Asset Entities Inc
For the period ended Sep 30, 2024. Filed Nov 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.
Sep 30, 2024 · Filed Nov 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 2024-06-30; filed 2024-08-14.
0001213900-24-069032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001213900-24-098471
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 166 previous paragraphs and 186 current paragraphs.
102 unchanged; 52 reworded; 30 added; 11 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 50 previous and 51 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 (30)
Current report
On September 30, 2024, we cancelled 30,067 shares of Class B Common Stock that were granted as restricted stock under the Asset Entities Inc. 2022 Equity Incentive Plan (the “Plan”) due to the termination of the grantee’s employment, which were forfeited and returned to the Plan in accordance with the terms of the Plan.
Current report
Comparison of Nine Months Ended September 30, 2024 and 2023
Current report
As of September 30, 2024, we had an accumulated deficit of $9,994,891. During the nine months ended September 30, 2024 and 2023, we had a net loss of $4,428,810 and $3,582,799, respectively. To date, we have financed our operations primarily through capital raises and sales of our services. In April 2024, we filed the Shelf Registration Statement, which was also declared effective by the SEC in April 2024, for potential offerings of up to $100,000,000 in aggregate, subject to the requirement that in no event may we sell shares having a value exceeding more than one-third of our public float in any 12-month period under the Shelf Registration Statement so long as our public float remains below $75,000,000. 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. In September 2024, the Company entered into the ATM Sales Agreement and filed a prospectus supplement to the Shelf Registration Statement for the ATM Financing for gross proceeds of up to $1,791,704. The Company expects that up to approximately $1.0 million of additional gross proceeds may be sold in the ATM Financing, subject to the Company’s ability to meet the requirements of SEC rules for the filing of an additional prospectus supplement to the Shelf Registration Statement for such additional amount. Based on our existing cash resources and the cash expected to be received from the ATM Financing and other planned financings, it is expected that the Company will have sufficient funds to carry out the Company’s planned operations through September 30, 2025 and for at least 12 months beyond that period, including the Company’s costs associated with being a public reporting company.
Current report
However, see “—ATM Financing – Waivers and Consents to ATM Financing” below.
Current report
Sales to Triton Funds LP
Current report
Exhibits
Current report
June 2024 TommyBoyTV Asset Purchase Agreement
Current report
Private Placements of Series A Preferred Stock
Current report
Compensation to Boustead Securities, LLC
Current report
Pursuant to an Assignment and Assumption Agreement, dated as of July 30, 2024, among Boustead, Sutter Securities, Inc., a registered broker-dealer and an affiliate of Boustead (“Sutter”), and the Company (the “First July 2024 Boustead Warrant Assignment Agreement”), all of the rights to the July 2024 Boustead Warrant were assigned by Boustead to Sutter. Pursuant to an Assignment and Assumption Agreement, dated as of July 30, 2024, among Sutter, Michael R. Jacks (the “Warrant Assignee”), Boustead, and the Company (the “Second July 2024 Boustead Warrant Assignment Agreement”), all of the rights to the July 2024 Boustead Warrant were assigned by Sutter to the Warrant Assignee, a registered representative of Sutter. Pursuant to the First July 2024 Boustead Warrant Assignment Agreement and the Second July 2024 Boustead Warrant Assignment Agreement, the July 2024 Boustead Warrant was cancelled, and a warrant (the “July 2024 Assignee Warrant”) was issued to the Warrant Assignee. The terms of the July 2024 Assignee Warrant are identical to those of the July 2024 Boustead Warrant.
Current report
The May 2024 Boustead Warrant and the July 2024 Boustead Assignee Warrant have an exercise price of $3.75 per share, subject to adjustment, five-year terms, and cashless exercise and piggyback registration rights.
Current report
The May 2024 Boustead Warrant was filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q filed by the Company on August 14, 2024, and the description above is qualified in its entirety by reference to the full text of such exhibit. The July 2024 Assignee Warrant is filed as Exhibit 4.1 to this Quarterly Report on Form 10-Q, and the description above is qualified in its entirety by reference to the full text of such exhibit. The First July 2024 Boustead Warrant Assignment Agreement and the Second July 2024 Boustead Warrant Assignment Agreement are filed as Exhibit 10.4 and Exhibit 10.5 to this Quarterly Report on Form 10-Q, respectively, and the description above is qualified in its entirety by reference to the full text of such exhibits.
Current report
ATM Financing
Current report
ATM Sales Agreement
Current report
On September 27, 2024, the Company entered into the ATM Sales Agreement with the Sales Agent. Under the terms of the ATM Sales Agreement, the Company may, from time to time, in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, issue and sell through or to the Sales Agent, up to a maximum aggregate amount of $1,791,704 of shares of the Company’s Class B Common Stock (the “ATM Shares”). The issuance and sale of the ATM Shares to or through the Sales Agent from time to time will be effected pursuant to the Shelf Registration Statement and the prospectus supplement filed by the Company with the SEC on September 30, 2024 relating to the offering of the ATM Shares and the accompanying base prospectus.
