QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Large accelerated filer | o | Accelerated filer | o | |||||||||||
x | Smaller reporting company | |||||||||||||
Emerging growth company |
Page | |||||
June 30, 2024 | December 31, 2023* | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance | |||||||||||
Due from Sponsor | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Intangible assets, net | |||||||||||
Other assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Due to related parties | |||||||||||
Deferred revenue | |||||||||||
Convertible note | |||||||||||
Short-term debt | |||||||||||
Total current liabilities | |||||||||||
Warrant liabilities | |||||||||||
Note payable - related party | |||||||||||
Long-term debt | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note N) | |||||||||||
Stockholders’ equity: | |||||||||||
Preferred stock par value $ | |||||||||||
Common stock par value of $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | |||||||||
* Derived from audited information |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||||||||||
Cost of revenues | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
Other income (expenses): | |||||||||||||||||||||||
Interest expense | ( | ( | |||||||||||||||||||||
Interest income | |||||||||||||||||||||||
Gain on debt extinguishment | |||||||||||||||||||||||
Change in fair value of warrant liabilities | |||||||||||||||||||||||
Other | ( | ( | ( | ( | |||||||||||||||||||
Other income (expenses), net | ( | ( | |||||||||||||||||||||
Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
Income taxes | |||||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net loss per common share- basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average common shares - basic and diluted |
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Stock issued to DHC shareholders in reverse recapitalization | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||
Issuance of common stock pursuant to Reseller Agreement | — | — | — | ||||||||||||||||||||||||||||||||||||||
Sale of common stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
Warrant exercises | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | ( | ||||||||||||||||||||||||||||||||||||||||
Stock issued in settlement of accounts payable and loans payable | — | — | — | ||||||||||||||||||||||||||||||||||||||
Sale of common stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
Warrant exercises | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation, including vested restricted shares | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
Warrant exercises | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock issued in conversion of accounts payable and loans payable | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Stock issued for DM Lab APA | — | — | — | ||||||||||||||||||||||||||||||||||||||
Options and warrant exercises | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock Issued in conversion of convertible notes | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock issued in settlement of accounts payable and loans payable | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization expense | |||||||||||
Allowance for uncollected receivables | |||||||||||
Write off of deferred financing fees | |||||||||||
Change in fair value of warrant liabilities | ( | ||||||||||
Gain on debt extinguishment | ( | ||||||||||
Stock based compensation, including the issuance of restricted shares | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Prepaid expense and other current assets | ( | ( | |||||||||
Accounts receivable | ( | ||||||||||
Accounts payable | ( | ||||||||||
Accrued expenses | ( | ||||||||||
Other assets | |||||||||||
Deferred revenue | ( | ||||||||||
Net cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities: | |||||||||||
Purchase of property and equipment | ( | ( | |||||||||
Purchase of patents | ( | ||||||||||
Capitalized internal-use software costs | ( | ( | |||||||||
Asset acquisition (Note E) | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Cash and cash equivalents acquired in connection with the reverse recapitalization | |||||||||||
Proceeds from the sale of common stock | |||||||||||
Proceeds from convertible notes | |||||||||||
Proceeds from related party note | |||||||||||
Proceeds received from option exercises | |||||||||||
Proceeds received from warrant exercise | |||||||||||
Payment of deferred financing costs | ( | ( | |||||||||
Payment of related party note | ( | ||||||||||
Advances to related parties | ( | ||||||||||
Proceeds received from related party advance repayments | |||||||||||
Net cash provided by financing activities | |||||||||||
Net (decrease) increase in cash and cash equivalents | ( | ||||||||||
Cash and cash equivalents at the beginning of the period | |||||||||||
Cash and cash equivalents at the end of the period | $ | $ |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Supplemental Cash Flow Information | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | $ | $ | |||||||||
Supplemental Non-Cash Information | |||||||||||
Issuance of common stock pursuant to Reseller Agreement | $ | $ | |||||||||
Stock-based compensation capitalized as part of capitalized software costs | $ | $ | |||||||||
Settlement of accounts payable and debt into common shares | $ | $ | |||||||||
Settlement of accounts payable into convertible note | $ | $ | |||||||||
Conversion of notes into common shares | $ | $ | |||||||||
Warrants exercise through settlement of accounts payable | $ | $ | |||||||||
Property and equipment in accounts payable | $ | $ | |||||||||
Financing costs in accrued expenses | $ | $ | |||||||||
Issuance of common stock in connection with asset acquisition | $ | $ |
Fair value measurement at reporting date using | |||||||||||||||||
June 30, 2024 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Liabilities: | |||||||||||||||||
Warrant liabilities - Public Warrants | $ | $ | $ | ||||||||||||||
Warrant liabilities - Private Placement Warrants | $ | $ | $ |
June 30, | |||||||||||
2024 | 2023 | ||||||||||
Unvested restricted shares | |||||||||||
Options | |||||||||||
Warrants | |||||||||||
Convertible note (as converted) | |||||||||||
Total |
Six Months Ended June 30, 2023 | ||||||||||||||||||||
As reported | Adjusted | As restated | ||||||||||||||||||
Depreciation and amortization | $ | $ | ( | $ | ||||||||||||||||
Total expenses | $ | $ | ( | $ | ||||||||||||||||
Loss from operations | $ | ( | $ | $ | ( | |||||||||||||||
Loss before income taxes | $ | ( | $ | $ | ( | |||||||||||||||
Net loss | $ | ( | $ | $ | ( | |||||||||||||||
Net loss per common share - basic and diluted | $ | ( | $ | $ | ( |
Six Months Ended June 30, 2023 | ||||||||||||||||||||
As reported | Adjusted | As restated | ||||||||||||||||||
Net loss | $ | ( | $ | $ | ( | |||||||||||||||
Depreciation and amortization expense | $ | $ | ( | $ |
March 14, 2024 | |||||
Cash and cash equivalents | $ | ||||
Due from Sponsor | |||||
Prepaid and other current assets | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Due to related parties | ( | ||||
Warrant liability | ( | ||||
Net liabilities assumed | $ | ( |
Assets Acquired | Amount Recognized | ||||
In-process research and development intangible asset | $ | ||||
Property and equipment | |||||
Liabilities assumed | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Short-term debt | ( | ||||
Total assets acquired and liabilities assumed | |||||
Total consideration | $ |
June 30, 2024 | December 31, 2023 | ||||||||||
Security deposits | $ | $ | |||||||||
Prepaid VAT | |||||||||||
Prepaid professional fees | |||||||||||
Prepaid insurance | |||||||||||
Prepaid other | |||||||||||
Prepaid expenses and other current assets | $ | $ |
June 30, 2024 | December 31, 2023 | ||||||||||
Equipment | $ | $ | |||||||||
Furniture |
Capitalized software | |||||||||||
Total | |||||||||||
Accumulated depreciation and amortization | ( | ( | |||||||||
Property and equipment, net of accumulated depreciation and amortization | $ | $ |
June 30, 2024 | |||||||||||||||||
Gross | Accumulated Amortization | Net | |||||||||||||||
Amortizing intangible assets: | |||||||||||||||||
Patent portfolio | $ | $ | ( | $ | |||||||||||||
Developed technology | ( | ||||||||||||||||
Total | $ | $ | ( | $ |
December 31, 2023 | |||||||||||||||||
Gross | Accumulated Amortization | Net | |||||||||||||||
Amortizing intangible assets: | |||||||||||||||||
Patent portfolio | $ | $ | ( | $ | |||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||
In-process research and development | — | ||||||||||||||||
Total | $ | $ | ( | $ |
Years Ending December 31: | |||||
2024 (remaining 6 months) | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
Thereafter | |||||
$ |
June 30, 2024 | December 31, 2023 | ||||||||||
Accrued professional fees | $ | $ | |||||||||
Accrued compensation and related expenses |
Due to related party | |||||||||||
Accrued other | |||||||||||
Accrued expenses | $ | $ |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Expected term | |||||||||||
Risk-free interest rate | % | % | |||||||||
Dividend yield | % | % | |||||||||
Volatility | % | % |
Number of Shares | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||||||||
Outstanding as of December 31, 2023 | $ | $ | — | — | |||||||||||||||||||
Granted | $ | $ | — | ||||||||||||||||||||
Forfeited | ( | $ | $ | — | — | ||||||||||||||||||
Outstanding as of June 30, 2024 | $ | $ | |||||||||||||||||||||
Vested and expected to vest as of June 30, 2024 | $ | $ | |||||||||||||||||||||
Exercisable as of June 30, 2024 | $ | $ |
Six Months Ended June 30, | |||||||||||
2024 | 2023 | ||||||||||
Expected term | |||||||||||
Risk-free interest rate | % | % | |||||||||
Dividend yield | % | % | |||||||||
Volatility | % | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
General and administrative | $ | $ | $ | $ | |||||||||||||||||||
Research and development | |||||||||||||||||||||||
$ | $ | $ | $ |
Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
Outstanding at January 1, 2024 | $ | ||||||||||
Granted | $ | ||||||||||
Vested | ( | $ | |||||||||
Outstanding at June 30, 2024 | $ |
Three Months Ended June 30, | Increase (Decrease) | ||||||||||||||||
2024 | 2023 | ||||||||||||||||
Revenues | $ | — | $ | — | $ | — | |||||||||||
Operating expenses: | |||||||||||||||||
General and administrative | 5,255,136 | 2,779,722 | 2,475,414 | ||||||||||||||
Depreciation and amortization | 682,244 | 220,702 | 461,542 | ||||||||||||||
Research and development | 355,565 | 76,378 | 279,187 | ||||||||||||||
