOTE 5 - INTANGIBLE ASSETS

Intangibles - Seedinvest

On May 5, 2023, StartEngine Crowdfunding, Inc. ("StartEngine") completed its purchase of substantially all of the assets of the SeedInvest business as conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, a Delaware limited liability company ("Pluto Holdings") and through SI Securities, LLC, a New York limited liability company ("SI Securities"), and SeedInvest Technology, LLC, a New York limited liability company, each a wholly-owned subsidiary of Pluto Holdings ("SeedInvest Technology," collectively, with the assets acquired from Pluto Holdings and SI Securities, "SeedInvest"). The total consideration for the purchase is 960,000 shares of StartEngine's common stock, which based on StartEngine's previous Regulation A offering price of $1.25 per share would be valued at $24 million. The acquisition included intellectual property including the customer list of SI Securities as well as other digital assets.

The Company adheres to the provisions of ASC 350 - Goodwill concerning the valuation and presentation of intangible assets. The Company determined the useful life of 7 years for the purchased assets based on historical investment data for users of the StartEngine platform. In 2023, the Company received investments from users with accounts created from 2015-2023 and have seen a continuation of that trend in to 2024. As the Company continues to provide new offerings and work on outreach to users, we believe that this purchase will maintain its useful life for the duration.

As part of the acquisition of the SeedInvest business, the Company acquired a significant intangible asset in the form of a customer list. At the time of acquisition, the Company determined the fair value of the acquired assets, noting that approximately 100% of the gross assets acquired was concentrated in the customer list. The value of intellectual property and various immaterial contracts with vendors was deemed insignificant, and no fair value was assigned to those assets. All contracts have since been canceled, and the SeedInvest webpage and domain are solely used as a redirect to the Company's site, where users must set up new accounts with the Company. The acquisition did not include any fixed assets, vehicles, equipment, machinery, tools, furnishings, computer hardware, or fixtures, as outlined in Section 2.1(b) of the Asset Purchase Agreement.

In accordance with the guidance in FASB ASC 350-30-35-14, the Company evaluates the customer list for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test for intangible assets with indefinite useful lives involves comparing the fair value of the intangible asset with its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess.

The Company considers various factors that may indicate impairment of the customer list, including but not limited to:

●	Declines in customer retention rates.

●	Reductions in revenue per customer.

●	Changes in market conditions affecting the value of the customer relationships.

●	Strategic shifts that alter the utility of the acquired customer list.

As of December 31, 2023, the gross carrying amount of the purchase was $24,121,040, accumulated amortization is $2,248,848 and the estimated aggregate amortization for the five succeeding fiscal years is $17,229,315. The breakdown of each of the five succeeding fiscal years amortization is below.


2024	3,445,863
2025	3,445,863
2026	3,445,863
2027	3,445,863
2028	3,445,863
Total	17,229,315

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.

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NOTE 7 - STOCKHOLDERS' EQUITY

Preferred Stock

As of December 31, 2023, the Company has authorized the issuance of 519,000,000 shares of our preferred stock with par value of $0.00001. Of these authorized shares, 207,000,000 are designated as Series A, 99,000,000 are designated as Series T, and 213,000,000 are designated as Series Seed.

Series A 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 proportionto its respective liquidation preference. Holders of Series A will receive an amount equal to $0.0286per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series A votes on an as-converted basis. The Series A is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series A is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $2.86per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series A has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Series T Preferred Stock

The Series T have liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series T shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series A in proportion to its respective liquidation preference. Holders of Series T will receive an amount equal to $0.1465 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series T votes on an as-converted basis. The Series T is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series T is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $0.14667 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series T has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Series Seed Preferred stock

The Series Seed have liquidation priority over the common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series Seed shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, after any payment made to Series A and Series T, but before any payment is made to the Company's common stock, an amount equal to $0.0083 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of Series A and Series T first, then ratably in proportion to the full preferential amounts for which they are entitled to the Series Seed. The Series Seed votes on an as-converted basis. The Series Seed is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series Seed is automatically converted into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment

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underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, converts the offer and sale of common stock at an offering price of not less than $0.14317 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series Seed has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Common Stock

As of December 31, 2023 we had authorized the issuance of 1,500,000,000 shares of our common stock with par value of $0.00001. As described in Note 1, concurrently with a stock split, we increased the authorized shares of common stock to 1,500,000,000.

