Asset Entities Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
ASST$21.45+4.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001213900-24-043619
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-069032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 108 previous paragraphs and 166 current paragraphs.
72 unchanged; 31 reworded; 62 added; 5 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 49 previous and 50 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (62)
Current report
Reverse Stock Split
Current report
Unless otherwise noted, the share and per share information in this report have been adjusted to give effect to the one-for-five (1-for-5) reverse stock split of each of the Company’s authorized and issued and outstanding Class A Common Stock and the Company’s authorized and issued and outstanding Class B Common Stock, which became effective as of 5:00 p.m. Eastern Time on July 1, 2024 (the “Reverse Stock Split”).
Current report
Second Closing of Private Placement with Ionic Ventures, LLC
Current report
Under a Securities Purchase Agreement, dated as of May 24, 2024, as amended by a First Amendment to Securities Purchase Agreement, dated as of June 13, 2024 (as amended, the “Ionic Purchase Agreement”), between the Company and Ionic Ventures, LLC, a California limited liability company (“Ionic”), the Company agreed to the issuance and sale of up to 330 shares of the Company’s newly designated Series A Convertible Preferred Stock, $0.0001 par value per share, for maximum gross proceeds of $3,000,000. The shares of the Series A Preferred Stock are convertible into shares of Class B Common Stock. Pursuant to the Ionic Purchase Agreement, the Company is required to issue and sell 165 shares of Series A Preferred Stock at each of two closings subject to the satisfaction of the terms and conditions for each closing. The second closing (the “Second Closing”), for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $1,500,000, occurred on July 29, 2024, which was the first business day on which the conditions specified in the Ionic Purchase Agreement for the Second Closing were satisfied or waived.
Current report
In connection with each closing under the Ionic Purchase Agreement, pursuant to the Boustead Engagement Letter (as defined in “—Liquidity and Capital Resources – Initial Public Offering and Underwriting Agreement”) and the Underwriting Agreement (as defined in “—Liquidity and Capital Resources – Initial Public Offering and Underwriting Agreement”), the Company was required to pay Boustead Securities, LLC, a registered broker-dealer (“Boustead”), a fee equal to 7% of the aggregate purchase price and a non-accountable expense allowance equal to 1% of the aggregate purchase price for the Series A Preferred Stock. On the date of the Second Closing, we therefore paid Boustead a total amount of $120,000. In addition, on the date of the Second Closing, the Company was required to issue a warrant to Boustead for the purchase of 30,800 shares of Class B Common Stock, equal to 7% of the number of shares of Class B Common Stock that may be issued upon conversion of the shares of Series A Preferred Stock sold at the Second Closing at the initial Conversion Price of $3.75 per share (the “Fourth Tail Warrant”). The Fourth Tail Warrant has an exercise price of $3.75 per share. Notwithstanding certain provisions in the Boustead Engagement Letter, the Fourth Tail Warrant will not contain piggyback registration rights and will not contain anti-dilution provisions for future stock issuances, etc., at a price or at prices below the exercise price per share, or provide for automatic exercise immediately prior to expiration. The Fourth Tail Warrant may be deemed to be compensation by the Financial Industry Regulatory Authority, Inc. (“FINRA”), and may be subject to limits on exercise under FINRA rules.
Current report
On July 30, 2024, Boustead’s rights to the Fourth Tail Warrant were assigned to an assignee. The Fourth Tail Warrant was consequently cancelled and a new warrant (the “Assigned Fourth Tail Warrant”) was issued to the assignee.
Current report
The Assigned Fourth Tail Warrant is filed as Exhibit 4.1 to this report, and the description above is qualified in its entirety by reference to the full text of such exhibit.
Current report
See*“—Liquidity and Capital Resources – First Closing of Private Placement with Ionic Ventures, LLC*”.
Current report
Comparison of Six Months Ended June 30, 2024 and 2023
Current report
Operating Expenses. Our total operating expenses increased 31.8% to approximately $3.3 million for the six months ended June 30, 2024 from approximately $2.5 million for the six months ended June 30, 2023. This increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.5 million and an increase in management compensation costs of approximately $0.2 million for the six months ended June 30, 2024, compared to such costs for the six months ended June 30, 2023.
Current report
Loss From Operations. Our loss from operations increased 30.1% to approximately $3.1 million for the six months ended June 30, 2024 from approximately $2.4 million for the six months ended June 30, 2023. This increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.5 million and an increase in management compensation costs of approximately $0.2 for the six months ended June 30, 2024, compared to such costs for the six months ended June 30, 2023.
Current report
Net cash provided used in investing activities was approximately $0.2 million for the six months ended June 30, 2024, as compared to none for the six months ended June 30, 2023. This change was primarily due tothe purchases of an intangible asset and property and equipment totaling approximately $0.2 million during the six months ended June 30, 2024 compared to no such purchasesfor the six months ended June 30, 2023.
Current report
Private Placements with Triton Funds LP
Current report
Under a Closing Agreement, dated as of June 30, 2023 (the “Triton Closing Agreement”), between the Company and Triton Funds LP, a Delaware limited partnership (“Triton”), the Company agreed to sell to Triton, at its option, shares of Class B Common Stock having an aggregate value of $1,000,000 (“Triton Shares”), pursuant to a registration statement to be filed and made effective for the resale of the Triton Shares. Subject to the terms of the Triton Closing Agreement, the Company was provided a right to deliver a closing notice (the “Triton Closing Notice”) and issue the Triton Shares to Triton at any time before September 30, 2023, pursuant to which Triton had agreed to purchase the Triton Shares for $1,000,000 before deducting a $25,000 administrative fee. The price of each of the Triton Shares was agreed to be 85% of the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the closing of the purchase of the Triton Shares (the “Triton Closing”). The Triton Closing was required to occur within five business days after the Triton Shares were received by Triton. Triton’s obligation to purchase the Triton Shares was conditioned on the effectiveness of a registration statement covering the resale of the Triton Shares and Triton’s ownership not exceeding 9.99% of the Class B Common Stock outstanding as of June 30, 2023.
Current report
The Triton Closing Agreement contained additional requirements, including that the Company maintain the listing of the Class B Common Stock on the primary market on which the Class B Common Stock is listed and provide notice to Triton of certain events affecting registration or that may suspend its right to submit the Triton Closing Notice. The Company also agreed to provide indemnification against liabilities relating to misrepresentations, breaches of obligations, and third-party claims relating to the Triton Closing Agreement, with certain exceptions. The Triton Closing Agreement provided that it would expire either upon the Triton Closing or September 30, 2023.