Total operating expenses | 6,292,945 | 3,076,802 | 3,216,143 | ||||||||||||||
Loss from operations | (6,292,945) | (3,076,802) | (3,216,143) | ||||||||||||||
Other income (expenses): | |||||||||||||||||
Interest expense | (19,403) | — | (19,403) | ||||||||||||||
Interest income | 114 | — | 114 | ||||||||||||||
Gain on debt extinguishment | 1,847,992 | — | 1,847,992 | ||||||||||||||
Change in fair value of warrant liabilities | 1,456,661 | — | 1,456,661 | ||||||||||||||
Other | (42,123) | (31,750) | (10,373) | ||||||||||||||
Other income (expenses), net | 3,243,241 | (31,750) | 3,274,991 | ||||||||||||||
Net loss | (3,049,704) | (3,108,552) | 58,848 |
Six Months Ended June 30, | Increase (Decrease) | ||||||||||||||||
2024 | 2023 | ||||||||||||||||
Revenues | $ | 49,790 | $ | — | $ | 49,790 | |||||||||||
Operating expenses: | |||||||||||||||||
General and administrative | 11,765,671 | 5,396,446 | 6,369,225 | ||||||||||||||
Depreciation and amortization | 799,591 | 239,934 | 559,657 | ||||||||||||||
Research and development | 606,236 | 78,378 | 527,858 | ||||||||||||||
Total operating expenses | 13,171,498 | 5,714,758 | 7,456,740 | ||||||||||||||
Loss from operations | (13,121,708) | (5,714,758) | (7,406,950) | ||||||||||||||
Other income (expenses): | |||||||||||||||||
Interest expense | (44,453) | — | (44,453) | ||||||||||||||
Interest income | 3,232 | — | 3,232 | ||||||||||||||
Gain on debt extinguishment | 1,847,992 | — | 1,847,992 | ||||||||||||||
Change in fair value of warrant liabilities | 1,395,838 | — | 1,395,838 | ||||||||||||||
Other | (15,014) | (31,750) | 16,736 | ||||||||||||||
Other income (expenses), net | 3,187,595 | (31,750) | 3,219,345 | ||||||||||||||
Net loss | $ | (9,934,113) | $ | (5,746,508) | $ | (4,187,605) |
Number of Warrants | Date | ||||
100,000 | October 31, 2024 | ||||
300,000 | November 30, 2024 | ||||
300,000 | December 31, 2024 | ||||
300,000 | January 31, 2025 | ||||
300,000 | February 28, 2025 |
Six Months Ended June 30, | ||||||||||||||
2024 | 2023 | |||||||||||||
Cash used in operating activities | $ | (8,612,872) | $ | (1,251,563) | ||||||||||
Cash used in investing activities | (99,730) | (581,140) | ||||||||||||
Cash provided by financing activities | 8,459,014 | 2,118,776 | ||||||||||||
Net (decrease) increase in cash and cash equivalents | $ | (253,588) | $ | 286,073 |
10.7† | |||||||||||
31.1* | |||||||||||
31.2* | |||||||||||
32.1** | |||||||||||
32.2** | |||||||||||
101* | The following financial information from Brand Engagement Network Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Changes in Stockholders' Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements. | ||||||||||
101.INS | Inline XBRL Instance Document. | ||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | ||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||||||||
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. | ||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Brand Engagement Network Inc. | ||||||||
Date: August 14, 2024 | By: | /s/ Paul Chang | ||||||
Name: | Paul Chang | |||||||
Title: | Co-Chief Executive Officer | |||||||
(Principal Executive Officer) | ||||||||
Date: August 14, 2024 | By: | /s/ Bill Williams | ||||||
Name: | Bill Williams | |||||||
Title: | Chief Financial Officer | |||||||
(Principal Accounting Officer and Principal Financial Officer) |
/s/ Paul Chang | ||
Paul Chang | ||
Co-Chief Executive Officer |
/s/ Bill Williams | ||
Bill Williams | ||
Chief Financial Officer |
/s/ Paul Chang | ||
Paul Chang | ||
Co-Chief Executive Officer |
/s/ Bill Williams | ||
Bill Williams | ||
Chief Financial Officer |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 |
Preferred stock authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock issued (in shares) | 0 | 0 |
Preferred stock outstanding (in shares) | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 |
Common stock authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock issued (in shares) | 36,096,269 | 23,270,404 |
Common stock outstanding (in shares) | 36,096,269 | 23,270,404 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Statement) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Income Statement [Abstract] | ||||
Revenues | $ 0 | $ 0 | $ 49,790 | $ 0 |
Cost of revenues | 0 | 0 | 0 | 0 |
Gross profit | 0 | 0 | 49,790 | 0 |
Operating expenses: | ||||
General and administrative | 5,255,136 | 2,779,722 | 11,765,671 | 5,396,446 |
Depreciation and amortization | 682,244 | 220,702 | 799,591 | 239,934 |
Research and development | 355,565 | 76,378 | 606,236 | 78,378 |
Total operating expenses | 6,292,945 | 3,076,802 | 13,171,498 | 5,714,758 |
Loss from operations | (6,292,945) | (3,076,802) | (13,121,708) | (5,714,758) |
Other income (expenses): | ||||
Interest expense | (19,403) | 0 | (44,453) | 0 |
Interest income | 114 | 0 | 3,232 | 0 |
Gain on debt extinguishment | 1,847,992 | 0 | 1,847,992 | 0 |
Change in fair value of warrant liabilities | 1,456,661 | 0 | 1,395,838 | 0 |
Other | (42,123) | (31,750) | (15,014) | (31,750) |
Other income (expenses), net | 3,243,241 | (31,750) | 3,187,595 | (31,750) |
Loss before income taxes | (3,049,704) | (3,108,552) | (9,934,113) | (5,746,508) |
Income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (3,049,704) | $ (3,108,552) | $ (9,934,113) | $ (5,746,508) |
Net loss per common share- basic and diluted | ||||
Basic (in US dollars per share) | $ (0.09) | $ (0.15) | $ (0.34) | $ (0.31) |
Diluted (in US dollars per share) | $ (0.09) | $ (0.15) | $ (0.34) | $ (0.31) |
Weighted-average common shares - basic and diluted | ||||
Basic (in shares) | 33,993,867 | 20,193,447 | 29,635,857 | 18,662,480 |
Diluted (in shares) | 33,993,867 | 20,193,447 | 29,635,857 | 18,662,480 |
NATURE OF OPERATIONS AND GOING CONCERN |
6 Months Ended |
---|---|
Jun. 30, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS AND GOING CONCERN | NATURE OF OPERATIONS AND GOING CONCERN Nature of Operations Brand Engagement Network Inc. (formerly Blockchain Exchange Network Inc.) (together with its subsidiaries, "BEN" or "the Company") was formed in Jackson, Wyoming on April 17, 2018, and was named in honor of the renowned Founding Father and inventor, Benjamin Franklin. In 2019, the Company became a wholly owned subsidiary of Datum Point Labs ("DPL"), and then was spun out of DPL in May 2021. BEN acquired DPL in December 2021. The Company is an innovative AI platform provider, designed to interface with emerging technologies, including blockchain, internet of things, and cloud computing, that drives digital transformation across various industries and provides businesses with unparalleled competitive edge. BEN offers a suite of configured and customizable applications, including natural language processing, anomaly detection, encryption, recommendation engines, sentiment analysis, image recognition, personalization, and real-time decision-making. These applications help companies improve customer experiences, optimize cost drivers, mitigate risks, and enhance operational efficiency. Business Combination with DHC On March 14, 2024, the Company consummated its previously announced business combination (the “Closing”) pursuant to the Business Combination Agreement, dated September 7, 2023 (as amended, the “Business Combination Agreement”), by and among DHC Acquisition Corp., a Cayman Islands exempted company (“DHC”), Brand Engagement Network Inc., a Wyoming corporation (“Prior BEN”), BEN Merger Subsidiary Corp., a Delaware corporation and a direct, wholly owned subsidiary of DHC (“Merger Sub”) and DHC Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The transactions contemplated by the Business Combination Agreement, including the Domestication and the Merger (each as defined below) are collectively referred to herein as the “Business Combination.” Prior to the Closing, as contemplated by the Business Combination Agreement, DHC became a Delaware corporation named “Brand Engagement Network Inc.” (the “Domestication”), and (i) each issued and outstanding Class A ordinary share, par value $0.0001 per share, of DHC (the “Class A Shares”) was automatically converted, on a one-for-one basis, into a share of common stock, par value $0.0001 per share (“Common Stock”), of BEN, (ii) each issued and outstanding Class B ordinary share, par value $0.0001 per share, of DHC was automatically converted, on a one-for-one basis, into a share of Common Stock of BEN, (iii) each then-issued and outstanding public warrant of DHC, each representing a right to acquire one Class A Share for $11.50 was automatically converted, on a one-for-one basis, into a public warrant of BEN (a “Public Warrant”), which represents a right to acquire one share of Common Stock for $11.50, pursuant to Section 4.5 of the Warrant Agreement, dated March 4, 2021, by and between DHC and Continental Stock Transfer and Trust Company (the “Warrant Agreement”), (iv) each then-issued and outstanding private placement warrant, each representing a right to acquire one Class A Share for $11.50 (a “Private Placement Warrant”), was automatically converted, on a one-for-one basis, into a private placement warrant of BEN, which represents a right to acquire one share of BEN Common Stock for $11.50, pursuant to Section 4.5 of the Warrant Agreement, (v) each then-issued and outstanding unit of DHC, each representing a Class A Share and one-third of a DHC Public Warrant (a “Unit”), that had not been previously separated into the underlying Class A Share and one-third of one DHC Public Warrant upon the request of the holder thereof, were separated and automatically converted into one share of BEN Common Stock and one-third of one Public Warrant. Following the Domestication, on March 14, 2024, pursuant to the Business Combination Agreement, Merger Sub merged with and into Prior BEN (the “Merger”), with Prior BEN surviving the Merger as a direct, wholly owned subsidiary of BEN. In connection with the Merger, (i) all outstanding shares of Prior BEN’s common stock were exchanged for shares of Common Stock of BEN at an exchange ratio of 0.2701 (the “Exchange Ratio”) shares of BEN Common Stock per one share of Prior BEN common stock, (ii) each then-issued and outstanding compensatory warrant of Prior BEN, each representing a right to acquire one share of Prior BEN common stock, were assumed by BEN and adjusted pursuant to the Exchange Ratio and in accordance with the terms of their agreements, into new compensatory warrants of BEN, and (iii) each then issued and outstanding option to purchase shares of