During the year ended December 31, 2023, the Company sold 9,105,220 shares of common stock through its Regulation A offering for gross proceeds of $10,162,061 and incurred offering costs of $4,719,370.

During the year ended December 31, 2022, the Company sold 8,032,900 shares of common stock through its Regulation A offering for gross proceeds of $7,469,264 and incurred offering costs of $4,539,550.

Stock Options

In 2015, our Board of Directors adopted the StartEngine Crowdfunding, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). The 2015 Plan provides for the grant of equity awards to employees, and consultants, including stock options, stock purchase rights and restricted stock units to purchase shares of our common stock. Up to 231,800,000 shares of our common stock may be issued pursuant to awards granted under the 2015 Plan. The 2015 Plan is administered by our Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

The Company valued options granted under the 2015 Plan under ASC 718 using the Black-Scholes pricing model. The granted options in 2023 and 2022 have exercise prices ranging from $0.2165 to $1.25, generally vest over four years and expire in ten years. The stock options granted during the year ended December 31, 2023 and 2022 were valued using the Black-Scholes pricing model using the range of inputs as indicated below:


	2023		2022
Expected life (years)	6.5		6.5
Risk-free interest rate	3.6	%	2.5	%
Expected volatility	45.7	%	45.7	%
Annual dividend yield	0	%	0	%

The weighted average grant date fair values of options granted during the years ended December 31, 2023 and 2022 were $0.99 and $0.73 per option, respectively. The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company's employee stock options.

The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.

The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public Company's common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company's common stock has enough market history to use historical volatility.

The dividend yield assumption for options granted is based on the Company's history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.

The Company currently recognizes option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates A summary of the Company's stock option activity and related information is as follows

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A summary of the Company's stock option activity and related information is as follows.


					Weighted
		Weighted		average
		Average		Remaining
	Number of	Exercise		Contractual
	Shares	Price		Term
Outstanding at December 31, 2021	141,596,660	$	0.1180		6.50
Granted	26,011,240		0.7295
Exercised	(158,540)		0.1800
Expired/Cancelled	(15,420,160)		0.4145
Outstanding at December 31, 2022	152,029,200	$	0.1995		6.50
Granted	45,576,920		0.9900
Exercised	(2,676,100)		0.0275
Expired/Cancelled	(9,181,140)		0.7180
Outstanding at December 31, 2023	185,748,880	$	0.1995		6.50
Exercisable at December 31, 2023	123,049,620	$	0.1380		6.50
Vested and expected to vest at December 31, 2023	185,748,880	$	0.0100		6.50

During the years ended December 31, 2023 and 2022, employees exercised their vested options to purchase 2,676,100 and 158,540 shares of common stock, and the Company received aggregate exercise proceeds of $86,390 and $38,035, respectively. The intrinsic value of the options exercised was $3,394,400 and $925,607 during the year ended December 31, 2023 and 2022, respectively.

Stock option expense for the years ended December 31, 2023 and 2022 was $7,057,401 and $3,993,425, respectively, and are included within the consolidated statements of operations as follows:


	2023		2022
Cost of revenues	$	743,087		$	299,881
General and administrative		1,220,932			1,327,114
Sales and marketing		4,001,941			1,994,853
Research and development		1,091,441			371,577
Total	$	7,057,401		$	3,993,425

At December 31, 2023, the total compensation cost related to nonvested awards not yet recognized was approximately $20,229,215 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 2.74 years.