Current report
Pursuant to the ATM Sales Agreement, the Company may issue and sell the ATM Shares from time to time through or to the Sales Agent, acting as sales agent or principal, subject to the terms and conditions of the ATM Sales Agreement. The Company may instruct the Sales Agent to make such sales, and the Sales Agent, as agent, will use its commercially reasonable efforts to sell the ATM Shares within the parameters set forth in the Company’s notice to sell, and subject to the satisfaction of the Company’s obligations as set forth in the ATM Sales Agreement. The Company will designate the parameters within which the ATM Shares must be sold, including at a minimum the number to be sold, the time period during which sales are requested to be made, any limitation on the number of the ATM Shares that may be sold in any one trading day, and any minimum price below which sales may not be made. The Company has no obligation to sell, and the Sales Agent is not obligated to buy or sell, any of the ATM Shares under the ATM Sales Agreement and may at any time suspend offers under the ATM Sales Agreement or terminate the ATM Sales Agreement as provided for in the ATM Sales Agreement. The offering of the ATM Shares pursuant to the related prospectus supplement to the Shelf Registration Statement and the accompanying base prospectus will terminate upon the earlier of (i) the sale of the ATM Shares pursuant to such prospectus supplement and accompanying base prospectus having an aggregate sales price of $1,791,704, and (ii) the termination by the Company or the Sales Agent of the ATM Sales Agreement pursuant to its terms.
Current report
The Sales Agent may sell ATM Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.
Current report
Unless otherwise agreed between the Company and the Sales Agent, settlement for sales of the ATM Shares will occur on the first trading day following the date on which any sales are made. Sales of the ATM Shares will be settled through the facilities of The Depository Trust Company or by such other means as the Company and the Sales Agent may agree. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.
Current report
The Company will pay the Sales Agent a cash commission of 3.0% of the gross sales price of the ATM Shares sold by the Sales Agent pursuant to the ATM Sales Agreement. Pursuant to the terms of the ATM Sales Agreement, the Company also agreed to reimburse the Sales Agent for reasonable fees and expenses, not to exceed $60,000 (including but not limited to the reasonable and documented fees and disbursements of its legal counsel), and additional amounts for annual maintenance of the ATM Sales Agreement (including but not limited to the reasonable and documented fees and disbursements of its legal counsel) on a quarterly basis, not to exceed $5,000 per quarter.
Current report
Each of the Company and the Sales Agent has the right, by giving written notice as specified in the ATM Sales Agreement, to terminate the ATM Sales Agreement in its sole discretion at any time upon five (5) days’ prior written notice. The Sales Agent also has the right to terminate the ATM Sales Agreement at any time in certain circumstances, including in the event of the occurrence of a material adverse change with respect to the Company, the failure of the Company to perform its obligations under the ATM Sales Agreement, any failure to fulfill any condition to the obligations of the Sales Agent under the ATM Sales Agreement, or any suspension or limitation of trading of the ATM Shares.
Current report
The ATM Sales Agreement contains certain covenants, representations and warranties customary for an agreement of this type. The Company agreed to provide indemnification and contribution to the Sales Agent against certain liabilities, including liabilities under the Securities Act.
Current report
This Quarterly Report on Form 10-Q does not constitute an offer to sell or the solicitation of an offer to buy, and the ATM Shares cannot be sold in any state or jurisdiction in which the offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any state or jurisdiction. Any offer will be made only by means of a prospectus, consisting of a prospectus supplement and the accompanying base prospectus, forming a part of the effective registration statement.
Current report
A copy of the ATM Sales Agreement is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q, and the description above is qualified in its entirety by reference to the full text of such exhibit.
Current report
Waivers and Consents to ATM Financing
Current report
On September 20, 2024, the Company entered into a Waiver and Consent, dated as of September 20, 2024 (the “Ionic ATM Waiver”), between the Company and Ionic, pursuant to which Ionic waived any prohibition, restriction or adverse adjustment that would otherwise apply to any action of the Company relating to an “at the market offering” (as defined in Rule 415(a)(4) under the Securities Act), of equity securities of up to $5 million (“Waived ATM Financing”) under the Ionic Purchase Agreement or the Certificate of Designation. Pursuant to the Ionic ATM Waiver, regardless of the terms and conditions of the Ionic Purchase Agreement and the Certificate of Designation, the Company may at any time enter into any agreement relating to a Waived ATM Financing, the filing of a prospectus supplement to a prospectus contained in an effective registration statement that was filed under the Securities Act relating to a Waived ATM Financing, the announcement of a Waived ATM Financing, the issuance, offer, sale, or grant of any shares of Class B Common Stock relating to a Waived ATM Financing, or the issuance, offer, sale, or grant of any securities in connection with either the provision of goods or services or settlement of any obligations that may otherwise arise with respect to a Waived ATM Financing. In addition, pursuant to the Ionic ATM Waiver, Ionic waived any adjustment to the applicable Conversion Price, which partly determines the number of shares of Class B Common Stock issuable upon conversion of a share of Series A Preferred Stock, that would otherwise occur as a result of any Waived ATM Financing under the terms of the Certificate of Designation.
