Strive, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. ASSET ENTITIES INC. UNAUDITED FINANCIAL STATEMENTS Page Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 2 Statements of Operations 3 Statements of Changes in Stockholder’s Equity 4 Statements of Cash Flows 6 Notes to Financial Statements 7 1 ASSET ENTITIES INC. Condensed Balance Sheets As of June 30, As of December 31, 2024 2023 (Unaudited) ASSETS Current Assets Cash $ 1,926,888 $ 2,924,323 Prepaid expenses 184,250 38,681 Total Current Assets 2,111,138 2,963,004 Non-Current Assets Property and equipment, net 25,245 12,825 Intangible asset 309,500 100,000 Total Non-Current Assets 334,745 112,825 TOTAL ASSETS $ 2,445,883 $ 3,075,829 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable and credit card liability $ 347,107 $ 150,096 Contract liabilities 1,686 3,445 Total Current Liabilities 348,793 153,541 TOTAL LIABILITIES 348,793 153,541 Commitments and contingencies Stockholders’ Equity Preferred Stock; $ 0.0001 par value, 50,000,000 authorized Series A Convertible Preferred Stock; $ 0.0001 par value, $ 10,000 stated value, 660 designated, 165 and 0 shares issued and outstanding - - Common Stock; $ 0.0001 par value, 200,000,000 authorized Class A Common Stock; $ 0.0001 par value, 2,000,000 authorized, 1,506,406 and 1,677,056 shares issued and outstanding, respectively 151 168 Class B Common Stock; $ 0.0001 par value, 38,000,000 authorized, 1,559,595 and 1,207,827 shares issued, respectively 156 121 Treasury Stock, at cost: Class B Common Stock - 50,000 shares ( 176,876 ) ( 176,876 ) Additional paid in capital 10,945,415 8,657,190 Accumulated deficit ( 8,671,756 ) ( 5,558,315 ) TOTAL STOCKHOLDERS’ EQUITY 2,097,090 2,922,288 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,445,883 $ 3,075,829 The accompanying notes are an integral part of these unaudited condensed financial statements. 2 ASSET ENTITIES INC. Condensed Statements of Operations (Unaudited) Three Months Ended Six months ended June 30, June 30, 2024 2023 2024 2023 Revenues $ 92,966 $ 74,912 $ 217,807 $ 136,047 Operating expenses Contract labor 121,730 48,083 248,869 84,664 General and administrative 754,963 497,713 1,277,002 843,654 Management compensation 942,810 850,173 1,805,377 1,600,037 Total operating expenses 1,819,503 1,395,969 3,331,248 2,528,355 Loss from operations ( 1,726,537 ) ( 1,321,057 ) ( 3,113,441 ) ( 2,392,308 ) Net loss $ ( 1,726,537 ) $ ( 1,321,057 ) $ ( 3,113,441 ) $ ( 2,392,308 ) Loss per share of common stock - basic and diluted $ ( 0.58 ) $ ( 0.48 ) $ ( 1.07 ) $ ( 0.91 ) Weighted average number of shares of common stock outstanding - basic and diluted 2,960,126 2,742,530 2,897,504 2,618,380 The accompanying notes are an integral part of these unaudited condensed financial statements. 3 ASSET ENTITIES INC. Condensed Statement of Stockholders’ Equity For the three and six months ended June 30, 2024 and 2023 (Unaudited) Series A Convertible Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Treasury Accumulated Shares Amount Shares Amount Shares Amount Capital Stock Deficit Total Balance - December 31, 2023 - $ - 1,677,056 $ 168 1,207,827 $ 121 $ 8,657,190 $ ( 176,876 ) $ ( 5,558,315 ) $ 2,922,288 Conversion from Class A to Class B common stock - - ( 170,650 ) ( 17 ) 170,650 17 - - - - Stock Based Compensation - - - - - - 326,871 - - 326,871 Net loss - - - - - - - - ( 1,386,904 ) ( 1,386,904 ) Balance - March 31, 2024 - $ - 1,506,406 $ 151 1,378,477 $ 138 $ 8,984,061 $ ( 176,876 ) $ ( 6,945,219 ) $ 1,862,255 Series A Convertible Preferred stock issued 165 - - - - - 1,345,000 - - 1,345,000 Class B common stock subscription proceeds received, net - - - - 124,318 12 194,422 - - 194,434 Class B Common stock issued for restricted stock awards - - - - 51,800 5 412,433 - - 412,438 Class B Common stock issued for purchase of intangible asset - - - - 5,000 1 9,499 - - 9,500 Net loss - - - - - - - - ( 1,726,537 ) ( 1,726,537 ) Balance - June 30, 2024 165 $ - 1,506,406 $ 151 1,559,595 $ 156 $ 10,945,415 $ ( 176,876 ) $ ( 8,671,756 ) $ 2,097,090 4 ASSET ENTITIES INC. Condensed Statement of Stockholders’ Equity For the three and six months ended June 30, 2024 and 2023 (Unaudited) Series A Convertible Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Treasury Accumulated Shares Amount Shares Amount Shares Amount Capital Stock Deficit Total Balance - December 31, 2022 - $ - 1,677,056 $ 168 472,946 $ 47 $ 780,686 $ - $ ( 627,118 ) $ 153,783 Class B common stock and warrant issued - - - - 300,000 30 6,540,463 - - 6,540,493 Class B Common stock issued for restricted stock awards - - - - 282,200 28 200,182 - - 200,210 Net loss - - - - - - - ( 1,071,251 ) ( 1,071,251 ) Balance - March 31, 2023 - $ - 1,677,056 $ 168 1,055,146 $ 105 $ 7,521,331 $ - $ ( 1,698,369 ) $ 5,823,235 Class B Common stock issued for restricted stock awards - - - - 20,000 2 403,713 - - 403,715 Net loss - - - - - - - - ( 1,321,057 ) ( 1,321,057 ) Balance - June 30, 2023 - $ - 1,677,056 $ 168 1,075,146 $ 107 $ 7,925,044 $ - $ ( 3,019,426 ) $ 4,905,893 The accompanying notes are an integral part of these unaudited condensed financial statements. 