Current report
Under an Amended and Restated Closing Agreement, dated as of August 1, 2023, between the Company and Triton (the “Triton Amended and Restated Closing Agreement”), the Closing Agreement was amended and restated to provide that, subject to its terms and conditions, the Company may deliver a Triton Closing Notice and issue certain securities to Triton at any time on or before September 30, 2023, pursuant to which Triton would be required to purchase such securities of the Company with an aggregate gross purchase price of $1,000,000 in the following manner. Upon delivery of a Triton Closing Notice and the issuance and delivery of securities as described below, Triton would purchase Triton Shares in an amount equal to up to 9.99% of the outstanding shares of Class B Common Stock following such purchase, pre-funded warrants (“Triton Pre-Funded Warrants” and together with Triton Shares, “Triton Securities”) that may be exercised to purchase an amount of newly-issued shares of Class B Common Stock (“Triton Warrant Shares”), or both Triton Shares and Triton Pre-Funded Warrants, such that the aggregate price of the Triton Shares and the Triton Pre-Funded Warrants together with the exercise price to be paid upon full exercise of the Triton Pre-Funded Warrants was required to equal a total gross purchase price of $1,000,000. Any proceeds under the Triton Amended and Restated Closing Agreement must be reduced by a $25,000 administrative fee. The Triton Amended and Restated Closing Agreement also provided that it would expire either upon the date that Triton paid the required purchase price after receiving a Triton Closing Notice, or September 30, 2023. The terms of the price of the Triton Securities and the required date of the Triton Closing were not amended, except that if Triton elected to purchase Triton Pre-Funded Warrants in lieu of Triton Shares, then the purchase price per Triton Pre-Funded Warrant acquired would be reduced by $0.01 with such $0.01 being the exercise price of the Triton Pre-Funded Warrant.
Current report
The Triton Amended and Restated Closing Agreement provided that Triton’s obligation to purchase the Triton Securities was subject to certain conditions. These conditions included the filing and effectiveness of the required registration statement for the resale of the Triton Securities. In addition, the Class B Common Stock was required to remain listed on The Nasdaq Capital Market tier of Nasdaq, and the issuance of the Triton Securities was required to not violate any requirements of Nasdaq. Triton’s purchase requirement was also subject to provisions that prevented Triton from acquiring shares of Class B Common Stock at the time of any sale of the Triton Securities or exercise of the Triton Pre-Funded Warrants that would result in the number of shares beneficially owned by Triton and its affiliates exceeding 9.99% of the total number of shares of Class B Common Stock outstanding immediately after giving effect to the issuance of the shares under the Triton Amended and Restated Closing Agreement or the Triton Pre-Funded Warrants (the “Triton Beneficial Ownership Limitation”). The Triton Amended and Restated Closing Agreement provided for the issuance of the Triton Pre-Funded Warrants in lieu of issuance of some or all the Triton Shares, with an exercise price of $0.01 per share and with no expiration date, if, in Triton’s sole discretion, it would otherwise exceed the Triton Beneficial Ownership Limitation, or otherwise upon Triton’s election. For each of the Triton Shares that Triton instead elected to be issuable as Triton Warrant Shares, the number of Triton Shares that we were required to issue to Triton at the time of any sale of the Triton Securities was required to be decreased on a one-for-one basis. We were also required to provide indemnification against liabilities relating to misrepresentations, breaches of obligations, and third-party claims relating to the Triton Amended and Restated Closing Agreement, with certain exceptions.
Current report
In connection with the Triton Amended and Restated Closing Agreement, pursuant to the Boustead Engagement Letter, upon a closing under the Triton Amended and Restated Closing Agreement, the Company must pay Boustead a cash fee equal to 7% of the gross proceeds to be received from such closing and pay Boustead a non-accountable expense allowance equal to 1% of the gross proceeds to be received from such closing. The Company must also issue Boustead a warrant with respect to any Triton Shares exercisable for a number of shares of Class B Common Stock equal to 7% of the number of the Triton Shares at an exercise price equal to the price per share for the Triton Shares, and a warrant with respect to the issuance of any Triton Pre-Funded Warrants exercisable for a number of shares of Class B Common Stock equal to 7% of the Triton Warrant Shares at an exercise price equal to $0.01 per share (any such warrant, a “Tail Warrant”). Each Tail Warrant must be exercisable for a period of five years and contain cashless exercise provisions. The Company also must reimburse Boustead for all reasonable invoiced out-of-pocket expenses in connection with its performance of any services relating to the Triton Amended and Restated Closing Agreement, regardless of whether a sale under the Triton Amended and Restated Closing Agreement occurred. For further discussion of the Boustead Engagement Letter, see “—Engagement Letter with Boustead Securities, LLC”.
Current report
On August 18, 2023, the Company filed a Registration Statement on Form S-1 (File No. 333-274079) to register the offer and sale of the Triton Securities in an amount of up to 177,000 shares of Class B Common Stock consisting of Triton Shares and Triton Warrant Shares. The registration statement also registered the offer and sale of up to 12,390 shares of Class B Common Stock under Tail Warrants. The registration statement was declared effective by the SEC on September 6, 2023.
Current report
Under an Amendment to Triton Amended and Restated Closing Agreement (the “First Triton Amendment”), dated as of September 27, 2023, the Company and Triton agreed to amend the Triton Amended and Restated Closing Agreement (as amended, the “Amended A&R Closing Agreement”) to provide that the Amended A&R Closing Agreement would expire on December 30, 2023 instead of September 30, 2023; to provide that up to an aggregate value of $1,000,000 of the Class B Common Stock, based on the purchase price formula described above, may be sold and purchased pursuant to a Triton Closing Notice; and to amend the form of Triton Closing Notice to provide for a specific number of shares that may be sold to Triton under the Amended A&R Closing Agreement. The First Triton Amendment did not amend any of the other provisions of the Triton Amended and Restated Closing Agreement.
Current report
As an incentive to Triton to enter into the First Triton Amendment and agree to the extension of the term under the Amended A&R Closing Agreement to December 30, 2023, the Company indicated to Triton that it would deliver a Triton Closing Notice under the Amended A&R Closing Agreement to sell a number of shares of Class B Common Stock equal to approximately 4.9% of the outstanding shares of Class B Common Stock prior to the sale. Therefore, on September 29, 2023, under the Amended A&R Closing Agreement, the Company delivered a Triton Closing Notice to Triton (the “First Triton Closing Notice”) for the purchase of 52,682 Triton Shares (the “First Triton Shares”), which was the amount of shares of Class B Common Stock equal to approximately 4.9% of the shares of Class B Common Stock outstanding on that date. Pursuant to the Amended A&R Closing Agreement, the closing date for this purchase was required to take place within five business days after the Triton Shares were delivered to Triton. On the date of this Triton Closing (the “First Triton Closing”), Triton was required to pay the Company a purchase price per share equal to 85% of the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the date of the First Triton Closing, the proceeds of which would be reduced by the $25,000 administrative fee, in accordance with the terms of the Amended A&R Closing Agreement.