NOTE 8 - INCOME TAXES

The provision for income tax expense (benefit) consists of the following:


Current income tax expense (benefit)	-
Deferred income tax expense (benefit)	-
Total income tax expense (benefit)	-

Effective Rate Reconciliation:


Pre-Tax income (loss)	(16,308,366)

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The U.S. Federal Statutory Tax Rate for 2023 is 21%. The reconciliation of the expected income tax expense (benefit) and the actual income tax expense (benefit) is as follows:


	2023		2022
Expected Federal income tax expense (benefit)	(3,424,757)	21.00%	(1,661,193)	21.00%
State income tax expense (benefit)	(1,141,586)	7.00%	(553,731)	7.00%
Stock option compensation	926,072	(5.68)%	1,118,159	(14.14)%
Section 162(m) Limitation	364,000	(2.23)%	711,245	(8.99)%
Warrants issued	-	0.00%	(150,105)	1.90%
Other permanent differences	(3,577)	0.02%	(27,695)	0.35%
Prior Year True-Up Adjustments	(3,117,890)	19.12%	(713,419)	9.02%
Change in Valuation Allowance	6,397,738	(39.23)%	1,276,739	(16.14)%
Total income tax expense (benefit)	-		-	-

The Company has U.S. Federal net operating loss (NOL) carryovers of $17,516,800. Under the Tax Cuts and Jobs Act (TCJA), Federal NOL's incurred in taxable years beginning in 2018 and later have an indefinite carryforward period, but the use of the NOL carryover is limited to 80% of taxable income in the subsequent year. Federal NOL Carryovers incurred prior to 2018 expire after 20 years. The Company has $2,217,168 of Federal NOL carryovers incurred prior to 2018 which begin to expire in 2036. The Company has NOL carryovers in California of $25,412,005 which begin to expire in 2034. NOL carryovers and capital loss carryovers are a benefit to the Company in the form of future tax savings and such carryovers are recorded as deferred tax assets, subject to a valuation allowance.

Net deferred income tax assets (liabilities) are comprised of the following:


	2023	2022
Deferred tax assets (liabilities)
Net Operating Loss Carryovers	5,457,368	3,283,454
Credit Carryovers	2,127,544	1,390,684
Capitalized Research and Development	1,752,064	732,731
Reserves and Allowances	50,229	100,159
Capital Loss Carryover	21,557	22,425
Depreciation	1,922	(8,590)
Deferred Tax Assets	9,410,684	5,520,863
Less: Valuation Allowance	(9,410,684)	(5,520,863)
Net Deferred Tax Assets	-	-

NOTE 9 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events that occurred after December 31, 2023 through September 11, 2024.

The Company settled arbitration with a previous issuer as mentioned in Item 3. Legal Proceedings in February 2024 for a total of $2,100,000 of which the Company was responsible for $200,000 and the remaining $1,900,000 was reimbursed through an insurance policy.

On May 6, 2024, StartEngine Crowdfunding Inc. split its designated "Common Stock" and "Preferred Stock" on a 20for 1 basis. The total number of shares of Common Stock that the Company is authorized to issue was increased to 1,500,000,000shares after the split. The total number of shares of Preferred Stock that the Company is authorized to issue was increased to 519,000,000after the split. Accordingly, all share and per share amounts for all periods presented in the consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

On May 3, 2024, the SEC instituted administrative and cease-and-desist proceedings against BF Borgers CPA PC and its sole audit partner Benjamin Borger. BF Borgers was the prior auditor of the December 31, 2022 consolidated financial statements. As a result, the Company has re-audited its annual consolidated financial statements for the fiscal year ended December 31, 2022, which are included herein.

F-26

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On March 25, 2024, the Company granted 13,480,000options with a strike price of $1.25per share to employees.

On June 14, 2024, the Company granted 9,160,000options with a strike price of $1.25per share for 7,160,000options to employees and $1.38for 2,000,000options to Howard Marks, CEO.