Prior BEN common stock, each representing a right to acquire one share of Prior BEN common stock, were assumed by BEN and adjusted pursuant to the Exchange Ratio and in accordance with the terms of their agreements, into options to purchase BEN Common Stock. Except as otherwise indicated, references herein to “BEN,” the “Company,” or the “Combined Company,” refer to Brand Engagement Network Inc. Inc. on a post-Merger basis, and references to “Prior BEN” refer to the business of privately-held Brand Engagement Network Inc. prior to the completion of the Merger. References to “DHC” refer to DHC Acquisition Corp. prior to the completion of the Merger. In connection with the Business Combination, the Company assumed 10,314,952 Public Warrants and 6,126,010 Private Placement Warrants. Exchange Ratio As noted in Note D, the Business Combination was accounted for as a reverse recapitalization under which the historical financial statements of the Company prior to the Merger are Prior BEN. All common stock, per share and related information presented in the unaudited condensed consolidated financial statements and notes prior to the Merger have been retroactively adjusted to reflect the Exchange Ratio. Liquidity and Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of June 30, 2024, the Company had an accumulated deficit of $23,235,833, a net loss of $9,934,113 and net cash used in operating activities of $8,612,872 during the six months ended June 30, 2024. Management expects to continue to incur operating losses and negative cash flows from operations for at least the next 12 months. The Company has financed its operations to date from proceeds from the sale of Common Stock, exercises of warrants, the issuance of promissory notes and convertible debt, and its transactions with AFG Companies Inc. (“AFG”). The Company’s current liquidity position raises substantial doubt about the Company’s ability to continue as a going concern. The Company believes that its existing cash and cash equivalents and proceeds from the May SPA (Note K) will be insufficient to meet its anticipated cash requirements for at least the next 12 months from the date the unaudited condensed consolidated financial statements are issued. The assumptions upon which the Company has based its estimates are routinely evaluated and may be subject to change. The actual amount of the Company’s expenditures will vary depending upon several factors including but not limited to the design, timing, and the progress of the Company’s research and development programs, and the level of financial resources available. The Company can adjust its operating plan spending based on available financial resources. The Company will need to raise additional capital to continue to fund operations and product research and development. The Company believes that it will be able to obtain additional working capital through equity financings, additional debt, or other arrangements to fund future operations. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and the accounts of the Company’s wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. Unaudited interim results These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual audited financial statements and the notes thereto as of and for the year ended December 31, 2023 filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on March 20, 2024. The accompanying unaudited condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited but have been prepared on the same basis as the annual audited financial statements and include all normal, recurring adjustments that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2023 have been derived from the audited financial statements filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on March 20, 2024. Use of Estimates The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Significant estimates in the Company’s consolidated financial statements include, but are not limited to, assumptions used to measure stock-based compensation, valuation of the intangible assets acquired from DM Lab (see Note E), useful life of intangible assets, warrant liabilities, and deferred customer acquisition costs. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions. Segment and geographic information Operating segments are defined as components of an entity about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The CODM for the Company is the Co-Chief Executive Officer, Paul Chang. The Company views its operations as, and manages its business in, one operating segment. The Company has an office in the Republic of Korea dedicated to research and development activities. Significant Risks and Uncertainties There can be no assurance that the Company’s research and development will be successfully commercialized. Developing and commercializing goods and services require significant time and capital and is subject to regulatory review and approval as well as competition from other AI technology companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and consultants and obtaining and protecting intellectual property. Revenue Recognition and Accounts Receivable The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all periods presented. The core principle of ASC 606 is to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. This principle is achieved by applying the following five-step approach: 1)Identification of the Contract, or Contracts, with a Customer. 2)Identification of the Performance Obligations in the Contract. 3)Determination of the Transaction Price. 4)Allocation of the Transaction Price to the Performance Obligations in the Contract. 5)Recognition of Revenue when, or as, Performance Obligations are Satisfied. Trade receivables represent amounts due from customers and are stated net of the allowance for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts, the aging of the accounts receivable, historical experience, and other currently available evidence. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. Trade receivables of the Company as of June 30, 2024 and December 31, 2023 are net of an allowance for expected credit losses amounting to $50,000 and $20,000, respectively. The Company capitalizes the incremental costs of obtaining a contract with a customer. The Company’s incremental costs are related to the shares issued in connection with the Exclusive Reseller Agreement (“Reseller Agreement”) with AFG in August 2023 (Note K). Deferred customer acquisition costs, which are recorded within other assets on the unaudited condensed consolidated balance sheet, were $13,475,000 as of June 30, 2024. The Company had no such costs as of December 31, 2023. The deferred customer acquisition costs will be accounted for as a reduction in transaction price as the Company transfers goods and services to AFG over the term of the Reseller Agreement. Impairment of Definite Lived Intangible Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds its estimated undiscounted net cash flows, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset will be accounted for as its new cost. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in an estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the asset. No impairment losses were recorded for the three or six months ended June 30, 2024 or 2023. In-Process Research and Development The fair value of in-process research and development (“IPR&D”) acquired in an asset acquisition, that has been determined to have alternative future uses in accordance with ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”), is capitalized as an indefinite-lived intangible asset until the completion of the related research and development activities in accordance with ASC 350 or the determination that impairment is necessary. If the related research and development is completed, the asset is reclassified as a definite-lived asset at the time of completion and is amortized over its estimated useful life as research and development costs in accordance with ASC 730-10-25-2(c) and ASC 350. During the three months ended June 30, 2024, the Company’s IPR&D was completed and reclassified as a definite-lived asset and began amortizing over its estimated useful life of 5 years. During the three and six months ended June 30, 2024 and 2023, the Company did not recognize an impairment charge related to its indefinite-lived IPR&D. Research and Development Costs Costs incurred in connection with research and development activities are expensed as incurred. These costs include rent for facilities, hardware and software equipment costs, employee related costs, consulting fees for technical expertise, prototyping, and testing. Stock-Based Compensation The Company recognizes stock-based compensation for stock-based awards (including stock options, restricted stock units, and restricted stock awards) in accordance with ASC Topic 718, Compensation — Stock Compensation. Determining the appropriate fair value of stock-based awards requires numerous assumptions, some of which are highly complex and subjective. The Company estimates the fair value of its stock option and warrant awards on the grant date using the Black-Scholes option-pricing model. The fair value of each restricted stock award is measured as the fair value per share of the Company’s Common Stock at the date of grant. Stock-based awards generally vest subject to the satisfaction of service requirements, or the satisfaction of both service requirements and achievement of certain performance conditions or market and service conditions. For stock-based awards that vest subject to the satisfaction of service requirements or market and service conditions, stock-based compensation is measured based on the fair value of the award on the date of grant and is recognized as stock-based compensation on a straight-line basis over the requisite service period. For stock-based awards that have a performance component, stock-based compensation is measured based on the fair value on the grant date and is recognized over the requisite service period as achievement of the performance objective becomes probable. The Black-Scholes option-pricing model requires the use of judgments and assumptions, including fair value of its Common Stock, the option’s expected term, the expected price volatility of the underlying stock, risk free interest rates and the expected dividend yield. The Black-Scholes model assumptions are further described below: •Common stock — the fair value of the Company’s Common Stock. •Expected