5 ASSET ENTITIES INC. Condensed Statements of Cash Flows (Unaudited) Six months ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 3,113,441 ) $ ( 2,392,308 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 739,309 603,925 Depreciation and amortization 2,341 - Changes in operating assets and liabilities: Prepaid expenses ( 145,569 ) ( 71,096 ) Accounts payable and accrued expenses 197,011 ( 126,792 ) Contract liabilities ( 1,759 ) 20,226 Net cash used in operating activities ( 2,322,108 ) ( 1,966,045 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ( 14,761 ) - Purchase of intangible asset ( 200,000 ) - Net cash used in investing activities ( 214,761 ) - CASH FLOWS FROM FINANCING ACTIVITIES Series A Convertible Preferred stock issued 1,345,000 - Class B common stock subscription proceeds received, net 194,434 6,845,050 Net cash provided by financing activities 1,539,434 6,845,050 Net change in cash ( 997,435 ) 4,879,005 Cash at beginning of period 2,924,323 137,177 Cash at end of period $ 1,926,888 $ 5,016,182 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income taxes $ - $ - Cash paid for interest $ - $ - NON CASH INVESTING AND FINANCING ACTIVITIES Conversion from Class A to Class B common stock $ 17 $ - Class B Common stock issued for purchase of intangible asset $ 9,500 $ - The accompanying notes are an integral part of these unaudited condensed financial statements. 6 ASSET ENTITIES INC. NOTES TO CONDENSED FINANCIAL STATEMENTS As of and for the six months ended June 30, 2024 (Unaudited) Note 1. Organization, Description of Business and Liquidity Organization Asset Entities Inc. (“Asset Entities”, “we”, “us” or the “Company”), began operations as a general partnership in August 2020 and formed Assets Entities Limited Liability Company in the state of California on October 20, 2020. The interim financial statements reflect the operations of the Company from inception of the general partnership. On March 15, 2022, the Company filed Articles of Merger to register and incorporate with the state of Nevada and changed the company name to Asset Entities Inc. Reverse Stock Split On June 27, 2024, the Company filed a Certificate of Change pursuant to Section 78.209 of the Nevada Revised Statutes with the Secretary of State of the State of Nevada authorizing a 1-for-5 reverse stock split of the Company’s issued and outstanding shares of Class A Common Stock, $ 0.0001 par value per share, and Class B Common Stock, $ 0.0001 par value per share. The reverse stock split became effective on July 1, 2024. Prior to the reverse stock split, the Company was authorized to issue 200,000,000 shares of common stock, consisting of 10,000,000 shares of Class A Common Stock and 190,000,000 shares of Class B Common Stock. As a result of the reverse stock split, the Company will be authorized to issue 40,000,000 shares of common stock, consisting of 2,000,000 shares of Class A Common Stock and 38,000,000 shares of Class B Common Stock. All share and per share information in these financial statements retroactively reflect this reverse stock split. Description of Business Asset Entities is an Internet company providing social media marketing, content delivery, and development and design services across Discord, TikTok, and other social media platforms. Based on the rapid growth of our Discord servers and social media following, we have developed three categories of services. First, we provide subscription upgrades to premium content on our investment education and entertainment servers on Discord. Second, we codevelop and execute influencer social media and marketing campaigns for clients. Third, we design, develop and manage Discord servers for clients under our “AE.360.DDM” brand. Our AE.360.DDM service was released in December 2021. All of these services – our Discord investment education and entertainment, social media and marketing, and AE.360.DDM services – are therefore based on our effective use of Discord in combination with ongoing social media outreach on TikTok, Facebook, Twitter, Instagram, and YouTube. Liquidity