Current report
On September 26, 2024, the Company entered into a Limited Waiver and Consent, dated as of September 26, 2024 (the “Boustead ATM Waiver”), between the Company and Boustead. Pursuant to the Boustead ATM Waiver, Boustead waived any condition on, restriction on, compensation rights, or rights of first refusal that would be applicable under the Boustead Engagement Letter and the Underwriting Agreement in relation to a Waived ATM Financing. Pursuant to the Boustead ATM Waiver, the Company may at any time enter into any agreement relating to a Waived ATM Financing, the filing of a prospectus supplement to a prospectus contained in an effective registration statement that was filed under the Securities Act relating to a Waived ATM Financing, the announcement of a Waived ATM Financing, the issuance, offer, sale, or grant of any shares of the Class B Common Stock relating to a Waived ATM Financing, or the issuance, offer, sale, or grant of any securities in connection with either the provision of goods or services or settlement of any obligations that may otherwise arise with respect to a Waived ATM Financing. As consideration, the Boustead ATM Waiver provides that the Company will promptly pay Boustead 3.0% of the gross sales price of all shares of Class B Common Stock sold in connection with any Waived ATM Financing until the end of the applicability of the provisions of the right of first refusal provisions of the Boustead Engagement Letter.
Current report
The Ionic ATM Waiver and the Boustead ATM Waiver are filed as Exhibit 10.2 and Exhibit 10.3 to this Quarterly Report on Form 10-Q, respectively, and the description above is qualified in its entirety by reference to the full text of such exhibits.
Current report
In addition, under a Renewal Service Agreement, dated as of June 9, 2024, between the Company and Regus Management, the Company will lease an office located at 100 Crescent Court, 7 th Floor, Dallas, Texas 75201, for a total monthly payment of $1,981. The term of the lease will be from October 1, 2024 to September 30, 2025.
Current report
Changes in contract liabilities for the nine months ended September 30, 2024 are as follows:
Current report
For the three months ended September 30, 2024, warrants representing 105,490 shares of common stock equivalents were excluded from the computation from diluted net loss per share as the result was anti-dilutive.
Removed paragraphs (11)
Previous report
Second Closing of Private Placement with Ionic Ventures, LLC
Previous 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.
Previous 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.
Previous 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.
Previous report
See*“—Liquidity and Capital Resources – First Closing of Private Placement with Ionic Ventures, LLC*”.
Previous report
Comparison of Six Months Ended June 30, 2024 and 2023
Previous 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”.
Previous report
TommyBoyTV Asset Purchase Agreement
Previous report
First Closing of Private Placement with Ionic Ventures, LLC
Previous report
See “—Recent Developments – Second Closing of Private Placement with Ionic Ventures, LLC” for related recent developments.
Previous report
The Third Tail Warrant is filed as Exhibit 4.2 to this report, and the description above is qualified in its entirety by reference to the full text of such exhibit.
Reworded paragraphs (52)
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. “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.
Current wording
Except as otherwise indicated by the context and for the purposes of this Quarterly Report on Form 10-Q only, references in this Quarterly Report on Form 10-Q 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
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 wording
Unless otherwise noted, the share and per share information in this Quarterly Report on Form 10-Q 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 Daylight Time on July 1, 2024 (the “Reverse Stock Split”).
Previous wording
We use various trademarks, trade names and service marks in our business, including “AE 360 DDM”, “Asset Entities Where Assets Are Created”, “SiN”, “Social Influencer Network”, and associated marks. For convenience, we may not include the ℠,®or™symbols, but such omission is not meant to indicate that we would not protect our intellectual property rights to the fullest extent allowed by law. Any other trademarks, trade names or service marks referred to in this report are the property of their respective owners.
Current wording
We use various trademarks, trade names and service marks in our business, including “AE 360 DDM”, “Asset Entities Where Assets Are Created”, “SiN”, “Social Influencer Network”, “Ternary D”, “Options Swing”, and associated marks. For convenience, we may not include the ℠,®or™symbols, but such omission is not meant to indicate that we would not protect our intellectual property rights to the fullest extent allowed by law. Any other trademarks, trade names or service marks referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.
Previous wording
This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
Current wording
This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
Previous wording
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Current wording
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Previous wording
The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Current wording
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
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 212,000 as of August 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 was approximately 200,000 as of September 30, 2024.
Previous 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.