Term — The expected term of employee options with service-based vesting is determined using the “simplified” method, as prescribed in the SEC’s Staff Accounting Bulletin No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of nonemployee options is equal to the contractual term. •Expected Volatility — The Company lacks its own historical stock data. Therefore, it estimates its expected stock volatility based primarily on the historical volatility of a publicly traded set of peer companies. •Risk-Free Interest Rate — The Company bases the risk-free interest rate on the U.S. Treasury yield curve commensurate with the expected term of each option. •Expected Dividend —The Company has never declared or paid any cash dividends on its Common Stock and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models. Cash and Cash Equivalents The Company considers all highly-liquid investments, readily convertible to cash, and which have a remaining maturity date of three months or less at the date of purchase, to be cash equivalents. Cash and cash equivalents are recorded at fair value and are held for the purpose of meeting short-term liquidity requirements, rather than for investment purposes. The Company maintains its cash and cash equivalent balances in the form of business checking accounts and money market accounts, the balances of which, at times, may exceed federally insured limits. Capitalized Internal-Use Software Costs Pursuant to ASC 350-40, Internal-Use Software, the Company capitalizes development costs for internal use software projects once the preliminary project stage is completed, management commits to funding the project, and it is probable that the project will be completed, and the software will be used to perform the function intended. The Company ceases capitalization at such time as the computer software project is substantially complete and ready for its intended use. The determination that a software project is eligible for capitalization and the ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, estimated economic life and changes in software and hardware technologies. The Company capitalizes costs for internal-use software once project approval, funding, and feasibility are confirmed. These costs primarily consist of external consulting fees and direct labor costs. During the three months ended June 30, 2024, $645,683 of the Company’s internal-use software became ready for its intended use and, as a result, the Company reclassified this internal-use software to developed software intangible assets and began amortizing the intangible asset. The useful life of the developed software intangible asset ranges from 3 to 5 years. During the three and six months ended June 30, 2024, the Company recorded $16,364 in amortization expense related to the developed software. As of June 30, 2024, the cost of the Company’s capitalized internal-use software was $150,421, which is included within property and equipment, net of accumulated depreciation and amortization in the accompanying unaudited condensed consolidated balance sheet. No impairment losses were recorded for the three and six months ended June 30, 2024. Leases The Company’s accounting policy provides that leases with an initial term of 12 months or less will not be recognized as right-of-use assets and lease liabilities on its unaudited condensed consolidated balance sheet. Lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term. Foreign Currency Transactions Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Gains and losses arising from foreign currency transactions and the effects of remeasurements are captured within the net loss within statement of operations. Foreign currency transaction gains and losses were not material for the three and six months ended June 30, 2024 and 2023. Warrant Liabilities The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, ASC Topic 505, Equity, and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company accounts for the Public Warrants and Private Placement Warrants in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Public Warrants and Private Placement Warrants as liabilities at their fair value and adjust the Public Warrants and Private Placement Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statements of operations. Fair Value of Financial Instruments The Company accounts for financial instruments under ASC 820, Fair Value Measurements (“ASC 820”). This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and Level 3 — assets and liabilities whose significant value drivers are unobservable. The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
The Public Warrants and Private Placement Warrants assumed in connection with the Business Combination were accounted for as liabilities in accordance with ASC 815 and are presented within warrant liabilities on the accompanying unaudited condensed consolidated balance sheets. The warrant liabilities are initially measured at fair value at the day of the Business Combination and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations. The fair value of the Public Warrants and Private Placement Warrants is estimated based on the closing price of the Public Warrants, an observable market quote but is classified as a Level 2 fair value measurement due to the lack of an active market. Net Loss per Share Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted loss per share reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding instruments are exercised/converted, and the proceeds are used to purchase Common Stock at the average market price during the period. Instruments may have a dilutive effect under the treasury stock method only when the average market price of the Common Stock during the period exceeds the exercise price/conversion rate of the instruments. The Company accounts for stock issued in spin-out transactions and consummations of mergers of entities under common control retrospectively. For diluted net loss per share, the weighted-average number of shares of Common Stock is the same for basic net loss per share due to the fact that when a net loss exists, potentially dilutive securities are not included in the calculation when the impact is anti-dilutive. The following potentially dilutive securities are excluded from the calculation of weighted average shares of Common Stock outstanding because their inclusion would have been anti-dilutive:
Recently Issued but Not Yet Adopted Accounting Standards In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
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MERGER WITH DHC |
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Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MERGER WITH DHC | MERGER WITH DHC On March 14, 2024, Prior BEN completed the Merger with DHC as discussed in Note A. The Merger was accounted for as a reverse recapitalization under U.S. GAAP because the primary assets of DHC were cash and cash equivalents. For financial reporting purposes Prior BEN was determined to be the accounting acquirer based upon the terms of the Merger and other factors, including: (i) Prior BEN stockholders owned approximately 76% of the Combined Company and (ii) Prior BEN management held all key positions of management. Accordingly, the Merger was treated as the equivalent of Prior BEN issuing stock to assume the net liabilities of DHC. As a result of the Merger, the net liabilities of DHC were recorded at their historical cost in the unaudited condensed consolidated financial statements and the reported operating results prior to the Merger are those of Prior BEN. The following table summarizes the assets acquired and liabilities assumed as part of the reverse recapitalization:
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ACQUISITIONS |
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Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS | ACQUISITIONS On May 3, 2023, in connection with the development the Company’s core technology, the Company entered into an Asset Purchase Agreement with DM Lab Co., LTD (“DM Lab”), to acquire certain assets and assume certain liabilities in exchange for 16,012,750 shares of Common Stock with a fair value of $16,012,750 and $257,112 in cash consideration including $107,112 in transaction-related costs. The Company accounted for the transaction with DM Lab as an asset acquisition as the acquired set passed the screen test and as such did not meet the criteria to be considered a business according to ASC 805, Business Combinations. The total consideration paid including transaction-related costs was allocated to identifiable intangible and tangible assets acquired based on their acquisition date estimated fair values. The largest asset acquired was the in-process research and development intangible asset which the Company determined had alternative future uses and capitalized as an indefinite-lived intangible asset until the completion of the related research and development activities in accordance with ASC 350 or the determination that impairment is necessary. The in-process research and development intangible asset was valued using the multi-period excess earnings method which requires several judgements and assumptions to determine the fair value of intangible assets, including growth rates, EBITDA margins, and discount rates, among others. This nonrecurring fair value measurement is a Level 3 measurement within the fair value hierarchy. The following table summarizes the fair value of consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition date fair values.
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PREPAID EXPENSES AND OTHER CURRENT ASSETS |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following:
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PROPERTY AND EQUIPMENT, NET |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET Property and equipment include equipment, furniture, and capitalized software. Furniture and equipment are depreciated using the straight-line method over estimated useful lives of three years. Capitalized software costs are amortized straight-line over an estimated useful life ranging from 5 to 10 years. Property and equipment consists of the following:
For the three months ended June 30, 2024 and 2023 depreciation and amortization of property and equipment totaled $55,792 and $38,626, respectively. For the six months ended June 30, 2024 and 2023 depreciation and amortization of property and equipment totaled $138,078 and $38,626, respectively.