Current report
Under a Second Amendment to Triton Amended and Restated Closing Agreement (the “Second Triton Amendment”), dated as of December 30, 2023, the Company and Triton agreed to amend the Amended A&R Closing Agreement to provide that the Amended A&R Closing Agreement would expire on March 31, 2024, instead of December 30, 2023. The Second Triton Amendment did not amend any of the other provisions of the Amended A&R Closing Agreement.
Current report
Under a Third Amendment to Amended and Restated Closing Agreement (the “Third Triton Amendment”), dated as of March 29, 2024, the Company and Triton agreed to amend the Amended A&R Closing Agreement to provide that the Amended A&R Closing Agreement would expire on April 30, 2024, instead of March 31, 2024. The Third Triton Amendment did not amend any of the other provisions of the Amended A&R Closing Agreement.
Current report
TommyBoyTV Asset Purchase Agreement
Current report
Under an Asset Purchase Agreement (the “Asset Purchase Agreement”), dated as of June 21, 2024, among the Company, TommyBoyTV, LLC (the “Seller”), and Tomas Cvercko, the owner of all of the membership interests of Seller (the “Member”), the Company agreed to purchase all of the Seller’s right, title, and interest in and to substantially all of the assets and properties owned by the Seller and used in connection with its business of Discord development, social media, online community management, marketing, and analytics for the payment of $200,000 in cash (the “Cash Consideration”), the issuance of 5,000 shares of Class B Common Stock (the “Stock Consideration”), and other good and valuable consideration as described herein.
Current report
Pursuant to the Asset Purchase Agreement, on June 21, 2024, the Company paid the Seller $200,000 and issued the Stock Consideration to the Member, and the Seller and the Member delivered title to all of the assets of the Seller. The Stock Consideration vested immediately upon issuance.
Current report
Pursuant to the Asset Purchase Agreement, the Company agreed to assume certain liabilities including the obligations, duties and liabilities with respect to the contracts used in conducting or relating to the business of the Seller and other specified assets, in each case only to the extent arising from and after June 21, 2024. These assumed liabilities also exclude any obligations arising from the Seller’s breach or default before June 21, 2024.
Current report
The Asset Purchase Agreement also contains mutual indemnification provisions with respect to breaches of representations and warranties as well as to certain third-party claims, and indemnification by the Company of the Seller and the Member with respect to certain damages with respect to the assumed liabilities and certain other liabilities asserted by a third party arising after June 21, 2024. In the case of indemnification provided with respect to breaches of certain non-fundamental representations and warranties, the indemnifying party will only become liable for indemnified losses to the extent that the amount exceeds an aggregate threshold of $25,000. However, this threshold limitation does not apply to claims by the Company for breaches by the Seller or the Member of certain fundamental representations and warranties. In addition, the Company’s aggregate remedy with respect to any and all indemnifiable losses may in no event exceed the purchase price, consisting of the Cash Consideration.
Current report
First Closing of Private Placement with Ionic Ventures, LLC
Current report
Under the Ionic Purchase Agreement, the Company agreed to the issuance and sale of up to 330 shares of the Company’s newly designated Series A Convertible Preferred Stock, $0.0001 par value per share (the “Series A Preferred Stock”), for maximum gross proceeds of $3,000,000. The shares of the Series A Preferred Stock are convertible into shares of Class B Common Stock. Pursuant to the Ionic Purchase Agreement, the Company is required to issue and sell 165 shares of Series A Preferred Stock at each of two closings subject to the satisfaction of the terms and conditions for each closing. The first closing (the “First Closing”) occurred on May 24, 2024 for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $1,500,000. The second closing (the “Second Closing”), for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $1,500,000, was required to occur on the first business day on which the conditions specified in the Ionic Purchase Agreement for the Second Closing were satisfied or waived, including the filing and effectiveness of the First Registration Statement (as defined below) and the effectiveness of the Stockholder Approval (as defined below).
Current report
Registration Rights Agreement
Current report
In connection with the Ionic Purchase Agreement, the Company agreed to provide certain registration rights to Ionic, pursuant to the Registration Rights Agreement, dated as of May 24, 2024, between the Company and Ionic (the “Ionic Registration Rights Agreement”). The Ionic Registration Rights Agreement provides for the registration for resale of any and all shares of Class B Common Stock issuable to Ionic with respect to the shares of Series A Preferred Stock under the Ionic Purchase Agreement (the “Registrable Conversion Shares”). Within the later of 15 calendar days of the First Closing or May 24, 2024, the Company was required to file a registration statement (the “First Registration Statement”) for the offer and resale of the maximum number of Registrable Conversion Shares permitted to be covered in accordance with applicable SEC rules, regulations and interpretations. The First Registration Statement was required to be declared effective within 45 days of the First Closing, or 90 days if the First Registration Statement received a review. Pursuant to these requirements, a Registration Statement on Form S-1 (File No. 333-280020) was originally filed by the Company with the SEC on June 7, 2024 to register the offer and resale of the maximum number of Registrable Conversion Shares permitted to be covered in accordance with applicable SEC rules, regulations and interpretations, and was declared effective by the SEC on July 24, 2024.
Current report
If an additional registration statement must be filed to cover the resale of Registrable Conversion Shares that were not permitted to be included in the First Registration Statement in accordance with applicable SEC rules, regulations and interpretations, the Company must file an additional registration statement (the “Second Registration Statement”) within 15 days of the Second Closing for the maximum number of Registrable Conversion Shares permitted to be covered in accordance with applicable SEC rules, regulations and interpretations. The Second Registration Statement must be declared effective within 45 days of the Second Closing, or 90 days if the Second Registration Statement receives a review.
Current report
In the event the number of shares of Class B Common Stock available under the First Registration Statement and the Second Registration Statement is insufficient to cover all of the Registrable Conversion Shares, the Company will be required to file at least one additional registration statement (each of such additional registration statement, the First Registration Statement, and the Second Registration Statement, and collectively, the “Registration Statement”) within 14 days of the date that the necessity arises and that such additional Registration Statement may be filed under SEC rules to cover such Registrable Conversion Shares up to the maximum permitted to be covered under SEC rules, which must be made effective within 45 days of such date, or 90 days if such additional Registration Statement receives a review. Any failure to meet the filing deadline for either the First Registration Statement or the Second Registration Statement (“Filing Failure”) would have resulted in liquidated damages of 20,000 shares of Class B Common Stock. Any failure to meet the effectiveness deadline for any Registration Statement (“Effectiveness Failure”) will result in liquidated damages of 20,000 shares of Class B Common Stock. Each of the shares issuable upon a Filing Failure or an Effectiveness Failure must also be covered by a Registration Statement to the same extent as the Registrable Conversion Shares. The Company will be required to use its best efforts to keep each Registration Statement effective until all such shares of Class B Common Stock are sold or may be sold without restriction pursuant to Rule 144 under the Securities Act (“Rule 144”), and without the requirement for us to be in compliance with the current public information requirement under Rule 144.
Current report
The form of the Registration Rights Agreement is filed as Exhibit 10.4 to this report, and the description above is qualified in its entirety by reference to the full text of such exhibit.