Current wording
Our revenue depends on the number of paying subscribers to our Discord servers. During the three months ended September 30, 2024 and 2023, we received revenue from 1,184 and 298 Asset Entities Discord server paying subscribers, respectively.
Previous 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”.
Current wording
As of September 30, 2024, the Company had an accumulated deficit of $9,994,891 and cash balance of $2,098,406. During the three months ended September 30, 2024 and 2023, we had a net loss of $1,315,369 and $1,190,491, 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 Registration Statement on Form S-3 (File No. 333-278707), which was declared effective by the SEC on April 26, 2024, for potential offerings of up to $100,000,000 in aggregate (the “Shelf Registration Statement”), subject to the requirement that in no event may we sell shares having a value exceeding more than one-third of our public float in any 12-month period under the Shelf Registration Statement so long as our public float remains below $75,000,000. 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. In September 2024, the Company entered into a Sales Agreement, dated as of September 27, 2024 (the “ATM Sales Agreement”), between the Company and A.G.P./Alliance Global Partners (the “Sales Agent”), and filed a prospectus supplement to the Shelf Registration Statement for an “at the market offering” of shares of Class B Common Stock (the “ATM Financing”) for gross proceeds of up to $1,791,704. The Company expects that up to approximately $1.0 million of additional gross proceeds may be sold in the ATM Financing, subject to the Company’s ability to meet the requirements of SEC rules for the filing of an additional prospectus supplement to the Shelf Registration Statement for such additional amount. Based on the Company’s existing cash resources and the cash expected to be received from the ATM Financing and other planned financings, it is expected that the Company will have sufficient funds to carry out the Company’s planned operations through September 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 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.
Current wording
Revenues. Our revenues increased 237.4% to approximately $0.20 million for the three months ended September 30, 2024 from approximately $0.06 million for the three months ended September 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 September 30, 2024, including subscribers to the OptionsSwing and Pure Profits Discord servers that the Company acquired in November 2023 and June 2024, respectively, compared to such revenues for the three months ended September 30, 2023, which preceded the acquisitions of the OptionsSwing and Pure Profits Discord servers. There was no material difference in the Company’s subscription pricing structure between these periods.
Previous 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.
Current wording
Operating Expenses. Our total operating expenses increased 21.4% to approximately $1.52 million for the three months ended September 30, 2024 from approximately $1.25 million for the three months ended September 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 $0.24 million and an increase in management compensation costs of approximately $0.03 million for the three months ended September 30, 2024, compared to such costs for the three months ended September 30, 2023.
Previous 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.
Current wording
Loss From Operations. Our loss from operations increased 10.5% to approximately $1.32 million for the three months ended September 30, 2024 from approximately $1.19 million for the three months ended September 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 $0.24 million and an increase in management compensation costs of approximately $0.03 million for the three months ended September 30, 2024, compared to such costs for the three months ended September 30, 2023.
Previous wording
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.
Current wording
Revenues. Our revenues increased 114.5% to approximately $0.42 million for the nine months ended September 30, 2024 from approximately $0.20 million for the nine months ended September 30, 2023. This increase was primarily due to an increase in revenues from the increased number of our Discord server paying subscribers during the nine months ended September 30, 2024, including subscribers to the OptionsSwing and Pure Profits Discord servers that the Company acquired in November 2023 and June 2024, respectively, compared to such revenues for the nine months ended September 30, 2023, which preceded the acquisitions of the OptionsSwing and Pure Profits Discord servers. There was no material difference in the Company’s subscription pricing structure between these periods.
Previous wording
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 wording
Operating Expenses. Our total operating expenses increased 28.3% to approximately $4.85 million for the nine months ended September 30, 2024 from approximately $3.78 million for the nine months ended September 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 $0.84 million and an increase in management compensation costs of approximately $0.23 million for the nine months ended September 30, 2024, compared to such costs for the nine months ended September 30, 2023.
Previous wording
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 wording
Loss From Operations. Our loss from operations increased 23.6% to approximately $4.43 million for the nine months ended September 30, 2024 from approximately $3.58 million for the nine months ended September 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 $0.84 million and an increase in management compensation costs of approximately $0.23 million for the nine months ended September 30, 2024, compared to such costs for the nine months ended September 30, 2023.
Previous 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.
Current wording
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 six months ended June 30, 2024 and 2023.
Current wording
The following table provides detailed information about our net cash flow for the nine months ended September 30, 2024 and 2023.
Previous 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.
Current wording
Net cash used in operating activities was approximately $3.45 million for the nine months ended September 30, 2024, as compared to net cash used in operating activities of approximately $2.95 million for the nine months ended September 30, 2023. This increase was primarily due to an increase in net loss.