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INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | INTANGIBLE ASSETS The following table summarizes intangible assets included on the consolidated balance sheet:
Total amortization expense was $626,452 and $182,076 for the three months ended June 30, 2024 and 2023, respectively. Total amortization expense was $661,513 and $201,308 for the six months ended June 30, 2024 and 2023, respectively. Future amortization of intangible assets are estimated to be as follows:
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ACCRUED EXPENSES |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES | ACCRUED EXPENSES Accrued expenses consist of the following:
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SHORT-TERM DEBT RELATED TO ACQUISITION OF DM LAB |
6 Months Ended |
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Jun. 30, 2024 | |
Debt Disclosure [Abstract] | |
SHORT-TERM DEBT RELATED TO ACQUISITION OF DM LAB | DEBT Convertible Notes On April 12, 2024, the Company issued a convertible promissory note to J.V.B. Financial Group, LLC, acting through its Cohen & Company Capital Markets division (“CCM”) in the principal amount of $1,900,000 (the “Cohen Convertible Note”), to settle outstanding invoices totaling $1,900,000 related to investment banking services rendered to the Company in connection with the Business Combination. Beginning on October 14, 2024, interest will accrue at the fixed rate of 8% per annum on the outstanding principal amount until the Cohen Convertible Note is paid in full. Interest is payable monthly in cash or in-kind at the election of the Company. The Company may prepay the Cohen Convertible Note in whole or in part at any time or from time to time without penalty or premium. The Company may be required to prepay all or a portion of the Cohen Convertible Note upon the consummation of certain capital raising activities as described therein. The maturity date of the Cohen Convertible Note is March 14, 2025. Beginning on December 14, 2024 (the “First Conversion Date”), the Cohen Convertible Note is convertible into shares of Common Stock of the Company equal to: (i) up to 40% of the outstanding principal balance plus accrued interest due under the Cohen Convertible Note divided by (ii) a price per share (the “Conversion Purchase Price”) equal to 92.75% of the arithmetic average of the Daily Volume-Weighted Average Price (“VWAP”) for the five VWAP Trading Days (as defined therein) ending on the VWAP Trading Day immediately preceding the applicable Conversion Date (as defined below); provided, that, if the Conversion Purchase Price is less than $1.20 per share (the “Floor Price”) on the Conversion Date, CCM may not convert any portion of the Cohen Convertible Note on such Conversion Date at a price less than the Floor Price. Additionally, on the 14th day of each successive month commencing with January 14, 2025 (each such day, an “Additional Conversion Date” and together with the First Conversion Date, the “Conversion Dates”), CCM may convert a portion of Cohen Convertible Note to a number of shares equal to (i) up to 20% of the outstanding principal balance of the Cohen Convertible Note plus accrued interest due under the Cohen Convertible Note divided by (ii) the Conversion Purchase Price (subject to the Floor Price). A maximum of 1,583,334 shares of Common Stock may be issued upon conversion of the Cohen Convertible Note. Short-term Debt Related to Acquisition of DM Lab As of June 30, 2024, the Company had four loans outstanding that were assumed in the DM Lab transaction, totaling $891,974, a decrease of $252,601 from the acquisition date due to the amount converted to equity on May 25, 2023. The loans carry varying interest rates ranging from 4.667% to 6.69%. During the three months ended June 30, 2024 and 2023 the Company incurred interest expense of $11,404 and $15,585, respectively, which is included in interest expense in the unaudited condensed consolidated statement of operations. During the six months ended June 30, 2024 and 2023, the Company incurred interest expense of $27,020 and $15,585, respectively. All loans are due within 12 months from the balance sheet date and have no optional or mandatory redemption or conversion features. These obligations have been classified as current liabilities on the balance sheet and the fair value of the loans approximates the carrying amount due to their short-term nature. Additionally, there are no associated restrictive covenants, third-party guarantees, or pledged collateral. As of the reporting date, there have been no defaults on these loans. In February 2024, the Company obtained a waiver to extend the due dates of $668,674 of its short-term debt to January 2025.
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STOCKHOLDERS’ EQUITY |
6 Months Ended |
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Jun. 30, 2024 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY In August 2023, the Company entered into the Reseller Agreement with AFG whereby AFG agreed to operate as the exclusive channel partner and reseller of the Company’s software as a service in the motor vehicle marketing and manufacturing industry for a term of five years. The Company issued to AFG 1,750,000 shares of Common Stock with an aggregate fair value of $13,475,000 based on the closing stock price on the date of the Merger which is recorded within other assets on the unaudited condensed consolidated balance sheet. This amount will be accounted for as a reduction in transaction price as the Company transfers goods and services to AFG over the term of the Reseller Agreement. Additionally, the Company issued a non-transferable warrant (“Reseller Warrant”) that entitles AFG to purchase up to 3,750,000 shares of Common Stock at an exercise price of $10.00 and a fair value of $2.52 per warrant. The Reseller Warrant is divided into eleven tranches and each warrant tranche will become exercisable for a three-year period if the amount actually paid by AFG during an annual period meets or exceeds the corresponding threshold. As of June 30, 2024, none of the warrant tranches were exercisable as the vesting condition was not yet probable. When the vesting condition becomes probable, the fair value of the warrant tranche will be accounted for as a reduction in transaction price as the Company transfers goods and services to AFG during the annual period. On March 14, 2024 in connection with the Closing, the issuance of 7,885,220 shares of Common Stock to DHC stockholders as consideration for the Merger was reflected on the unaudited condensed consolidated statements of stockholders’ equity (deficit). Further, upon completion of the Merger, the Company’s Certificate of Incorporation and Bylaws were adopted, authorizing the issuance of 750,000,000 shares of Common Stock, par value of $0.0001 per share and 10,000,000 shares of Preferred Stock, par value of $0.0001 per share. In March 2024, concurrent with the Merger, the Company sold 550,000 shares of Common Stock to AFG for gross proceeds of $5,500,000. On May 28, 2024, the Company entered into a Securities Purchase Agreement (the “May SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers an aggregate of 1,980,000 shares of Common Stock of the Company at a price per share of $2.50 and an aggregate of 3,960,000 warrants to purchase 3,960,000 shares of Common Stock, which was divided into two tranches consisting of (i) 1,980,000 warrants immediately exercisable for a term of one year from (the “May One-Year Warrants”) and (ii) 1,980,000 warrants immediately exercisable for a term of five years (the “May Five-Year Warrants,” together with the May One-Year Warrants, the “May Warrants”), each with an exercise price of $2.50 per share, subject to customary adjustments, for an aggregate purchase price of $4,950,000. Through June 30, 2024, the Company issued an aggregate 877,500 shares of Common Stock to the Purchasers for net proceeds of $1,993,750. Upon the issuances of such shares of Common Stock, an aggregate 877,500 May One-Year Warrants and 877,500 May Five-Year Warrants were issued to the Purchasers and are currently exercisable. The remaining unissued shares and May Warrants remain in escrow until the conditions in the May SPA are satisfied. The Purchaser shall be required to pay to the Company monthly cash installments in the amounts and on the dates as determined in the May SPA ending on October 29, 2024. For every $2.50 paid to the Company, the Company will release one share of Common Stock and two May Warrants from escrow to the Purchasers. If a Purchaser fails to pay its required funding by the respective deadline, the Purchaser’s entire commitment under the May SPA will become immediately due and payable. Common Stock Warrants In connection with the Business Combination, the Company assumed 10,314,952 Public Warrants and 6,126,010 Private Placement Warrants which are all outstanding as of June 30, 2024. Each whole Public Warrant and Private Placement Warrant entitles the holder to purchase one share of the Company’s Common Stock at an exercise price of $11.50 per share. The Public Warrants and Private Placement Warrants were exercisable beginning on April 13, 2024 and expire on April 14, 2029. The Private Placement Warrants are identical to the Public Warrants, except that (x) the Private Placement Warrants and the Common Stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until 30 days after the completion of a business combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable as described above so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. In connection with the May SPA, the Company also entered into a Letter Agreement to Exercise Warrants (“May Warrant Exercise Agreement”) with certain of the Purchasers (the “Required Warrant Parties”). Under the May Warrant Exercise Agreement, if the Company uses commercially reasonable efforts to raise an additional $3,250,000 in capital (excluding amounts raised under the May SPA) but is unable to do so by October 31, 2024, the Required Warrant Parties will be required to exercise for cash certain of their May Warrants on a monthly basis in the amounts and on the dates as determined in the May Warrant Exercise Agreement. For each May Warrant so exercised, the Company will issue one new May One-Year Warrant and one new May Five-Year Warrant (collectively, “May Reload Warrants”) each with an exercise price of $2.50 to the Required Warrant Party. A maximum of 2,600,000 May Reload Warrants may be issued pursuant to the May Warrant Exercise Agreement. As of June 30, 2024 there were 1,755,000 May Warrants outstanding at an exercise price of $2.50 per share. As of June 30, 2024, there were no May Reload Warrants issued. Equity Compensation Plans 2021 Incentive Stock Option Plan In May 2021, the Company adopted the 2021 Incentive Stock Option Plan (“2021 Option Plan”) that provides for the grant of the following types of stock awards: (i) incentive stock Options, (ii) non-statutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards, and (vi) other stock awards. The 2021 Option Plan was administered by the Company’s Board of Directors (the “Board of Directors”). In connection with the Closing, all outstanding awards were assumed by BEN pursuant to the terms of the Business Combination Agreement and the Board of Directors declared that there will be no further issuances under the 2021 Option Plan. 2023 Long-Term Incentive Plan In connection with the Closing, the 2023 Long-Term Incentive Plan (the “2023 Plan”) became effective. The 2023 Plan provides for the grant of the following types of stock awards: (i) incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights, (iv) restricted stock, (v) restricted stock units, (vi) performance awards, (vii) dividend equivalent rights, (viii) performance awards, (ix) performance goals, (x) tandem awards, (xi) prior plan awards, and (xii) other awards. The 2023 Plan is administered by the Board of Directors. The 2023 Plan awards are available to employees, officers and contractors. The option grants authorized for issuance under the 2023 Plan may total up to 2,942,245 shares of Common Stock. As of June 30, 2024, 2,555,256 shares remained available for grant under the 2023 Plan.