Current report
Terms of Series A Convertible Preferred Stock under Certificate of Designation and Securities Purchase Agreement
Current report
Pursuant to the Ionic Purchase Agreement, on May 24, 2024, the Company filed a Certificate of Designation of Series A Convertible Preferred Stock of the Company with the Secretary of State of the State of Nevada (the “Initial Certificate of Designation”), as amended by the Certificate of Amendment to Designation (the “Designation Amendment”) filed with the Secretary of State of the State of Nevada on June 14, 2024 (as amended, the “Certificate of Designation”), designating 660 shares of the Company’s preferred stock as “Series A Convertible Preferred Stock,” and setting forth the voting and other powers, preferences and relative, participating, optional or other rights of the Series A Preferred Stock. Each share of Series A Preferred Stock has an initial stated value (“Stated Value”) of $10,000 per share.
Current report
The Series A Preferred Stock ranks senior to all other capital stock of the Company with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, unless the holders of the majority of the outstanding shares of Series A Preferred Stock consent to the creation of other capital stock of the Company that is senior or equal in rank to the Series A Preferred Stock.
Current report
Holders of Series A Preferred Stock will be entitled to receive cumulative dividends, in shares of Class B Common Stock (or cash at the Company’s option) on the Stated Value at an annual rate of 6% (which will increase to 12% if a Triggering Event (as defined in the Certificate of Designation) occurs until such Triggering Event, if curable, is cured). Dividends will be payable upon conversion or redemption of the Series A Preferred Stock.
Current report
Holders of Series A Preferred Stock will be entitled to convert shares of Series A Preferred Stock into a number of shares of Class B Common Stock determined by dividing the Stated Value of such shares (plus any accrued but unpaid dividends and other amounts due, unless paid by the Company in cash) by the conversion price of the Series A Preferred Stock (the “Conversion Price”). The initial Conversion Price is $3.75, subject to adjustment including adjustments due to full-ratchet anti-dilution provisions. Holders may elect to convert shares of Series A Preferred Stock to Class B Common Stock at an alternate Conversion Price equal to 85% (or 70% if the Company’s Class B Common Stock is suspended from trading on or delisted from a principal trading market or upon occurrence of a Triggering Event) of the average lowest daily volume weighed average price of the Class B Common Stock during the Alternate Conversion Measuring Period (as defined in the Certificate of Designation).
Showing the first 40 of 62 passages. Open the source sections for the rest.
Removed paragraphs (5)
Previous report
The amount of the Second Triton Shares was equal to the amount that remained unsold by the Company to Triton pursuant to the Registration Statement on Form S-1 (File No. 333-274079) initially filed on August 18, 2023, and declared effective by the SEC on September 6, 2023, to register the offer and resale of up to 885,000 shares of Class B Common Stock issuable to Triton pursuant to the Amended A&R Closing Agreement (the “Triton Registration Statement”). The Company’s first sale pursuant to the Triton Registration Statement was of 263,410 shares of Class B Common Stock in October 2023.
Previous report
For further discussion of the Amended A&R Closing Agreement, see “—Liquidity and Capital Resources – Amended and Restated Closing Agreement”. For further discussion of the Underwriting Agreement and the Boustead Engagement Letter, see “—Liquidity and Capital Resources – Initial Public Offering and Underwriting Agreement” and “—Liquidity and Capital Resources – Engagement Letter with Boustead Securities, LLC”.
Previous report
Amended and Restated Closing Agreement
Previous report
Subject to its terms, the Amended A&R Closing Agreement provided that the Company may deliver a closing notice (“Closing Notice”) and issue shares of Class B Common Stock and/or certain other securities to Triton at any time on or before April 30, 2024, pursuant to which Triton was required to purchase such securities with an aggregate gross purchase price of $1,000,000 in the following manner. The price of any shares of Class B Common Stock sold pursuant to the Amended A&R Closing Agreement was required to be set at 85%of the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the closing of the purchase of the shares, and such closing was required to occur within five business days after the date that such shares were received by Triton.
Previous report
See “—Recent Developments” for a description of related developments which occurred subsequent to March 31, 2024.
Reworded paragraphs (31)
Previous wording
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our,” the “Company,” “Asset Entities,” and “our company” are to Asset Entities Inc., a Nevada corporation. “Class A Common Stock” refers to the Company’s Class A Common Stock, $0.0001 par value per share. “Class B Common Stock” refers to the Company’s Class B Common Stock, $0.0001 par value per share.
Current wording
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our,” the “Company,” “Asset Entities,” and “our company” are to Asset Entities Inc., a Nevada corporation. “Common stock” refers to the Company’s Common Stock, $0.0001 par value per share. “Class A Common Stock” refers to the Company’s Class A Common Stock, $0.0001 par value per share. “Class B Common Stock” refers to the Company’s Class B Common Stock, $0.0001 par value per share. “Preferred stock” refers to the Company’s Preferred Stock, $0.0001 par value per share. “Series A Preferred Stock” refers to the Company’s Series A Convertible Preferred Stock, $0.0001 par value per share.
Previous wording
Our Discord investment education and entertainment service is designed primarily by and for enthusiastic Generation Z, or Gen Z, retail investors, creators and influencers. Gen Z is commonly considered to be people born between 1997 and 2012. Our investment education and entertainment service focuses on stock, real estate, cryptocurrency, and NFT community learning programs designed for the next generation. While we believe that Gen Z will continue to be our primary market, our Discord server offering features education and entertainment content covering real estate investments, which is expected to appeal strongly to older generations as well. Our current combined server user membership is approximately 209,417 as of May 2024.
Current wording
Our Discord investment education and entertainment service is designed primarily by and for enthusiastic Generation Z, or Gen Z, retail investors, creators and influencers. Gen Z is commonly considered to be people born between 1997 and 2012. Our investment education and entertainment service focuses on stock, real estate, cryptocurrency, and NFT community learning programs designed for the next generation. While we believe that Gen Z will continue to be our primary market, our Discord server offering features education and entertainment content covering real estate investments, which is expected to appeal strongly to older generations as well. Our current combined server user membership is approximately 212,000 as of August 2024.
Previous wording
Through Ternary v2, our subscription management and payment processing solution for Discord communities, subscribers can monetize and manage their Discord users. Ternary v2 simplifies the process for our subscribers to sell memberships to their Discord servers on their websites and collect payments through Stripe with daily payouts; add digital products and services and designate purchase options to their Discord servers; customize their user Discord permissions and roles and other Discord settings; and utilize our Discord bot to automatically apply their Discord user settings to authenticate new users, apply customizable permission sets to users, and remove users when their subscription expire. As a Stripe-verified partner through Ternary v2, we can also assist subscribers with integrating other platforms into their Discord servers with open application programming interfaces, further extending our platform’s capabilities.