The Company had an accumulated deficit of $ 8,671,756 as of June 30, 2024, cash of $ 1,926,888 as of June 30, 2024, and a net loss of $ 3,113,441 for the six months ended June 30, 2024 On May 24, 2024, the Company entered into a securities purchase agreement with an investor for the issuance and sale of up to 330 shares of the Company’s newly designated Series A Convertible Preferred Stock for maximum gross proceeds of $ 3,000,000 . Based on the Company’s existing cash resources and the cash expected to be received from these financings, management believes that the Company will have sufficient funds to carry out the Company’s planned operations for at least the next 12 months from the issuance date of the accompanying interim financial statements. Note 2. Summary of Significant Accounting Policies Basis of Presentation The Company prepares its financial statements in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”). The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended December 31, 2023, contained in the Company’s Form 10-K filed on April 2, 2024. 7 Use of Estimates The preparation of interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Cash and Cash Equivalents For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company had no cash equivalents at June 30, 2024 and December 31, 2023. Periodically, the Company may carry cash balances at financial institutions more than the federally insured limit of $ 250,000 per institution. The amount in excess of the FDIC insurance as of June 30, 2024, was approximately $ 1.64 million. The Company has not experienced losses on account balances and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. Property and equipment Property and equipment are stated at cost less accumulated depreciation and impairment loss, if any. Property and equipment are depreciated at rates sufficient to write off their costs less impairment and residual value, if any, over their estimated useful lives on a straight-line basis. Category Useful life (years) Building 39 Machinery and Equipment 5 - 10 Office Equipment and Fixtures 5 Vehicle 8 The Company did not have any Building, Machinery and Equipment, and Vehicle as of June 30, 2024. Maintenance and repairs are charged to expense as incurred. Improvements of a major nature are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in the income. The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment” (“ASC No. 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Intangible Assets Intangible assets acquired are recorded at fair value. We test our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. We test our indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If the carrying value exceeds the fair value, we recognize an impairment in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates. During the six months ended June 30, 2024 and 2023, there were no intangible asset impairment charges. Finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives, which ranges from 5 to 15 years . Our finite-lived intangible assets include acquired franchise agreements, acquired customer relationships, acquired customer lists, and internally developed software. Our indefinite-lived intangible assets include acquired domain names, trade names, and purchased software. 8 Intangible assets internally developed are measured at cost. We capitalize costs to develop or purchase computer software for internal use which are incurred during the application development stage. These costs include fees paid to third parties for development services and payroll costs for employees’ time spent developing the software. We expense costs incurred during the preliminary project stage and the post-implementation stage. Capitalized development costs are amortized on a straight-line basis over the estimated useful life of the software. The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life. Impairment of Long-lived Assets Other Than Goodwill Long-lived assets with finite lives, primarily property and equipment, intangible assets, and operating lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. Fair Value Measurements The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows: ● Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; ● Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and ● Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. The Company’s financial instruments, including cash, prepaid expense and contract liabilities, other current liabilities are carried at historical cost. At June 30, 2024 and December 31, 