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EQUITY-BASED COMPENSATION |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY-BASED COMPENSATION | EQUITY-BASED COMPENSATION Option Awards 2024 Activity The Company granted options to acquire 108,040 shares of Common Stock of the Company at weighted average exercise price of $8.10 per share in the six months ended June 30, 2024. Generally, options have a service vesting condition of 25% cliff after 1 year and then monthly thereafter for 36 months (2.067% per month). The following table provides the estimates included in the inputs to the Black-Scholes pricing model for the options granted:
A summary of option activity for the six months ended June 30, 2024 is as follows:
The aggregate intrinsic value of options outstanding and options exercisable as of June 30, 2024 was $623,931 and $428,953, respectively. At June 30, 2024, future stock-based compensation for options granted and outstanding of $1,539,203 will be recognized over a remaining weighted-average requisite service period of 3.28 years. The Company recorded stock-based compensation expense related to options of $291,610 and $1,841,767 in the three months ended June 30, 2024 and 2023, respectively, to the accompanying statements of operations. The Company recorded stock-based compensation expense related to options of $698,590 and $4,284,468 in the six months ended June 30, 2024 and 2023, respectively, to the accompanying statements of operations. Common Stock Warrants AFG Warrants There were 3,750,000 warrants granted to AFG during the six months ended June 30, 2024 at an exercise price of $10.00 and a fair value of $2.52 per warrant (Note K). Compensatory Warrants There were 54,019 warrants exercised in the six months ended June 30, 2024 at a weighted average exercise price of $0.38 per share. As of June 30, 2024, there were 985,864 warrants outstanding at a weighted average exercise price of $3.12 per share, with expiration dates ranging from 2025 to 2033. The Company recorded $61,691 and $1,815,496 stock-based compensation expense related to warrants for the three and six months ended June 30, 2023. There was no such expense during the three and six months ended June 30, 2024. The following table provides the estimates included in the inputs to the Black-Scholes pricing model for the AFG and compensatory warrants granted:
The Company has recorded stock-based compensation related to its options and warrants in the accompanying unaudited condensed consolidated statements of operations as follows:
Stock-based compensation capitalized as part of capitalized software costs for the six months ended June 30, 2024 were $205,154 which is in addition to amounts included in the table above. No stock-based compensation costs were capitalized during the three or six months ended June 30, 2023. Restricted share awards During the six months ended June 30, 2024, the Company issued 417,376 restricted share awards to certain of its directors and officers. Of the restricted share awards granted, 381,915 shares vested immediately upon grant, while 35,461 shares vest in the third quarter of 2024. The fair value of a restricted share award is equal to the fair market value price of the Company's Common Stock on the date of grant. The Company recorded stock-based compensation expense of $563,500 for the three and six months ended June 30, 2024 related to these restricted share awards. The following table summarizes activity related to restricted share awards:
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RELATED PARTY TRANSACTIONS |
6 Months Ended |
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Jun. 30, 2024 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS AFG Reseller Agreement On August 19, 2023, the Company entered into Reseller Agreement, providing for, among other things, AFG to act as the Company’s exclusive reseller of certain products on terms and conditions set forth therein and, as partial consideration to AFG for such services, the Company issued 1,750,000 shares of Common Stock with an aggregate fair value of $13,475,000 based on the closing stock price on the date of the Merger. Additionally, the Company issued AFG a warrant to purchase up to 3,750,000 shares of Common Stock, with each warrant exercisable for one share of Common Stock at an exercise price of $10.00 and a fair value of $2.52 per warrant (Note K). During the six months ended June 30, 2024 there was no revenue recognized pursuant to the Reseller Agreement. Advances to Officers and Directors Certain officers and directors advanced funds to or were advanced from the Company on an undocumented, non-interested bearing, due on demand basis. As of June 30, 2024, $380,000 and $30,570 of amounts owed to related parties were included within accrued expenses and accounts payable, respectively, in the accompanying unaudited condensed consolidated balance sheet. As of December 31, 2023, $178,723 and $48,069 of amounts owed to related parties were included within accrued expenses and accounts payable, respectively, in the accompanying consolidated balance sheet. During the three months ended June 30, 2024 and 2023, the Company recorded professional and other fees and costs related to consulting services from related parties of $66,102 and $116,927, respectively, within general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. During the six months ended June 30, 2024 and 2023, the Company recorded professional and other fees and cost related to consulting services from related parties of $124,887 and $157,217, respectively, within general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Promissory Note On June 30, 2023, the Company entered into a promissory note agreement with a related party for $620,000. The note bears interest at 7% per annum and matures on June 25, 2025. During the three and six months ended June 30, 2024, the Company issued 93,333 shares of Common Stock to extinguish the outstanding balance of $420,000, resulting in a gain on debt extinguishment of $97,992 in the accompanying unaudited condensed consolidated statements of operations. Related Party Advance The Company received non-interest bearing and payable upon demand related party advances from DHC’s Sponsor in connection with the Merger. As of June 30, 2024, the Company had $693,036 in related party advances in the accompanying unaudited consolidated balance sheets.
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES The Company is subject to various legal and regulatory proceedings, claims, and assessments, as well as other contingencies, that arise in the ordinary course of business. The Company accrues for these contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company regularly reviews and updates its accruals for contingencies and makes adjustments as necessary based on changes in circumstances and the emergence of new information. Litigation Liabilities for loss contingencies, arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Employment contracts The Company has entered into employment contracts with its officers and certain employees that provide for severance and continuation benefits in the event of termination of employment either by the Company without cause or by the employee for good reason, both as defined in the agreements, along with any unpaid vested options, equity or earned bonuses. In addition, in the event of termination of employment following a change in control, as defined in each agreement the employee shall receive a prorated bonus payment and severance payments (as defined in each agreement). Korea University The Company is party to multiple research and development sponsorship agreement with Korea University. Pursuant to a sponsorship agreement entered into in November 2023, the Company agreed to pay 21.6 million Korean won (approximately $15,552) to Korea University during the period from November 1, 2023 through March 10, 2024. As of June 30, 2024, the Company paid the agreed upon funding of $15,552. The Company entered into another sponsorship agreement in December 2023 for total consideration of up to 528.0 million Korean won (approximately $380,160) from January 2024 through December 2024. The Company can terminate the agreement upon written notice to Korea University for a period of at least one month. As of June 30, 2024, the Company had paid 211.2 million Korean won (approximately $152,064) and owes the remaining 316.8 million Korean won (approximately $228,096) throughout the remainder of 2024.
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2024 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On July 1, 2024, the Company entered into a separate Securities Purchase Agreement (the “July SPA”) with The Williams Family Trust for the issuance and sale of 120,000 shares of Common Stock at a price per share of $2.50 and an aggregate of 240,000 warrants, consisting of (i) 120,000 warrants with a term of one year and (ii) 120,000 warrants with a term of five years for an aggregate purchase price of $300,000. The warrants are immediately exercisable for Common Stock at a price of $2.50 per share.
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RESTATEMENT OF PREVIOUSLY ISSUED (UNAUDITED) INTERIM FINANCIAL STATEMENTS |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTATEMENT OF PREVIOUSLY ISSUED (UNAUDITED) INTERIM FINANCIAL STATEMENTS | RESTATEMENT OF PREVIOUSLY ISSUED (UNAUDITED) INTERIM FINANCIAL STATEMENTS During the first quarter of 2024, in connection with preparing its third amendment to its Registration Statement on Form S-4 related to the Business Combination, the Company restated previously issued unaudited interim financial statements. The restatement was a result of the Company re-evaluating the application of ASC 805 and ASC 350 for the accounting classification of the acquired developed technology intangible asset from DM Lab (Note E). While the AI based software modules had completed development, the technology was not ready for commercialization. As such, the Company reclassified the acquired developed technology from an amortizing intangible asset to an indefinite-lived in-process research and development asset until the abandonment or completion of the associated development efforts. If abandoned, the asset will be expensed in the period of abandonment. If completed, the asset will begin to be amortized over its estimated useful life. Given the change in classification, the previously recorded amortization expense was reversed. Additionally, the in-process research and development asset was recorded at its fair value of $17,000,000 and the excess consideration transferred was allocated to the acquired property and equipment which resulted in additional depreciation expense for the period. The following tables set forth the effects of the error corrections on affected items within the Company’s previously reported unaudited interim condensed consolidated statements of operations for the periods indicated had the adjustments been made in the corresponding period:
The following tables set forth the effects of the error corrections on affected items within the Company’s previously reported unaudited interim condensed consolidated statements of cash flows for the periods indicated had the adjustments been made in the corresponding period:
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Pay vs Performance Disclosure - USD ($) |
3 Months Ended | 6 Months Ended | ||||
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Jun. 30, 2024 |
Mar. 31, 2024 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
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Pay vs Performance Disclosure | ||||||
Net loss | $ (3,049,704) | $ (6,884,409) | $ (3,108,552) | $ (2,637,956) | $ (9,934,113) | $ (5,746,508) |
Insider Trading Arrangements |
3 Months Ended |
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Jun. 30, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and the accounts of the Company’s wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC.
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Use of Estimates | Use of Estimates The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Significant estimates in the Company’s consolidated financial statements include, but are not limited to, assumptions used to measure stock-based compensation, valuation of the intangible assets acquired from DM Lab (see Note E), useful life of intangible assets, warrant liabilities, and deferred customer acquisition costs. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.
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Segment and geographic information | Segment and geographic information Operating segments are defined as components of an entity about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The CODM for the Company is the Co-Chief Executive Officer, Paul Chang. The Company views its operations as, and manages its business in, one operating segment.