Current wording
Through Ternary v2, our subscription management and payment processing solution for Discord communities, subscribers can monetize and manage their Discord users. Ternary v2 simplifies the process for our subscribers to: (i) sell memberships to their Discord servers on their websites and collect payments through Stripe with daily payouts; (ii) add digital products and services and designate purchase options to their Discord servers; (iii) customize their user Discord permissions and roles and other Discord settings; and (iv) utilize our Discord bot to automatically apply their Discord user settings to authenticate new users, apply customizable permission sets to users, and remove users when their subscriptions expire. As a Stripe-verified partner through Ternary v2, we can also assist subscribers with integrating other platforms into their Discord servers with open application programming interfaces, further extending our platform’s capabilities.
Previous wording
Our revenue depends on the number of paying subscribers to our Discord servers. During the three months ended March 31, 2024 and 2023, we received revenue from 438 and 382 Asset Entities Discord server paying subscribers, respectively.
Current wording
Our revenue depends on the number of paying subscribers to our Discord servers. During the three months ended June 30, 2024 and 2023, we received revenue from 1,238 and 348 Asset Entities Discord server paying subscribers, respectively.
Previous wording
The Company had an accumulated deficit of $6,945,219, and $1,869,786 in cash. During the three months ended March 31, 2024 and 2023, we had a net loss of $1,386,904 and $1,071,251, respectively. To date, the Company has financed its operations primarily through capital raises and sales of its services. In April 2024, the Company filed a “shelf” registration statement, which the Company intends to use in connection with one or more new financings. Based on the Company’s existing cash resources and the cash expected to be received from these financings, it is expected that the Company will have sufficient funds to carry out the Company’s planned operations through March 31, 2025 and for at least 12 months beyond that period. For further discussion, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.
Current wording
As of June 30, 2024, the Company had an accumulated deficit of $8,671,756 and cash balance of $1,926,888. During the three months ended June 30, 2024 and 2023, we had a net loss of $1,726,537 and $1,321,057, respectively. To date, the Company has financed its operations primarily through capital raises and sales of its services. In April 2024, the Company filed a “shelf” registration statement, which the Company intends to use in connection with one or more new financings. In May 2024, the Company completed the first of a two-part private placement of its Series A Preferred Stock for gross proceeds of $1.5 million, and in July 2024, the Company completed the second part of the private placement for an additional $1.5 million in gross proceeds. Based on the Company’s existing cash resources and the cash expected to be received from new financings, it is expected that the Company will have sufficient funds to carry out the Company’s planned operations through June 30, 2025 and for at least 12 months beyond that period. For further discussion, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.
Previous wording
Revenues. Our revenues increased 104% to approximately $0.12 million for the three months ended March 31, 2024 from approximately $0.06 million for the three months ended March 31, 2023. This increase was primarily due to an increase in revenues from the increased number of our Discord server paying subscribers during the three months ended March 31, 2024, including subscribers to our OptionsSwing server in November 2023, compared to such revenues for the three months ended March 31, 2023, which preceded the acquisition of our OptionsSwing server. There was no material difference in the Company’s subscription pricing structure between these periods.
Current wording
Revenues. Our revenues increased 24.1% to approximately $0.09 million for the three months ended June 30, 2024 from approximately $0.07 million for the three months ended June 30, 2023. This increase was primarily due to an increase in revenues from the increased number of our Discord server paying subscribers during the three months ended June 30, 2024, including subscribers to our OptionsSwing server in November 2023, compared to such revenues for the three months ended June 30, 2023, which preceded the acquisition of our OptionsSwing server. There was no material difference in the Company’s subscription pricing structure between these periods.
Previous wording
Operating Expenses. Our total operating expenses increased 34% to approximately $1.5 million for the three months ended March 31, 2024 from approximately $1.1 million for the three months ended March 31, 2023. This increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.3 million and an increase in management compensation costs of approximately $0.1 million for the three months ended March 31, 2024 compared to such costs for the three months ended March 31, 2023.
Current wording
Operating Expenses. Our total operating expenses increased 30.3% to approximately $1.8 million for the three months ended June 30, 2024 from approximately $1.4 million for the three months ended June 30, 2023. This increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.3 million and an increase in management compensation costs of approximately $0.1 million for the three months ended June 30, 2024, compared to such costs for the three months ended June 30, 2023.
Previous wording
Loss From Operations. Our loss from operations increased 29% to approximately $1.39 million for the three months ended March 31, 2024 from approximately $1.1 million for the three months ended March 31, 2023. This increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.3 million and an increase in management compensation costs of approximately $0.1 for the three months ended March 31, 2024 compared to such costs for the three months ended March 31, 2023.
Current wording
Loss From Operations. Our loss from operations increased 30.7% to approximately $1.7 million for the three months ended June 30, 2024 from approximately $1.3 million for the three months ended June 30, 2023. This increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.3 million and an increase in management compensation costs of approximately $0.1 for the three months ended June 30, 2024, compared to such costs for the three months ended June 30, 2023.
Previous wording
As of March 31, 2024, we had an accumulated deficit of $6,945,219, and $1,869,786 in cash. During the three months ended March 31, 2024 and 2023, we had a net loss of $1,386,904 and $1,071,251, respectively. To date, we have financed our operations primarily through capital raises and sales of our services. In April 2024, we filed a “shelf” registration statement, which the Company intends to use in connection with one or more new financings. Based on our existing cash resources and the cash expected to be received from these financings, it is expected that we will have sufficient funds to carry out our planned operations through March 31, 2025 and for at least 12 months beyond that period, including our costs associated with being a public reporting company. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
Current wording
As of June 30, 2024, we had an accumulated deficit of $8,671,756. During the six months ended June 30, 2024 and 2023, we had a net loss of $3,113,441 and $2,392,308, respectively. To date, we have financed our operations primarily through capital raises and sales of our services. In April 2024, we filed a “shelf” registration statement, which the Company intends to use in connection with one or more new financings. In May 2024, the Company completed the first of a two-part private placement of its Series A Preferred Stock for gross proceeds of $1.5 million, and in July 2024, the Company completed the second part of the private placement for an additional $1.5 million in gross proceeds. Based on our existing cash resources and the cash expected to be received from new financings, it is expected that we will have sufficient funds to carry out our planned operations through June 30, 2025 and for at least 12 months beyond that period, including our costs associated with being a public reporting company. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
Previous wording
The following table provides detailed information about our net cash flow for the three months ended March 31, 2024 and 2023.
Current wording
The following table provides detailed information about our net cash flow for the six months ended June 30, 2024 and 2023.
Previous wording
Net cash used in operating activities was approximately $1.04 million for the three months ended March 31, 2024, as compared to net cash used in operating activities of approximately $0.82 million for the three months ended March 31, 2023. The increase was primarily due to an increase in advertising, marketing, payroll and other administrative expenses and administrative cost of public filings of approximately $0.3 million and an increase in management compensation costs of approximately $0.1 for the three months ended March 31, 2024 compared to such costs for the three months ended March 31, 2023.