Previous wording
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 wording
Net cash used in investing activities was approximately $0.215 million for the nine months ended September 30, 2024, as compared to $0.008 million for the nine months ended September 30, 2023. This change was primarily due tothe purchase of an intangible asset and increased purchases of property and equipment duringthe nine months ended September 30, 2024 compared to a lesser amount of such purchasesfor the nine months ended September 30, 2023.
Previous 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.
Current wording
Net cash provided by financing activities was approximately $2.84 million for the nine months ended September 30, 2024, as compared to approximately $6.85 million net cash provided by financing activities for the nine months ended September 30, 2023. This change was primarily due to the reduced amount of proceeds from the Company’s private placements during the nine months ended September 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 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”).
Current wording
On February 2, 2023, the Company entered into the Underwriting Agreement, dated as of February 2, 2023, between the Company and Boustead Securities, LLC, a registered broker-dealer (“Boustead”), 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
As of the date of this report, none of the proceeds from the initial public offering were used to make direct or indirect payments to any of the Company’s directors or officers, any of their associates, any persons owning 10% or more of any class of the Company’s equity securities, or any of our affiliates, or direct or indirect payments to any others other than for the direct costs of the offering.
Current wording
As of the date of this Quarterly Report on Form 10-Q, none of the proceeds from the initial public offering were used to make direct or indirect payments to any of the Company’s directors or officers, any of their associates, any persons owning 10% or more of any class of the Company’s equity securities, or any of our affiliates, or direct or indirect payments to any others other than for the direct costs of the offering.
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. 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.
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”), remained in full force and effect.
Previous wording
The Boustead Engagement Letter expired on February 7, 2024. Following the expiration of the Boustead Engagement Letter, we must compensate Boustead with a cash fee equal to 7% and non-accountable expense allowance equal to 1% of the gross proceeds received by the Company from the sale of securities in an investment transaction, or up to 10% of the gross proceeds from certain other merger, acquisition, or joint venture, strategic alliance, license, research and development, or other similar transactions, with a party, including any investor in a private placement in which Boustead served as placement agent or in the initial public offering, or who became aware of the Company or who became known to the Company prior to the termination or expiration of the Boustead Engagement Letter, including any Company officers, directors, employees, consultants, advisors, stockholders, members, or partners, for such transactions that occur during the 12-month period following the expiration of the Boustead Engagement Letter, as described further below (the “Tail Rights”).
Current wording
The Boustead Engagement Letter expired on February 7, 2024. Following the expiration of the Boustead Engagement Letter, we must compensate Boustead with a cash fee equal to 7% and non-accountable expense allowance equal to 1% of the gross proceeds received by the Company from the sale of securities in an investment transaction, or up to 10% of the gross proceeds from certain other merger, acquisition, or joint venture, strategic alliance, license, research and development, or other similar transactions, with a party, including any investor in a private placement in which Boustead served as placement agent or in the initial public offering, or who became aware of the Company or who became known to the Company prior to the termination or expiration of the Boustead Engagement Letter, including any Company officers, directors, employees, consultants, advisors, stockholders, members, or partners, for such transactions that occur during the 12-month period following the expiration of the Boustead Engagement Letter, as described further below (the “Tail Rights”). However, see “—ATM Financing – Waivers and Consents to ATM Financing” below.
Previous wording
The Boustead Engagement Letter also provided Boustead a right of first refusal (the “Right of First Refusal”) for two years following the expiration of the Boustead Engagement Letter to act as financial advisor, lead managing underwriter, book runner, placement agent, or to act as joint advisor, managing underwriter, book runner, or placement agent on at least equal economic terms, on any public or private financing (debt or equity), merger, business combination, recapitalization or sale of some or all of the equity or assets of the Company. In the event that we engage Boustead to provide such services, Boustead will be compensated consistent with the Boustead Engagement Letter, as described below, unless we mutually agree otherwise.
Current wording
The Boustead Engagement Letter also provided Boustead a right of first refusal (the “Right of First Refusal”) for two years following the expiration of the Boustead Engagement Letter to act as financial advisor, lead managing underwriter, book runner, placement agent, or to act as joint advisor, managing underwriter, book runner, or placement agent on at least equal economic terms, on any public or private financing (debt or equity), merger, business combination, recapitalization or sale of some or all of the equity or assets of the Company. In the event that we engage Boustead to provide such services, Boustead will be compensated consistent with the Boustead Engagement Letter, as described below, unless we mutually agree otherwise. However, see “—ATM Financing – Waivers and Consents to ATM Financing” below.
Previous wording
Private Placements with Triton Funds LP
Current wording
October 2023 and April 2024 Private Placements with Triton Funds LP
Previous wording
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 wording
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, as well as other securities. The registration statement was declared effective by the SEC on September 6, 2023.
Previous 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.
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 warrant (the “October 2023 Boustead 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, subject to adjustment, a five-year term, and cashless exercise and registration rights.
Previous 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.
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 warrant (the “April 2024 Boustead 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, subject to adjustment, a five-year term, and cashless exercise and registration rights.