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Revenue Recognition and Accounts Receivable | Revenue Recognition and Accounts Receivable The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all periods presented. The core principle of ASC 606 is to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. This principle is achieved by applying the following five-step approach: 1)Identification of the Contract, or Contracts, with a Customer. 2)Identification of the Performance Obligations in the Contract. 3)Determination of the Transaction Price. 4)Allocation of the Transaction Price to the Performance Obligations in the Contract. 5)Recognition of Revenue when, or as, Performance Obligations are Satisfied. Trade receivables represent amounts due from customers and are stated net of the allowance for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts, the aging of the accounts receivable, historical experience, and other currently available evidence. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected.
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Impairment of Definite Lived Intangible Assets | Impairment of Definite Lived Intangible Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds its estimated undiscounted net cash flows, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset will be accounted for as its new cost. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in an estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the asset.
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In-Process Research and Development | In-Process Research and Development The fair value of in-process research and development (“IPR&D”) acquired in an asset acquisition, that has been determined to have alternative future uses in accordance with ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”), is capitalized as an indefinite-lived intangible asset until the completion of the related research and development activities in accordance with ASC 350 or the determination that impairment is necessary. If the related research and development is completed, the asset is reclassified as a definite-lived asset at the time of completion and is amortized over its estimated useful life as research and development costs in accordance with ASC 730-10-25-2(c) and ASC 350. During the three months ended June 30, 2024, the Company’s IPR&D was completed and reclassified as a definite-lived asset and began amortizing over its estimated useful life of 5 years.
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Research and Development Costs | Research and Development Costs Costs incurred in connection with research and development activities are expensed as incurred. These costs include rent for facilities, hardware and software equipment costs, employee related costs, consulting fees for technical expertise, prototyping, and testing.
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Stock Compensation | Stock-Based Compensation The Company recognizes stock-based compensation for stock-based awards (including stock options, restricted stock units, and restricted stock awards) in accordance with ASC Topic 718, Compensation — Stock Compensation. Determining the appropriate fair value of stock-based awards requires numerous assumptions, some of which are highly complex and subjective. The Company estimates the fair value of its stock option and warrant awards on the grant date using the Black-Scholes option-pricing model. The fair value of each restricted stock award is measured as the fair value per share of the Company’s Common Stock at the date of grant. Stock-based awards generally vest subject to the satisfaction of service requirements, or the satisfaction of both service requirements and achievement of certain performance conditions or market and service conditions. For stock-based awards that vest subject to the satisfaction of service requirements or market and service conditions, stock-based compensation is measured based on the fair value of the award on the date of grant and is recognized as stock-based compensation on a straight-line basis over the requisite service period. For stock-based awards that have a performance component, stock-based compensation is measured based on the fair value on the grant date and is recognized over the requisite service period as achievement of the performance objective becomes probable. The Black-Scholes option-pricing model requires the use of judgments and assumptions, including fair value of its Common Stock, the option’s expected term, the expected price volatility of the underlying stock, risk free interest rates and the expected dividend yield. The Black-Scholes model assumptions are further described below: •Common stock — the fair value of the Company’s Common Stock. •Expected Term — The expected term of employee options with service-based vesting is determined using the “simplified” method, as prescribed in the SEC’s Staff Accounting Bulletin No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of nonemployee options is equal to the contractual term. •Expected Volatility — The Company lacks its own historical stock data. Therefore, it estimates its expected stock volatility based primarily on the historical volatility of a publicly traded set of peer companies. •Risk-Free Interest Rate — The Company bases the risk-free interest rate on the U.S. Treasury yield curve commensurate with the expected term of each option. •Expected Dividend —The Company has never declared or paid any cash dividends on its Common Stock and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly-liquid investments, readily convertible to cash, and which have a remaining maturity date of three months or less at the date of purchase, to be cash equivalents. Cash and cash equivalents are recorded at fair value and are held for the purpose of meeting short-term liquidity requirements, rather than for investment purposes. The Company maintains its cash and cash equivalent balances in the form of business checking accounts and money market accounts, the balances of which, at times, may exceed federally insured limits.
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Capitalized Internal-Use Software Costs | Capitalized Internal-Use Software Costs Pursuant to ASC 350-40, Internal-Use Software, the Company capitalizes development costs for internal use software projects once the preliminary project stage is completed, management commits to funding the project, and it is probable that the project will be completed, and the software will be used to perform the function intended. The Company ceases capitalization at such time as the computer software project is substantially complete and ready for its intended use. The determination that a software project is eligible for capitalization and the ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, estimated economic life and changes in software and hardware technologies. The Company capitalizes costs for internal-use software once project approval, funding, and feasibility are confirmed. These costs primarily consist of external consulting fees and direct labor costs.
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Leases | Leases The Company’s accounting policy provides that leases with an initial term of 12 months or less will not be recognized as right-of-use assets and lease liabilities on its unaudited condensed consolidated balance sheet. Lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.
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Foreign Currency Transactions | Foreign Currency Transactions Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Gains and losses arising from foreign currency transactions and the effects of remeasurements are captured within the net loss within statement of operations.
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Warrant Liabilities | Warrant Liabilities The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, ASC Topic 505, Equity, and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company accounts for the Public Warrants and Private Placement Warrants in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Public Warrants and Private Placement Warrants as liabilities at their fair value and adjust the Public Warrants and Private Placement Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statements of operations.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company accounts for financial instruments under ASC 820, Fair Value Measurements (“ASC 820”). This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and Level 3 — assets and liabilities whose significant value drivers are unobservable. The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
The Public Warrants and Private Placement Warrants assumed in connection with the Business Combination were accounted for as liabilities in accordance with ASC 815 and are presented within warrant liabilities on the accompanying unaudited condensed consolidated balance sheets. The warrant liabilities are initially measured at fair value at the day of the Business Combination and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations. The fair value of the Public Warrants and Private Placement Warrants is estimated based on the closing price of the Public Warrants, an observable market quote but is classified as a Level 2 fair value measurement due to the lack of an active market.
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Net Loss per Share | Net Loss per Share Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted loss per share reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding instruments are exercised/converted, and the proceeds are used to purchase Common Stock at the average market price during the period. Instruments may have a dilutive effect under the treasury stock method only when the average market price of the Common Stock during the period exceeds the exercise price/conversion rate of the instruments. The Company accounts for stock issued in spin-out transactions and consummations of mergers of entities under common control retrospectively. For diluted net loss per share, the weighted-average number of shares of Common Stock is the same for basic net loss per share due to the fact that when a net loss exists, potentially dilutive securities are not included in the calculation when the impact is anti-dilutive.
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Recently Adopted Accounting Standards | Recently Issued but Not Yet Adopted Accounting Standards In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Liabilities Measured on Recurring Basis | The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following potentially dilutive securities are excluded from the calculation of weighted average shares of Common Stock outstanding because their inclusion would have been anti-dilutive:
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MERGER WITH DHC (Tables) |
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | As a result of the Merger, the net liabilities of DHC were recorded at their historical cost in the unaudited condensed consolidated financial statements and the reported operating results prior to the Merger are those of Prior BEN. The following table summarizes the assets acquired and liabilities assumed as part of the reverse recapitalization:
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ACQUISITIONS (Tables) |
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Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Acquisition | The following table summarizes the fair value of consideration transferred and its allocation to the assets acquired and liabilities assumed at their acquisition date fair values.