Current wording
Net cash used in operating activities was approximately $2.3 million for the six months ended June 30, 2024, as compared to net cash used in operating activities of approximately $2.0 million for the six months ended June 30, 2023. This increase was primarily due to an increase in net loss of approximately $0.7 million, offset by an increase in stock grants to certain recipients under the Asset Entities Inc. 2022 Equity Incentive Plan valued at approximately $0.7 million and an increase in accounts payable and accrued expenses for outstanding legal services fees and credit card payments to contractors of approximately $0.3 million compared to such costs for the six months ended June 30, 2023.
Previous wording
Net cash provided by financing activities was $0 million for the three months ended March 31, 2024, as compared to approximately $6.62 million for the three months ended March 31, 2023. The change was primarily due tothe non-recurrence of proceeds fromthe Company’s February 2023 initial public offering.
Current wording
Net cash provided by financing activities was approximately $1.5 million for the six months ended June 30, 2024, as compared to approximately $6.8 million net cash provided by financing activities for the six months ended June 30, 2023. This change was primarily due to the reduced amount of proceeds from the Company’s private placements during the six months ended June 30, 2024 compared to the proceeds received from its February 2023 initial public offering.
Previous wording
On February 2, 2023, the Company entered into the Underwriting Agreement with Boustead, as representative of the underwriters named on Schedule 1 thereto, relating to the Company’s initial public offering of 1,500,000 shares of Class B Common Stock (the “IPO Shares”). Pursuant to the Underwriting Agreement, in exchange for Boustead’s firm commitment to purchase the IPO Shares, the Company agreed to sell the IPO Shares to Boustead at a purchase price (the “IPO Price”) of $4.65 (93% of the public offering price per share of $5.00, after deducting underwriting discounts and commissions and before deducting a 0.75% non-accountable expense allowance), and one or more warrants to purchase 7% of the aggregate number of shares of Class B Common Stock sold in the initial public offering, at an exercise price equal to 125% of the public offering price, subject to adjustment (the “Representative’s Warrant”).
Current wording
On February 2, 2023, the Company entered into the Underwriting Agreement between the Company and Boustead Securities, LLC, as representative of the underwriters named on Schedule 1 thereto (the “Underwriting Agreement”), relating to the Company’s initial public offering of 1,500,000 shares of Class B Common Stock (the “IPO Shares”). Pursuant to the Underwriting Agreement, in exchange for Boustead’s firm commitment to purchase the IPO Shares, the Company agreed to sell the IPO Shares to Boustead at a purchase price (the “IPO Price”) of $23.25 (93% of the public offering price per share of $25.00, after deducting underwriting discounts and commissions and before deducting a 0.75% non-accountable expense allowance), and one or more warrants to purchase 7% of the aggregate number of shares of Class B Common Stock sold in the initial public offering, at an exercise price equal to 125% of the public offering price, subject to adjustment (the “Representative’s Warrant”).
Previous wording
On February 3, 2023, the IPO Shares and 1,500,000 outstanding shares of Class B Common Stock that were registered for resale as described below were listed and commenced trading on the Nasdaq Capital Market tier of Nasdaq.
Current wording
On February 3, 2023, the IPO Shares and 300,000 outstanding shares of Class B Common Stock that were registered for resale as described below were listed and commenced trading on The Nasdaq Capital Market tier of Nasdaq.
Previous wording
The closing of the initial public offering took place on February 7, 2023. At the closing, the Company sold the IPO Shares for total gross proceeds of $7,500,000. After deducting the underwriting discounts, commissions, non-accountable expense allowance, and other expenses from the initial public offering, the Company received net proceeds of approximately $6.6 million. The Company also issued Boustead the Representative’s Warrant exercisable for the purchase of 105,000 shares of Class B Common Stock at an exercise price of $6.25 per share, subject to adjustment. The Representative’s Warrant may be exercised by payment of cash or by a cashless exercise provision, and may be exercised at any time for five years following the date of issuance.
Current wording
The closing of the initial public offering took place on February 7, 2023. At the closing, the Company sold the IPO Shares for total gross proceeds of $7,500,000. After deducting the underwriting discounts, commissions, non-accountable expense allowance, and other expenses from the initial public offering, the Company received net proceeds of approximately $6.6 million. The Company also issued Boustead the Representative’s Warrant exercisable for the purchase of 21,000 shares of Class B Common Stock at an exercise price of $31.25 per share, subject to adjustment. The Representative’s Warrant may be exercised by payment of cash or by a cashless exercise provision, and may be exercised at any time for five years following the date of issuance.
Previous wording
The IPO Shares were offered and sold, and the Representative’s Warrant was issued, pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-267258), as amended, initially filed with the SEC on September 2, 2022, and declared effective by the SEC on February 2, 2023 (the “IPO Registration Statement”), and the final prospectus, dated February 2, 2023 (the “Final IPO Prospectus”), filed with the SEC on February 6, 2023 pursuant to Rule 424(b)(4) of the Securities Act. In addition, a total of 1,500,000 shares of Class B Common Stock were registered for resale by the selling stockholders named in the IPO Registration Statement, and a final prospectus relating to these shares, dated February 2, 2023 (the “Final Resale Prospectus”), was filed with the SEC on February 6, 2023 pursuant to Rule 424(b)(3) of the Securities Act. As stated in the Final Resale Prospectus, any resales of these shares occurred at a fixed price of $5.00 per share until the Class B Common Stock was listed on Nasdaq. Thereafter, these sales will occur at fixed prices, at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices. The Company would not receive any proceeds from the resale of Class B Common Stock by the selling stockholders.
Current wording
The IPO Shares were offered and sold, and the Representative’s Warrant was issued, pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-267258), as amended, initially filed with the SEC on September 2, 2022, and declared effective by the SEC on February 2, 2023 (the “IPO Registration Statement”), and the final prospectus, dated February 2, 2023 (the “Final IPO Prospectus”), filed with the SEC on February 6, 2023 pursuant to Rule 424(b)(4) of the Securities Act. In addition, a total of 300,000 shares of Class B Common Stock were registered for resale by the selling stockholders named in the IPO Registration Statement, and a final prospectus relating to these shares, dated February 2, 2023 (the “Final Resale Prospectus”), was filed with the SEC on February 6, 2023 pursuant to Rule 424(b)(3) of the Securities Act. Any resales of these shares occurred at a fixed price of $25.00 per share until the Class B Common Stock was listed on Nasdaq. Thereafter, these sales will occur at fixed prices, at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices. The Company will not receive any proceeds from the resale of Class B Common Stock by the selling stockholders.