2023, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. Advertising Expenses The Company expenses advertising costs as they incurred. Total advertising expenses were $ 284,886 and 170,371 for the six months ended June 30, 2024 and 2023, respectively, and have been included as part of general and administrative expenses. Research and Development Research and development costs are charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. The Company incurred research and development expenses of $ 238,739 and $ 0 for the six months ended June 30, 2024 and 2023, respectively, and have been included as part of contract labor. Stock based compensation Service-Based Awards The Company records stock-based compensation for awards granted to employees, non-employees, and to members of the Board for their services on the Board based on the grant date fair value of awards issued, and the expense is recorded on a straight-line basis over the requisite service period, which is generally one to three years. For restricted stock awards (“RSAs”) issued under the Company’s stock-based compensation plans, the fair value of each grant is calculated based on the Company’s stock price on the date of grant. Share Repurchase Share repurchases are open market purchases. Share repurchases are generally recorded on the settlement date, as treasury stock. When shares are cancelled, the value of repurchased shares is deducted from stockholders’ equity through common stock with the excess over par value recorded to accumulated deficit. 9 Revenue Recognition The Company recognizes revenue utilizing the following steps: (i) Identify the contract, or contracts, with a customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; (v) Recognize revenue when the Company satisfies a performance obligation. Subscriptions Subscription revenue is related to a single performance obligation that is recognized over time when earned. Subscriptions are paid in advance and can be purchased on a monthly, quarterly, or annual basis. Any quarterly or annual subscription revenue is recognized as a contract liability recorded over the contracted service period. Marketing Revenue related to marketing campaign contracts with customers are normally of a short duration, typically less than two (2) weeks. AE.360.DDM Contracts Revenue related to AE.360.DDM contracts with customers are normally of a short duration, typically less than one (1) week. Contract Liabilities Contract liabilities consist of quarterly and annual subscription revenue that have not been recognized. Revenue under these agreements is recognized over the related service period. As of June 30, 2024 and December 31, 2023, total contract liabilities were $ 1,686 and $ 3,445 respectively. Contract liabilities are expected to be recognized as revenue over a period not to exceed twelve (12) months. Changes in contract liabilities for the six months ended June 30, 2024 are as follows: June 30, 2024 Balance, December 31, 2023 $ 3,445 Deferral of revenue - Recognition of revenue ( 1,759 ) Balance, June 30, 2024 $ 1,686 10 Earnings Per Share of Common Stock The Company has adopted ASC Topic 260, “Earnings per Share” which requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying interim financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common stock issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. The Company would account for the potential dilution from convertible securities using the as-if converted method. The Company accounts for warrants and options using the treasury stock method. For the three months ended June 30, 2024, warrants representing 71,002 shares of common stock equivalents were excluded from the computation from diluted net loss per share as the result was anti-dilutive. Related Parties The Company follows ASC 850, “Related Party Disclosures” , for the identification of related parties and disclosure of related party transactions and balances. There were no related party transactions except management fees. During the six months ended June 30, 2024 and 2023, the Company paid management fees to their controlling members totaling $ 1,805,377 and $ 1,600,037 , respectively. Recent Accounting Pronouncements The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its interim financial statements. Note 3. Property and Equipment Property and equipment consisted of the following: June 30, December 31, 2024 2023 Office equipment $ 28,320 $ 13,559 Accumulated depreciation ( 3,075 ) ( 734 ) $ 25,245 $ 12,825 During the six months ended June 30, 2024 and 2023, the Company recorded depreciation of $ 2,341 and $0 , respectively. Note 