Previous 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.
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 October 2023 Boustead Warrant and April 2024 Boustead 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
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 wording
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 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.
Previous wording
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 wording
The first closing (the “First Ionic 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 Ionic 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 Ionic 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). On July 29, 2024, the conditions to the occurrence of the Second Ionic Closing were met. As a result, on July 29, 2024, the Company issued and sold 165 shares of Series A Preferred Stock to Ionic for gross proceeds of $1,500,000.
Previous wording
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 wording
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 Ionic 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 Ionic 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, and as amended, was filed to register the offer and resale of 385,894 shares of Class B Common Stock, which was considered 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. Following the Second Ionic Closing, which occurred on July 29, 2024, for the issuance and sale of an additional 165 shares of Series A Preferred Stock for gross proceeds of $1,500,000, the Company was required to file a registration statement (the “Second Registration Statement”) within 45 days of the Second Ionic Closing 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 Second Registration Statement was required to be declared effective within 45 days of the Second Ionic Closing, or 90 days if the Second Registration Statement received a review. Pursuant to these requirements, a Registration Statement on Form S-1 (File No. 333-281438), was originally filed by the Company with the SEC on August 9, 2024, and as amended, was filed to register the offer and resale of 482,120 shares of Class B Common Stock, which was considered 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 September 11, 2024.
Previous wording
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 wording
The form of the Registration Rights Agreement is filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q filed by the Company on August 14, 2024, and the description above is qualified in its entirety by reference to the full text of such exhibit.
Previous wording
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 wording
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 “First Designation Amendment”) filed with the Secretary of State of the State of Nevada on June 14, 2024, as amended by the Certificate of Amendment to Designation (the “Second Designation Amendment”) filed with the Secretary of State of the State of Nevada on September 4, 2024 at 9:58 AM Pacific Daylight Time, as amended by the Certificate of Amendment to Designation (the “Third Designation Amendment”) filed with the Secretary of State of the State of Nevada on September 4, 2024 at 11:38 AM Pacific Daylight Time (as amended, the “Certificate of Designation”), designating 660 shares of the Company’s preferred stock as “Series A Convertible Preferred Stock,” $0.0001 par value per share, 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.
Previous wording
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).
Current wording
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 of the 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).
Previous wording
A holder of Series A Preferred Stock may not convert the Series A Preferred Stock into Class B Common Stock to the extent that such conversion would cause such holder’s beneficial ownership of Class B Common Stock to exceed 4.99% of the outstanding Class B Common Stock immediately after conversion, which may be increased by the holder to up to 9.99% upon no fewer than 61 days’ prior notice (the “Series A Beneficial Ownership Limitation”). In addition, if a conversion would result in the issuance of an amount of shares of Class B Common Stock exceeding 19.99% of the Company’s outstanding common stock, which number of shares would be reduced, on a share-for-share basis, by the number of shares of common stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by the Certificate of Designation under applicable rules of Nasdaq, including Nasdaq Listing Rule 5635(d) (such amount, the “Exchange Limitation”), the Conversion Price would be required to be at least equal to the price (the “Minimum Price”) that would be the lower of the last closing price of the stock immediately preceding the signing of the related binding agreement and the average closing price for the five Trading Days (as defined below) immediately preceding the signing of the related binding agreement, before the effectiveness of the approval of such number of the holders of the outstanding shares of the Company’s voting securities as required by the Bylaws of the Company (the “Bylaws”) and the Nevada Revised Statutes (“NRS”), to ratify and approve all of the transactions contemplated by the Transaction Documents (as defined in the Ionic Purchase Agreement), including the issuance of all of the shares of Series A Preferred Stock and shares of Class B Common Stock upon conversion of the shares of Series A Preferred Stock, all as may be required by the applicable rules and regulations of The Nasdaq Capital Market tier of Nasdaq (or any successor entity) (the “Stockholder Approval”). The Ionic Purchase Agreement requires that the Company obtain the Stockholder Approval by the prior written consent of the requisite stockholders to obtain the approval of such number of the holders of the outstanding shares of the Company’s voting securities as required by the Bylaws and the NRS, to ratify and approve all of the transactions contemplated by the Transaction Documents, including the issuance of all of the shares of Series A Preferred Stock and shares of Class B Common Stock issuable upon conversion of such shares pursuant to the Ionic Purchase Agreement, all as may be required by the applicable rules and regulations of The Nasdaq Capital Market tier of Nasdaq (or any successor entity). The Conversion Price also may not be lower than a separate floor price (the “Floor Price”) of $0.4275 per share. The Series A Preferred Stock also may not be converted except to the extent that the shares of Class B Common Stock issu…
Excerpt shortened here; the source contains the full paragraph.