Previous wording
The IPO Registration Statement also registered for sale shares of Class B Common Stock with a maximum aggregate offering price of $1,125,000 for an additional 225,000 shares of Class B Common Stock at the assumed public offering price of $5.00 per share upon full exercise of the underwriters’ over-allotment option; and up to an additional 15,750 shares of Class B Common Stock underlying the Representative’s Warrant with a maximum aggregate offering price of $98,437.50 at the assumed exercise price of $6.25 per share assuming full exercise of the over-allotment option. The underwriters’ over-allotment option expired unexercised. The Company has not received any proceeds from the exercise of the Representative’s Warrant because it has not been exercised.
Current wording
The IPO Registration Statement also registered for sale shares of Class B Common Stock with a maximum aggregate offering price of $1,125,000 for an additional 45,000 shares of Class B Common Stock at the assumed public offering price of $25.00 per share upon full exercise of the underwriters’ over-allotment option; and up to an additional 3,150 shares of Class B Common Stock underlying the Representative’s Warrant with a maximum aggregate offering price of $98,437.50 at the assumed exercise price of $31.25 per share assuming full exercise of the over-allotment option. The underwriters’ over-allotment option expired unexercised. The Company has not received any proceeds from the exercise of the Representative’s Warrant because it has not been exercised.
Previous wording
On April 4, 2023, Post-Effective Amendment No. 1 to the IPO Registration Statement (the “Post-Effective Amendment”) was filed with the SEC andbecame effective on April 14, 2023. The Post-Effective Amendmentwas required to be filed to update the IPO Registration Statement to include, among other things, the information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 31, 2023. The Post-Effective Amendment maintained the effectiveness of the IPO Registration Statement with respect to the sale of shares of common stock issuable upon exercise of the Representative’s Warrant and the resale of the shares of common stock held by the selling stockholders. Updated prospectuses were included with the Post-Effective Amendment.
Current wording
On April 4, 2023, Post-Effective Amendment No. 1 to the IPO Registration Statement (the “Post-Effective Amendment”) was filed with the SEC and became effective on April 14, 2023. The Post-Effective Amendment was required to be filed to update the IPO Registration Statement to include, among other things, the information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 31, 2023. The Post-Effective Amendment maintained the effectiveness of the IPO Registration Statement with respect to the sale of shares of common stock issuable upon exercise of the Representative’s Warrant and the resale of the shares of common stock held by the selling stockholders. Updated prospectuses were included with the Post-Effective Amendment. The Post-Effective Amendment also incorporates by reference all documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering described in the prospectuses included with the Post-Effective Amendment.
Previous wording
The Underwriting Agreement contains other customary representations, warranties and covenants by the Company, customary conditions to closing, indemnification obligations of the Company and Boustead, including for liabilities under the Securities Act, other obligations of the parties, and termination provisions. The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.
Current wording
The Underwriting Agreement contains other customary representations, warranties and covenants by the Company, customary conditions to closing, indemnification obligations of the Company and Boustead, including for liabilities under the Securities Act, other obligations of the parties, and termination provisions. The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties. The Underwriting Agreement also provided that the engagement letter agreement between the Company and Boustead, dated November 29, 2021 (the “Boustead Engagement Letter”), will remain in full force and effect.
Previous wording
On September 29, 2023, the Company delivered the first Closing Notice (the “First Closing Notice”) for the purchase by Triton of 263,410 shares of Class B Common Stock (the “First Triton Shares”). On October 4, 2023, the First Triton Shares were received by Triton. On October 11, 2023, Triton was required to pay the Company $46,083.53, based on a price per share of $0.26894, equal to 85% of $0.3164, the lowest daily volume-weighted average price of the Class B Common Stock during the five-business-day period ending October 11, 2023, less a $25,000 administrative fee pursuant to the Amended and Restated Closing Agreement, as amended. The Company received payment of this amount on October 13, 2023, less the $25,000 administrative fee.
Current wording
On October 4, 2023, the First Triton Shares were received by Triton. Pursuant to the Amended A&R Closing Agreement, on the fifth business day following the day that the First Triton Shares were received, Triton was required to pay the Company approximately $45,841, based on a price per share of $1.3447, equal to 85% of $1.582, the lowest daily volume-weighted average price of the Class B Common Stock during the five-business-day period ending October 11, 2023, less the $25,000 administrative fee. The Company received payment of this amount on October 13, 2023.
Previous wording
In connection with the closing pursuant to the First Closing Notice described above, pursuant to the Boustead Engagement Letter and the Underwriting Agreement, the Company paid Boustead a fee of $4,975.85, equal to 7% of the aggregate purchase price, and non-accountable expense allowance of $710.84, equal to 1% of the aggregate purchase price for the First Triton Shares. In addition, the Company issued a warrant to Boustead for the purchase of 18,439 shares of Class B Common Stock, equal to 7% of the number of the First Triton Shares, with an exercise price of $0.26894 per share, equal to the purchase price per share of the First Triton Shares (the “First Tail Warrant”). The First Tail Warrant is exercisable for a period of five years and contains cashless exercise provisions.
Current wording
In connection with the First Triton Closing, pursuant to the Boustead Engagement Letter and the Underwriting Agreement, the Company was required to pay Boustead a fee equal to 7% of the aggregate purchase price, and non-accountable expense allowance equal to 1% of the aggregate purchase price for the First Triton Shares. In addition, the Company issued a Tail Warrant (the “First Tail Warrant”) to Boustead for the purchase of 3,688 shares of Class B Common Stock, equal to 7% of the number of the First Triton Shares, with an exercise price of $1.3447 per share, equal to the purchase price per share of the First Triton Shares. The First Tail Warrant is exercisable for a period of five years and contains cashless exercise provisions.
Previous wording
On March 27, 2024, the Company delivered a closing notice (the “Second Closing Notice”) to Triton Funds LP, a Delaware limited partnership (“Triton”), to notify Triton that it was electing to exercise its right to sell Triton 621,590 shares of Class B Common Stock (the “Second Triton Shares”), pursuant to the Amended and Restated Closing Agreement, dated as of August 1, 2023, between the Company and Triton (the “Amended and Restated Closing Agreement”), as amended by the Amendment to Amended and Restated Closing Agreement, dated as of September 27, 2023 (the “First Triton Amendment”), between the Company and Triton, the Second Amendment to Amended and Restated Closing Agreement, dated as of December 30, 2023, between the Company and Triton (the “Second Triton Amendment”), and the Third Amendment to Amended and Restated Closing Agreement (the “Third Triton Amendment”), dated as of March 29, 2024, between the Company and Triton (as amended, the “Amended A&R Closing Agreement”). On April 3, 2024, the Company issued the Second Triton Shares to Triton.
Current wording
Pursuant to the Amended A&R Closing Agreement, as amended by each of the Second Triton Amendment and the Third Triton Amendment, on March 27, 2024, the Company delivered a Triton Closing Notice to Triton informing Triton that the Company had elected to exercise its right to sell Triton 124,318 Triton Shares (the “Second Triton Shares”). The price of each of the Second Triton Shares was required to be 85% of the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the Triton Closing for the sale of the Second Triton Shares (the “Second Triton Closing”), and the Second Triton Closing was required to occur within five business days after the date that the Second Triton Shares were received by Triton.