4. Intangible Assets Intangible assets consist of the following: June 30, December 31, 2024 2023 Purchased software $ 309,500 $ 100,000 Less: Impairment - - $ 309,500 $ 100,000 11 Note 5. Stockholders’ Equity Authorized Capital Stock On March 9, 2022, the Company filed Articles of Incorporation with the state of Nevada to authorize the Company to issue 250,000,000 shares, consisting of 10,000,000 shares of Class A Common Stock, $ 0.0001 par value per share (“Class A Common”), 190,000,000 shares of Class B Common stock, $ 0.0001 par value per share (“Class B Common”), and 50,000,000 shares of Preferred Stock, $ 0.0001 par value (the “Preferred Stock”). On June 27, 2024, the Company filed a Certificate of Change pursuant to Section 78.209 of the Nevada Revised Statutes with the Secretary of State of the State of Nevada authorizing a 1-for-5 reverse stock split of the Company’s issued and outstanding shares of class A common stock and class B common stock. As a result of the Reverse Stock Split, the Company will be authorized to issue 40,000,000 shares of common stock, consisting of 2,000,000 shares of Class A Common Stock and 38,000,000 shares of Class B Common Stock. Preferred Stock The Company shall have the authority to issue the shares of Preferred Stock in one or more series with such rights, preferences and designations as determined by the Board of Directors of the Company. Series A Convertible Preferred Stock On May 24, 2024, the Company filed a Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada designating 660 shares of the Company’s Preferred Stock, $ 0.0001 par value per share, as “Series A Convertible Preferred Stock,” and setting forth the voting and other powers, preferences and relative, participating, optional or other rights of the Series A Preferred Stock. Each share of Series A Preferred Stock has an initial stated value (“Stated Value”) of $ 10,000 per share. The Series A Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, ranks senior to all capital stock of the Company unless the holders of the majority of the outstanding shares of Series A Preferred Stock consent to the creation of other capital stock of the Company that is senior or equal in rank to the Series A Preferred Stock. Holders of Series A Preferred Stock will be entitled to receive cumulative dividends, in shares of Class B Common Stock or cash on the Stated Value at an annual rate of 6 % (which will increase to 12 % if a Triggering Event (as defined in the Certificate of Designation) occurs. Dividends will be payable upon conversion of the Series A Preferred Stock or upon any redemption. Holders of Series A Preferred Stock will be entitled to convert shares of Series A Preferred Stock into a number of shares of Class B Common Stock determined by dividing the Stated Value (plus any accrued but unpaid dividends and other amounts due, unless paid by the Company in cash) by the conversion price of the Series A Preferred Stock (the “Conversion Price”). The initial Conversion Price is $ 0.75 , subject to adjustment including adjustments due to full-ratchet anti-dilution provisions. Holders may elect to convert shares of Series A Preferred Stock to Class B Common Stock at an alternate Conversion Price equal to 85 % (or 70 % if the Company’s Class B Common Stock is suspended from trading on or delisted from a principal trading market or upon occurrence of a Triggering Event) of the average lowest daily volume weighed average price of the Class B Common Stock during the Alternate Conversion Measuring Period (as defined in the Certificate of Designation). 12 Securities Purchase Agreement On May 24, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”) for the issuance and sale of up to 330 shares of the Company’s newly designated Series A Convertible Preferred Stock, $ 0.0001 par value per share (“Series A Preferred Stock”), for maximum gross proceeds of $ 3,000,000 . Pursuant to the Purchase Agreement, the Company is required to issue and sell 165 shares of Series A Preferred Stock at each of two closings subject to the satisfaction of the terms and conditions for each closing. The first closing (the “First Closing”) occurred on May 24, 2024 for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $ 1,500,000 . The second closing (the “Second Closing”), for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $ 1,500,000 , will occur on the first business day on which the conditions specified in the Purchase Agreement for the Second Closing are satisfied or waived, including the filing and effectiveness of the Registration Statement and the