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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Current Assets | Prepaid expenses and other current assets consisted of the following:
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PROPERTY AND EQUIPMENT, NET (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | Property and equipment consists of the following:
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INTANGIBLE ASSETS (Tables) |
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | The following table summarizes intangible assets included on the consolidated balance sheet:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Indefinite-Lived Intangible Assets | The following table summarizes intangible assets included on the consolidated balance sheet:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Future amortization of intangible assets are estimated to be as follows:
|
ACCRUED EXPENSES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities | Accrued expenses consist of the following:
|
EQUITY-BASED COMPENSATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions | The following table provides the estimates included in the inputs to the Black-Scholes pricing model for the options granted:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement, Option, Activity | A summary of option activity for the six months ended June 30, 2024 is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement Inputs and Valuation Techniques | The following table provides the estimates included in the inputs to the Black-Scholes pricing model for the AFG and compensatory warrants granted:
|
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Share-Based Payment Arrangement, Expensed and Capitalized, Amount | The Company has recorded stock-based compensation related to its options and warrants in the accompanying unaudited condensed consolidated statements of operations as follows:
|
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Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity | The following table summarizes activity related to restricted share awards:
|
RESTATEMENT OF PREVIOUSLY ISSUED (UNAUDITED) INTERIM FINANCIAL STATEMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Error Corrections and Prior Period Adjustments | The following tables set forth the effects of the error corrections on affected items within the Company’s previously reported unaudited interim condensed consolidated statements of operations for the periods indicated had the adjustments been made in the corresponding period:
The following tables set forth the effects of the error corrections on affected items within the Company’s previously reported unaudited interim condensed consolidated statements of cash flows for the periods indicated had the adjustments been made in the corresponding period:
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Antidilutive Securities (Details) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 27,059,174 | 2,987,474 |
Stock Option | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 2,508,553 | 1,920,579 |
Warrant | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 22,931,826 | 1,066,895 |
Convertible Notes Payable | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 1,583,334 | 0 |
Restricted Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 35,461 | 0 |
MERGER WITH DHC - Narrative (Details) - USD ($) |
Jun. 30, 2024 |
Mar. 14, 2024 |
---|---|---|
Prior BEN | Combined Company | ||
Business Acquisition [Line Items] | ||
Ownership percentage | 76.00% | |
DHC | ||
Business Acquisition [Line Items] | ||
Cash and cash equivalents | $ 858,292 | |
Due from Sponsor | 3,000 | |
Prepaid and other current assets | 16,824 | |
Accounts payable | (2,352,328) | |
Accrued expenses | (5,782,211) | |
Warrant liability | (1,913,737) | |
Net liabilities assumed | (9,863,196) | |
Transaction costs | $ 78,347 | 4,121,000 |
DHC | General and administrative | ||
Business Acquisition [Line Items] | ||
Transaction costs | $ 3,262,708 | |
DHC | Additional Paid-in Capital | ||
Business Acquisition [Line Items] | ||
Transaction costs | 858,292 | |
DHC | Related Party | ||
Business Acquisition [Line Items] | ||
Due to related parties | $ (693,036) |
ACQUISITIONS - Additional Information (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
May 03, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Business Acquisition [Line Items] | |||
Payments for asset acquisitions | $ 0 | $ 257,113 | |
DM Lab Co., LTD | |||
Business Acquisition [Line Items] | |||
Consideration transferred (in shares) | 16,012,750 | ||
Equity interest issued and issuable | $ 16,012,750 | ||
Consideration transferred | 16,269,862 | ||
Payments for asset acquisitions | 257,112 | ||
Asset acquisition, transaction cost | $ 107,112 |
ACQUISITIONS - Summary of Acquisitions (Details) - DM Lab Co., LTD |
May 03, 2023
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
In-process research and development intangible asset | $ 17,000,000 |
Property and equipment | 721,916 |
Accounts payable | (57,700) |
Accrued expenses | (249,779) |
Short-term debt | (1,144,575) |
Total assets acquired and liabilities assumed | 16,269,862 |
Consideration transferred | $ 16,269,862 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Security deposits | $ 47,150 | $ 71,300 |
Prepaid VAT | 10,046 | 7,821 |
Prepaid professional fees | 277,554 | 43,712 |
Prepaid insurance | 554,675 | 0 |
Prepaid other | 121,700 | 78,460 |
Prepaid expenses and other current assets | $ 1,011,125 | $ 201,293 |
PROPERTY AND EQUIPMENT, NET - Additional Information (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | $ 682,244 | $ 220,702 | $ 799,591 | $ 239,934 |
Equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Useful life | 3 years | 3 years | ||
Furniture | ||||
Property, Plant and Equipment [Line Items] | ||||
Useful life | 3 years | 3 years | ||
Capitalized software | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | $ 16,364 | $ 16,364 | ||
Capitalized software | Maximum | ||||
Property, Plant and Equipment [Line Items] | ||||
Useful life | 10 years | 10 years | ||
Capitalized software | Minimum | ||||
Property, Plant and Equipment [Line Items] | ||||
Useful life | 5 years | 5 years | ||
Property, Plant and Equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | $ 55,792 | $ 38,626 | $ 138,078 | $ 38,626 |
PROPERTY AND EQUIPMENT, NET - Summary of Property and Equipment (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 944,812 | $ 1,342,514 |
Accumulated depreciation and amortization | (678,035) | (539,957) |
Property and equipment, net of accumulated depreciation and amortization | 266,777 | 802,557 |
Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 447,800 | 426,000 |
Furniture | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 346,591 | 346,591 |
Capitalized software | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 150,421 | $ 569,923 |
INTANGIBLE ASSETS - Summary of Intangible Assets (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Schedule Of Intangible Assets [Line Items] | ||
Accumulated Amortization | $ (1,039,229) | $ (377,716) |
Net | 17,866,317 | |
Gross | 18,905,546 | 18,259,863 |
Net | 17,866,317 | 17,882,147 |
In-process research and development | ||
Schedule Of Intangible Assets [Line Items] | ||
Indefinite-lived intangible assets | 17,000,000 | |
Patent portfolio | ||
Schedule Of Intangible Assets [Line Items] | ||
Gross | 1,259,863 | 1,259,863 |
Accumulated Amortization | (447,838) | (377,716) |
Net | 812,025 | $ 882,147 |
Developed Technology Rights | ||
Schedule Of Intangible Assets [Line Items] | ||
Gross | 17,645,683 | |
Accumulated Amortization | (591,391) | |
Net | $ 17,054,292 |
INTANGIBLE ASSETS - Additional Information (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization | $ 626,452 | $ 182,076 | $ 661,513 | $ 201,308 |
INTANGIBLE ASSETS - Summary of Future Amortization (Details) |
Jun. 30, 2024
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2024 (remaining 6 months) | $ 1,844,293 |
2025 | 3,688,589 |
2026 | 3,688,589 |
2027 | 3,656,574 |
2028 | 3,640,566 |
Thereafter | 1,347,706 |
Net | $ 17,866,317 |
ACCRUED EXPENSES - Summary of Accrued Expenses (Details) - USD ($) |
Jun. 30, 2024 |
Dec. 31, 2023 |
---|---|---|
Related Party Transaction [Line Items] | ||
Accrued professional fees | $ 4,390,068 | $ 245,751 |
Accrued compensation and related expenses | 974,996 | 1,146,435 |
Accrued expenses | 5,834,362 | 1,637,048 |
Nonrelated Party | ||
Related Party Transaction [Line Items] | ||
Other accrued liabilities, current | $ 89,298 | $ 66,139 |
EQUITY-BASED COMPENSATION - Fair Value of Stock Options Granted Using Black-Scholes Options Pricing Model (Details) - Stock Option |
6 Months Ended | |
---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Expected term | 5 years | 5 years |
Risk-free interest rate | 4.13% | 3.55% |
Dividend yield | 0.00% | 0.00% |
Volatility | 54.79% | 50.00% |
EQUITY-BASED COMPENSATION - Valuation Assumptions of Warrants (Details) - Warrant |
Jun. 30, 2024 |
Jun. 30, 2023 |
---|---|---|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Expected term | 3 years | 10 years |
Risk-free interest rate | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Measurement input | 0.0446 | 0.0374 |
Dividend yield | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Measurement input | 0.0000 | 0.0000 |
Volatility | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Measurement input | 0.5514 | 0.4586 |
EQUITY-BASED COMPENSATION - Summary of Stock Based Compensation Expenses (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2024 |
Jun. 30, 2023 |
|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Share-based payment arrangement, expense | $ 291,610 | $ 1,841,767 | $ 698,590 | $ 4,284,468 |
General and administrative | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Share-based payment arrangement, expense | 159,387 | 1,841,767 | 493,436 | 4,284,468 |
Research and development | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Share-based payment arrangement, expense | $ 132,223 | $ 0 | $ 205,154 | $ 0 |
EQUITY-BASED COMPENSATION - Summary of Restricted Stock Based Compensation Expenses (Details) - Restricted Stock |
6 Months Ended |
---|---|
Jun. 30, 2024
$ / shares
shares
| |
Share-Based Compensation Arrangement by Share-Based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward] | |
Beginning balance (in shares) | shares | 0 |
Granted (in shares) | shares | 417,376 |
Vested (in shares) | shares | (381,915) |
Ending balance (in shares) | shares | 35,461 |
Weighted Average | |
Beginning balance (in US dollars per share) | $ / shares | $ 0 |
Granted (in US dollars per share) | $ / shares | 1.41 |
Vested (in US dollars per share) | $ / shares | 1.41 |
Ending balance (in US dollars per share) | $ / shares | $ 1.41 |
COMMITMENTS AND CONTINGENCIES (Details) ₩ in Millions |
1 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Dec. 31, 2023
KRW (₩)
|
Jun. 30, 2024
KRW (₩)
|
Jun. 30, 2024
USD ($)
|
Jun. 30, 2024
USD ($)
|
Dec. 31, 2023
USD ($)
|
Nov. 30, 2023
KRW (₩)
|
Nov. 30, 2023
USD ($)
|
|
Additional Research and Development Sponsorship Agreement | |||||||
Other Commitments [Line Items] | |||||||
Other commitment to be paid, remainder of fiscal year | ₩ 21.6 | $ 15,552 | |||||
Payments for other commitment | $ 15,552 | ||||||
Research and Development Agreement | |||||||
Other Commitments [Line Items] | |||||||
Other Commitment | ₩ 528.0 | $ 380,160 | |||||
Other commitment to be paid, remainder of fiscal year | ₩ 316.8 | $ 228,096 | |||||
Payments for other commitment | ₩ 211.2 | $ 152,064 | |||||
Minimum termination notice period | 1 month |
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