F-27

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Item 9A.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, who is also our principal financial officer, has evaluated as of the end of the period covered by this Annual Report on Form 10-K/A, 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 who also serves as our Principal Financial Officer concluded our disclosure controls and procedures were not effective as of December 31, 2023, based on material weaknesses in our internal control over financial reporting described below.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act). The Company's internal control over financial reporting includes those policies and procedures that:

●	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

●	Provide reasonable assurance regarding prevention of timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has concluded that the Company's internal control over financial reporting was not effective as of December 31, 2023 due to a material weaknesses identified below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified:

●	Material asset and liability general ledger accounts were not reconciled to support schedules;

●	Investment securities were not counted or reconciled to detail records;

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●

Stock and warrants held as investments were not valued using fair value accounting or cost method less adjustments for estimated impairments (stock investments) or using a modified Black-Scholes option pricing model (warrant investments) per the Company's stated policies. Also, period end procedures did not include revaluing investments under Company policies and the inclusion of sufficient detail in the support schedules and general ledger accounts to draft financial statement disclosures that properly list investments in the fair value hierarchy, reconcile changes in level 3 investments, and present that variables used in valuing investments;

●	Financial spreadsheets used to support prepaid assets lacked adequate review and were susceptible to formula and manual input errors; and

●	Payroll was recorded on a cash basis, rather than an accrual basis, during the fiscal year.

A description of the Company's ongoing remediation process is provided below in "Changes in Internal Control over Financial Reporting."

The Company's registered public accounting firm has not provided an attestation report on the Company's internal control over financial reporting as of December 31, 2023, because the Company is an emerging growth company as defined by SEC Rule 405 of the Securities Act of 1933, as amended, and Rule 12b-2 of the Exchange Act.

For a complete description of errors in the Company's previously reported financial statements for the fiscal year ended December 31, 2022 and December 31, 2021, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Restatement."

Changes in Internal Control Over Financial Reporting

During preparation for financial reporting related to the year ended December 31, 2023, and based on review from the auditors, the Company discovered certain material weaknesses, described above, that resulted in errors in its previously reported financial statements for the year ended December 31, 2022. Accordingly, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2022, and determined that a restatement based on the corrections made was not necessary, however it has been noted in the 2023 financial statements. Management continues to evaluate the material weakness discussed above, has created a remediation plan that it has already begun implementing and continues to finalize that plan's implementation. Specifically, management enhanced the Company' internal controls regarding the review and preparation of financial statements by adding enhanced procedures for the review of account balances and assessing collectible accounts receivables as well as a process for annual revaluation of the Company's stocks and warrants. Additionally, the Company has added additional accounting software to assist with more accurate financial reporting for future periods. In addition, we have corrected the deficiency discovered during our annual audit process prior to the filing of this annual report.

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.

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PART IV

Item 15.Exhibit and Financial Statement Schedules

1.	Financial Statements

The financial statements and Report of Independent Registered Public Accounting Firm are listed in the "Index to Financial Statements and Schedules" on page F-1 and included on pages F-1 to F-26 of this annual report on Form 10-K/A

2.	Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the "Commission") are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.

3.	Exhibits (including those incorporated by reference).

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.


Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Seventh Amended and Restated Certificate of Incorporation	8-K	000-56415	3.1	May 10, 2024
3.2	Second Amended and Restated Bylaws	8-K	000-56415	3.2	May 10, 2024
4.1	Second Amended and Restated Investors' Rights Agreement	1-A	024-11177	3.1	March 12, 2020
10.1	Amended and Restated 2015 Equity Incentive Plan	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	April 15, 2024
10.3	Asset Purchase Agreement	8-K	000-56415	99.2	November 28, 2022
31.1	Certification of the principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1 #	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					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 Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	STARTENGINE CROWDFUNDING, INC.
		(Registrant)
Date: September 11, 2024
By:	/s/ Howard Marks
		Howard Marks
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


/s/ Howard Marks
Howard Marks, Chief Executive Officer, principal financial
officer, principal accounting officer and Director
Date: September 11, 2024


/s/ Ronald Miller
Ronald Miller, Director and Chairman
Date: September 11, 2024

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