Current wording
If a conversion of Series A Preferred Stock would have resulted in the issuance of an amount of shares of Class B Common Stock exceeding 19.99% of the Company’s common stock outstanding as of the date of the signing of the related binding agreement, which number of shares would be reduced, on a share-for-share basis, by the number of shares of common stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by the Certificate of Designation under applicable rules of Nasdaq, including Nasdaq Listing Rule 5635(d) (such amount, the “Exchange Limitation”), the Conversion Price would have been required to be at least equal to the price (the “Minimum Price”) that would be the lower of the last closing price of the stock immediately preceding the signing of the related binding agreement and the average closing price for the five Trading Days (as defined below) immediately preceding the signing of the related binding agreement, before the effectiveness of the approval of such number of the holders of the outstanding shares of the Company’s voting securities as required by the Bylaws of the Company (the “Bylaws”) and the Nevada Revised Statutes (“NRS”), to ratify and approve all of the transactions contemplated by the Transaction Documents (as defined in the Ionic Purchase Agreement), including the issuance of all of the shares of Series A Preferred Stock and shares of Class B Common Stock upon conversion of the shares of Series A Preferred Stock, all as may be required by the applicable rules and regulations of The Nasdaq Capital Market tier of Nasdaq (or any successor entity) (the “Stockholder Approval”). In the event that the Conversion Price on a Conversion Date (as defined in the Certificate of Designation) would have been less than the applicable Minimum Price or the Floor Price if not for the immediately preceding sentence, then, upon any conversion of shares of Series A Preferred Stock, the Stated Value will automatically be increased by an amount equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Class B Common Stock trades at on the Trading Day immediately preceding the Conversion Date and (II) the applicable Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Class B Common Stock delivered (or to be delivered) to the holder on the applicable Conversion Date with respect to such conversion of shares of Series A Preferred Stock from (II) the quotient obtained by dividing (x) the Stated Value (plus any accrued but unpaid dividends and other amounts due on such shares) of the Series A Preferred Stock being converted that the holder has elected to be the subject of the applicable conversion, by (y) the applicable Conversion Price.
Previous wording
The Ionic Purchase Agreement and the Certificate of Designation require that the Company file a Preliminary Information Statement on Schedule 14C with the SEC within 10 days of the date of the First Closing followed by the filing of a Definitive Information Statement on Schedule 14C with the SEC within 20 days of the date of the First Closing, or within 45 days of the date of the First Closing if delayed due to a court or regulatory agency, including but not limited to the SEC, which shall disclose the Stockholder Approval. In accordance with the rules of the SEC, the Stockholder Approval will become effective 20 days after the Definitive Information Statement is sent or given in accordance with SEC rules. Prior to such date of effectiveness, if the number of shares of Class B Common Stock subject to a conversion would exceed the Exchange Limitation prior to the date of the effectiveness of the Stockholder Approval, and the Conversion Price for such conversion would otherwise be lower than the Minimum Price or the Floor Price, then, upon any conversion of shares of Series A Preferred Stock, the Stated Value will automatically be increased by an amount equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Class B Common Stock trades at on the Trading Day immediately preceding the conversion date and (II) the applicable Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Class B Common Stock delivered (or to be delivered) to the holder on the applicable conversion date with respect to such conversion of Series A Preferred Stock from (II) the quotient obtained by dividing (x) the applicable value of the Series A Preferred Stock being converted that the holder has elected to be the subject of the applicable conversion of Series A Preferred Stock, by (y) the applicable Conversion Price.
Current wording
The Ionic Purchase Agreement required that the Company obtain the Stockholder Approval, by the prior written consent of the requisite stockholders as required by the Bylaws and the NRS, to ratify and approve all of the transactions contemplated by the Transaction Documents, including the issuance of all of the shares of Series A Preferred Stock and shares of Class B Common Stock issuable upon conversion of such shares pursuant to the Ionic Purchase Agreement, all as may be required by the applicable rules and regulations of The Nasdaq Capital Market tier of Nasdaq (or any successor entity). The Ionic Purchase Agreement and the Certificate of Designation further required that the Company file a Preliminary Information Statement on Schedule 14C with the SEC within 10 days of the date of the First Ionic Closing followed by the filing of a Definitive Information Statement on Schedule 14C with the SEC within 20 days of the date of the First Ionic Closing, or within 45 days of the date of the First Ionic Closing if delayed due to a court or regulatory agency, including but not limited to the SEC, which was required to disclose the Stockholder Approval. In accordance with the rules of the SEC, the Stockholder Approval was required to become effective 20 days after the Definitive Information Statement was sent or given in accordance with SEC rules.