Previous wording
Under the Amended A&R Closing Agreement, the price of each of the Second Triton Shares was required to be set at 85% of the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the closing of Triton’s purchase of the Second Triton Shares (the “Second Triton Closing”). The Second Triton Closing was required to occur within five business days after the delivery of the Second Triton Shares to Triton. On April 10, 2024, the date of the Second Triton Closing, the price of the Second Triton Shares was determined to be $0.34 per share based on the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the Second Triton Closing, which was $0.40 per share. On April 17, 2024, the Company received gross proceeds of $211,341.
Current wording
On April 10, 2024, the date of the Second Triton Closing, the price of the Second Triton Shares was determined to be $1.70 per share based on the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the Second Triton Closing. On April 17, 2024, the Company received gross proceeds of $211,341.
Previous wording
In connection with the Second Triton Closing, pursuant tothe engagement letter agreement between the Company and Boustead Securities, LLC (“Boustead”), dated November 29, 2021 (the “Boustead Engagement Letter”), and the underwriting agreement between the Company and Boustead, as representative of the underwriters of the Company’s initial public offering, dated February 2, 2023 (the “Underwriting Agreement”), the Company paid Boustead, as placement agent compensation, a total of $16,907, equal to 7% of the aggregate purchase price and a non-accountable expense allowance equal to 1% of the aggregate purchase price for the Second Triton Shares. In addition, the Company issued a warrant to Boustead for the purchase of 43,511 shares of Class B Common Stock, equal to 7% of the number of the Second Triton Shares, with an exercise price of $0.34 per share, equal to the purchase price per share of the Second Triton Shares (the “Second Tail Warrant”). The Second Tail Warrant is exercisable for a period of five years and contains cashless exercise provisions.
Current wording
In connection with the Second Triton Closing, pursuant to the Boustead Engagement Letter and the Underwriting Agreement, the Company paid Boustead, as placement agent compensation, a fee equal to 7% of the aggregate purchase price and a non-accountable expense allowance equal to 1% of the aggregate purchase price for the Second Triton Shares. In addition, the Company issued a Tail Warrant (the “Second Tail Warrant”) to Boustead for the purchase of 8,702 shares of Class B Common Stock, equal to 7% of the number of the Second Triton Shares, with an exercise price of $1.70 per share, equal to the purchase price per share of the Second Triton Shares. The Second Tail Warrant is exercisable for a period of five years and contains cashless exercise provisions.
Previous wording
Copies of the Amended and Restated Closing Agreement, the First Triton Amendment, the Second Triton Amendment, the Third Triton Amendment, and the form of the First Tail Warrant and Second Tail Warrant are each attached to the Annual Report as Exhibit 10.26, Exhibit 10.27, Exhibit 10.30, Exhibit 10.32, and Exhibit 4.7, respectively, and the description above is qualified in its entirety by reference to the full text of such exhibits.
Current wording
The Triton Closing Agreement, the Triton Amended and Restated Closing Agreement, the First Triton Amendment, the Second Triton Amendment, the Third Triton Amendment, the form of the Triton Pre-Funded Warrant, and the form of the First Tail Warrant and Second Tail Warrant are filed as Exhibit 10.25, Exhibit 10.26, Exhibit 10.27, Exhibit 10.30, Exhibit 10.32, Exhibit 4.6, and Exhibit 4.7 to the 2023 Annual Report, respectively, and the description above is qualified in its entirety by reference to the full text of such exhibits.
Previous wording
During the three months ended March 31, 2024 and 2023, we had no significant cash requirements for capital expenditures or other cash needs under any contractual or other obligations.
Current wording
During the six months ended June 30, 2024 and 2023, we had no significant cash requirements for capital expenditures or other cash needs under any contractual or other obligations, except as follows.
Previous wording
Intangible assets acquired are recorded at fair value. We test our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. We test our indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If the carrying value exceeds the fair value, we recognize an impairment in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates. During the three months ended March 31, 2024 and 2023, there were no intangible asset impairment charges.
Current wording
Intangible assets acquired are recorded at fair value. We test our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. We test our indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If the carrying value exceeds the fair value, we recognize an impairment in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates. During the six months ended June 30, 2024 and 2023, there were no intangible asset impairment charges.
Previous wording
The Company expenses advertising costs as they incurred. Total advertising expenses were $143,915 and $19,697 for the three months ended March 31, 2024 and 2023, respectively, and have been included as part of general and administrative expenses.
Current wording
The Company expenses advertising costs as they incurred. Total advertising expenses were $284,886 and 170,371 for the six months ended June 30, 2024 and 2023, respectively, and have been included as part of general and administrative expenses.
Previous wording
The Company incurred research and development expenses of $119,009 and $0 for thethree months ended March 31, 2024 and 2023, respectively, and have been included as part of contract labor.
Current wording
The Company incurred research and development expenses of $238,739 and $0 for the six months ended June 30, 2024 and 2023, respectively, and have been included as part of contract labor.
Previous wording
Contract liabilities consist of quarterly and annual subscription revenue that have not been recognized. Revenue under these agreements is recognized over the related service period. As of March 31, 2024 and December 31, 2023, total contract liabilities were $2,031 and $3,445 respectively. Contract liabilities are expected to be recognized as revenue over a period not to exceed twelve (12) months.
Current wording
Contract liabilities consist of quarterly and annual subscription revenue that have not been recognized. Revenue under these agreements is recognized over the related service period. As of June 30, 2024 and December 31, 2023, total contract liabilities were $1,686 and $3,445 respectively. Contract liabilities are expected to be recognized as revenue over a period not to exceed twelve (12) months.
Previous wording
The Company follows ASC 850,* “Related Party Disclosures”, *for the identification of related parties and disclosure of related party transactions and balances. There were no related party transactions except management fees. During the three months ended March 31, 2024 and 2023, the Company paid management fees to their controlling members totaling $862,567 and $749,864, respectively.
Current wording
The Company follows ASC 850,* “Related Party Disclosures”, *for the identification of related parties and disclosure of related party transactions and balances. There were no related party transactions except management fees. During the six months ended June 30, 2024 and 2023, the Company paid management fees to their controlling members totaling $1,805,377 and $1,600,037, respectively.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Revenues. Our revenues increased 60.1% to approximately $0.2 million for the six months ended June 30, 2024 from approximately $0.1 million for the six months ended June 30, 2023. This increase was primarily due to an increase in revenues from the increased number of our Discord server paying subscribers during the six months ended June 30, 2024, including subscribers to our OptionsSwing server in November 2023, compared to such revenues for the six months ended June 30, 2023, which preceded the acquisition of our OptionsSwing server. There was no material difference in the Company’s subscription pricing structure between these periods.