effectiveness of the Stockholder Consent. In addition, the Company issued a warrant to Boustead for the purchase of 30,800 shares of Class B Common Stock with an exercise price of $ 3.75 per share. The warrant is exercisable for a period of five years and contains cashless exercise provisions. The Company received $ 1,345,000 , net of offering cost of $ 155,000 . Class A Common Stock Each share of Class A Common Stock entitles the holder to ten (10) votes, in person or proxy, on any matter on which an action of the stockholders of the Company is sought and is convertible by the holder into one (1) share of Class B Common Stock. As part of a share conversion in March 2022, the Company converted the 97.56 % membership interest to 1,951,200 shares of Class A Common Stock of the Company. The Company has reflected this conversion for all periods presented. The Company had 1,506,406 and 1,677,056 shares of Class A Common Stock issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. Class B Common Stock Each share of Class B Common Stock entitles the holder to one (1) vote, in person or proxy, on any matter on which an action of the stockholders of the Company is sought. The Company had 1,559,595 and 1,207,827 shares of Class B Common Stock issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. Six months ended June 30, 2024 During the six months ended June 30, 2024, the Company issued Class B common stock as follows: ● 170,650 shares of Class A common stock were converted into 170,650 shares of Class B common stock. ● 124,318 shares of Class B common stock for cash of $ 194,433 , net (Triton Purchase agreement). ● 51,800 shares of Class B common stock for restricted stock awards valued at $ 95,342 . ● 5,000 shares of Class B common stock for purchase of intangible asset valued at $ 9,500 Treasury Stock During the year ended December 31, 2023, the Company repurchased 50,000 shares of Class B Common stock at $ 176,876 and recorded as treasury stock as of June 30, 2024 and December 31, 2023. Triton Purchase Agreement On June 30, 2023, the Company, entered into a Closing Agreement (the “Closing Agreement”) with Triton. Under the Closing Agreement, the Company agreed to sell to Triton shares of class B common stock, $ 0.0001 par value per share, of the Company (the “Class B Common Stock”), having a total value, as determined under the Closing Agreement, of $ 1,000,000 . On August 1, 2023, the Company and Triton entered into an Amended and Restated Closing Agreement (the “Amended and Restated Closing Agreement”). Subject to the terms of the Amended and Restated Closing Agreement, the Company may deliver a closing notice (the “Closing Notice”) and issue certain securities to Triton at any time on or before April 30, 2024, pursuant to which Triton will be obligated to purchase such securities of the Company with an aggregate value of $ 1,000,000 in the following manner. Upon delivery of the Closing Notice, Triton must purchase newly-issued shares of Class B Common Stock of the Company (the “Triton Shares”) in an amount equal to up to 9.99 % of the outstanding shares of Class B Common Stock following such purchase, plus pre-funded warrants (the “Triton Pre-Funded Warrants” and together with the Triton Shares, the “Triton Securities”) that may be exercised to purchase an amount of newly-issued shares of Class B Common Stock (the “Triton Warrant Shares”), such that the aggregate price of the Triton Shares and the Triton Pre-Funded Warrants together with the exercise price to be paid upon full exercise of the Triton Pre-Funded Warrants will equal a total gross purchase price of $ 1,000,000 . Upon the Company’s election to deliver the Closing Notice, the price of each of the Triton Shares will be set at 85 % of the lowest daily volume-weighted average price of the Class B Common Stock during the five (5) business days before and five business days after the date of the Closing Notice. 