Previous wording
In accordance with the requirements and provisions described above, on May 24, 2024, the Company obtained the Stockholder Approval by execution of a written consent in lieu of a special meeting of a majority of the voting power of the stockholders of the Company approving a resolution approving the issuance of Class B Common Stock in aggregate in excess of the limitations provided by Nasdaq Listing Rule 5635(d), including that an amount of shares of Class B Common Stock equal to or greater than 20% of the total common stock or voting power outstanding on the date of the Certificate of Designation may be issued pursuant to the Certificate of Designation at a price that may be less than the Minimum Price. On May 31, 2024, the Company filed a Preliminary Information Statement on Schedule 14C with the SEC. On June 13, 2024, the Company filed a Definitive Information Statement on Schedule 14C with the SEC disclosing the Stockholder Approval. As of the 20 thday following actions meeting these and other applicable requirements, the Company will be permitted to issue more than the limited number of shares as defined by the Exchange Limitation, at a Conversion Price that may be below the Minimum Price.
Current wording
In accordance with the requirements and provisions described above, on May 24, 2024, the Company obtained the execution of a written consent in lieu of a special meeting of a majority of the voting power of the stockholders of the Company approving a resolution approving the issuance of Class B Common Stock in aggregate in excess of the limitations provided by Nasdaq Listing Rule 5635(d), including that an amount of shares of Class B Common Stock equal to or greater than 20% of the total common stock or voting power outstanding on the date of the Certificate of Designation may be issued pursuant to the Certificate of Designation at a price that may be less than the Minimum Price. On May 31, 2024, the Company filed a Preliminary Information Statement on Schedule 14C with the SEC. On June 13, 2024, the Company filed a Definitive Information Statement on Schedule 14C with the SEC disclosing the Stockholder Approval. As of the 20 thday following actions meeting these and other applicable requirements, the Company is permitted to issue more than the limited number of shares as defined by the Exchange Limitation, at a Conversion Price that may be below the Minimum Price.
Previous wording
The Company may not sell securities in a financing transaction while Ionic beneficially owns any of the Series A Preferred Stock or the common stock until the end of the 30-day period following the initial date of the effectiveness of the First Registration Statement or during any Alternate Conversion Measuring Period. In addition, the Company may not file any other registration statement or any offering statement under the Securities Act, other than a registration statement on Form S-8 or supplements or amendments to registration statements that were filed and effective as of the date of the Ionic Purchase Agreement, unless each Registration Statement is effective and the respective prospectus is available for use, or the shares of Series A Preferred Stock and underlying shares of Class B Common Stock that must be included in each Registration Statement under the Ionic Registration Rights Agreement may be resold without limitation under Rule 144.
Current wording
Under the Ionic Purchase Agreement, the Company generally may not sell securities in a financing transaction while Ionic beneficially owns any shares of Series A Preferred Stock or common stock until the end of the 30-day period following the initial date of the effectiveness of each Registration Statement or during any Alternate Conversion Measuring Period. In addition, the Company may not file any other registration statement or any offering statement under the Securities Act, other than a registration statement on Form S-8 or supplements or amendments to registration statements that were filed and effective as of the date of the Ionic Purchase Agreement (solely to the extent necessary to keep such registration statements effective and available and not with respect to any Subsequent Placement), unless each of the First Registration Statement and the Second Registration Statement is effective and the respective prospectuses are available for use, or the outstanding shares of Series A Preferred Stock and underlying shares of Class B Common Stock may be resold without limitation under Rule 144. Additionally, the Company may not, directly or indirectly, redeem, or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written consent of Ionic (other than as required by the Certificate of Designation).
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
A holder of Series A Preferred Stock may not convert the Series A Preferred Stock into Class B Common Stock to the extent that such conversion would cause such holder’s beneficial ownership of Class B Common Stock to exceed 4.99% of the outstanding Class B Common Stock immediately after conversion, which may be increased by the holder to up to 9.99% upon no fewer than 61 days’ prior notice (the “Series A Beneficial Ownership Limitation”). Any conversion of shares of Series A Preferred Stock that would result in the holder beneficially owning in excess of 4.99% of the shares of Class B Common Stock will not be effected, and the shares of Class B Common Stock that would cause such excess will be held in abeyance and not issued to the holder until the date the Company is notified by the holder that its ownership is less than 4.99%, at the applicable Conversion Price, and subject to the holder’s compliance with other applicable procedural requirements for conversion. Holders of Series A Preferred Stock are not prohibited from delivering a Conversion Notice (as defined by the Certificate of Designation) while another Conversion Notice remains outstanding.
Current report — wording carried from elsewhere
The Certificate of Designation provides that the Conversion Price may not be lower than a floor price (the “Floor Price”) of $0.4275 per share, subject to adjustment for stock splits and similar transactions. If the Conversion Price would be less than the Floor Price, then, subject to the terms and conditions of the Certificate of Designation, the Stated Value will automatically increase in the manner provided pursuant to the Certificate of Designation, as described in the following paragraph. The Series A Preferred Stock also may not be converted except to the extent that the shares of Class B Common Stock issuable upon such conversion may be resold pursuant to Rule 144 or an effective and available registration statement.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.