13 On March 27, 2024, the Company delivered a Closing Notice to Triton (the “Second Closing Notice”) for the purchase of 124,318 shares of the Company’s Class B Common Stock to Triton Funds LP, a Delaware limited partnership (“Triton”). The price of the shares was required to be 85 % of the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the closing of the purchase of the shares (the “Triton Closing”), and the Triton Closing was required to occur within five business days after the date that the Triton Shares were received by Triton, in accordance with the Amended and Restated Closing Agreement, dated as of August 1, 2023, between the Company and Triton, as amended by the Amendment to Amended and Restated Closing Agreement, dated as of September 27, 2023, between the Company and Triton, the Second Amendment to Amended and Restated Closing Agreement, dated as of December 30, 2023, between the Company and Triton, and the Third Amendment to Amended and Restated Closing Agreement, dated as of March 29, 2024, between the Company and Triton (as amended, the “Amended and Restated Closing Agreement”). On April 10, 2024, the date of the Triton Closing, the price of the Triton Shares was determined to be $ 1.70 per share based on the lowest daily volume-weighted average price of the Class B Common Stock during the five business days prior to the Triton Closing. In connection with the Triton Closing, pursuant to the Boustead Engagement Letter and the Underwriting Agreement, the Company paid Boustead, as placement agent compensation, a total of $ 16,907 , equal to 7 % of the aggregate purchase price and a non-accountable expense allowance equal to 1 % of the aggregate purchase price for the Triton Shares. In addition, the Company issued a warrant to Boustead for the purchase of 8,702 shares of Class B Common Stock, equal to 7 % of the number of the Triton Shares, with an exercise price of $ 1.70 per share, equal to the purchase price per share of the Triton Shares (the “Tail Warrant”). The Tail Warrant is exercisable for a period of five years and contains cashless exercise provisions. 2022 Equity Incentive Plan The maximum number of shares of Class B Common Stock that may be issued pursuant to awards granted under the 2022 Plan is 550,000 shares. Awards that may be granted include: (a) Incentive Stock Options, or ISO, (b) Non-statutory Stock Options, (c) Stock Appreciation Rights, (d) Restricted Stock, the Restricted Stock Units, or RSUs, (f) Stock granted as a bonus or in lieu of another award, and (g) Performance Awards. These awards offer us and our shareholders the possibility of future value, depending on the long-term price appreciation of our Class B Common Stock and the award holder’s continuing service with us. The RSA shares to directors vest quarterly for one year from the date of grantee’s appointment as a director. The RSA shares to officers vest annually over three years from the grant date. RSA shares are measured at fair market value on the date of grant and stock-based compensation expense is recognized as the shares vest with a corresponding offset credited to additional paid-in-capital. For the six months ended June 30, 2024 and 2023, the Company recorded stock-based compensation expense of $ 739,309 and $ 603,925 , respectively. As of June 30, 2024, 204,316 RSA shares have vested. As of June 30, 2024, there was $ 1,839,331 of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.64 years. Warrant A summary of activity during the six months ended June 30, 2024, follows: Number of shares Weighted Average Exercise Price Weighted Average Life (years) Outstanding, December 31, 2023 31,500 $ 31.25 3.97 Granted 39,502 3.30 5.00 Expired - - - Exercised - - - Outstanding, June 30, 2024 71,002 $ 15.70 4.11 All the outstanding warrants are exercisable as of June 30, 2024. The intrinsic value of the warrants as of June 30, 2024, is $ 1,566 . Note 6. Subsequent Events Management evaluated all events from the date of the balance sheet, which was June 30, 2024 through August 14, 2024 which was the date these financial statements were available to be issue. Based on our evaluation no material events have occurred that require disclosure other than as disclosed below. The Second Closing, for the issuance and sale of 165 shares of Series A Preferred Stock for gross proceeds of $ 1,500,000 , occurred on July 29, 2024, which was the first business day on which the conditions specified in the Purchase Agreement for the Second Closing were satisfied or waived. On the date of the Second Closing, the Company was required to issue a warrant to Boustead Securities, LLC for the purchase of 30,800 shares of Class B Common Stock, equal to 7 % of the number of shares of Class B Common Stock that may be issued upon conversion of the shares of Series A Preferred Stock sold at the Second Closing at the initial Conversion Price of $ 3.75 per share, subject to the Exchange Limitation before the effectiveness of the Stockholder Approval (the “Fourth Tail Warrant”). The Fourth Tail Warrant has an exercise price of $ 3.75 per share. On July 30, 2024, Boustead’s rights to the Fourth Tail Warrant were assigned to an assignee. The Fourth Tail Warrant was consequently cancelled and a new warrant was issued to the assignee. 14