Item 1. Business
ITEM 1. BUSINESS.
Overview
Asset Entities is a technology company
providing social media marketing and content delivery services across Discord, TikTok, and other social media platforms. We also design,
develop and manage servers for communities on Discord. Based on the growth of our Discord servers and social media following, we have
developed three categories of services: (1) our Discord investment education and entertainment services, (2) social media and marketing
services, and (3) our “AE.360.DDM” brand services. We also offer Ternary v2, a cloud-based subscription management and payment
processing solution for Discord communities, which includes a suite of customer relations management tools and Stripe-verified payment
processing. All of our services are based on our effective use of Discord as well as other social media including TikTok, X, Instagram,
and YouTube.
Our Background
In 2020, Mr. Arshia Sarkhani, our Chief
Executive Officer and President, and Mr. Kyle Fairbanks, our Executive Vice-Chairman and Chief Marketing Officer, had been actively investing
and developing social influencer followings on their own when they had a vision: Bring Wall Street trading education and entertainment
to the Generation Z masses through social media through the community-based platform known as Discord. Mr. Sarkhani and Mr. Fairbanks
sensed that social media could empower retail investors, as later demonstrated in the extreme by recent developments such as the GameStop
meme stock phenomenon. Based on their vision and personal investing experience, Mr. Sarkhani and Mr. Fairbanks founded our company with
fellow investors and social influencers Jackson Fairbanks, our Director of Socials, and Arman Sarkhani, our Chief Operating Officer. Our
company initially focused on providing social media and marketing campaigns and consulting services for clients.
By October 2020, we had determined that
the social media platform Discord, which focuses on users’ shared interests and features premium content instead of advertisements,
would be the most effective forum for our vision. We formed a stock investing education and entertainment Discord server, with the server
name “STOCKS”. Subsequently, in 2021, we formed similar servers focusing on cryptocurrencies and nonfungible tokens, or NFTs,
with the server names “CRYPTOS” and “NFTS”, respectively. We also launched a real estate Discord server in May
2022, with the server name “REALTY”, to provide similar content on various aspects of residential and commercial real estate
investing. We believe it is significant, and shows the pioneering vision of our founders, that we were able to obtain the Discord domain
names of “STOCKS”, “CRYPTOS”, “NFTS”, and “REALTY” for their four main Discord communities.
We believe that each of these servers is one of the first of its kind on Discord.
As of December 31, 2024, we had launched
or acquired a total of ten Discord servers, and our Discord servers had approximately 206,899 members combined. We plan to launch or acquire
servers with other popular investment themes in the future. Through the consistent release of relevant content, cross-marketing, strategic
subscription pricing, and strategic acquisitions, we anticipate that our various Discord communities will continue to grow.
Our record of growth on Discord has
also depended and will continue to depend on a massive social media following. Since deciding to form our Discord communities, our social
influencers’ effective use of TikTok and other social media has fueled their growth. Since August 2020, as a result of social media
campaigns helping to promote our Discord servers in the financial education and entertainment space, our social media presence has grown
from fewer than 50,000 members and followers, to over 2 million by December 31, 2024. Our social media reach across all platforms has
accumulated well over 1 billion interactions.
Our Current Business
Our Discord investment education and
entertainment service is designed primarily by and for enthusiastic Generation Z, or Gen Z, retail investors, creators and influencers.
Gen Z is commonly considered to be people born between 1997 and 2012. Our investment education and entertainment service focuses on stock,
real estate, cryptocurrency, and NFT community learning programs designed for the next generation. While we believe that Gen Z will continue
to be our primary market, our expanded Discord server offering also features education and entertainment content covering real estate
investments, which is expected to appeal strongly to older generations as well.
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We initially developed our Discord community
and other social media following for our company through the talents, insights and efforts of our executive social influencers, Messrs.
Arshia and Arman Sarkhani and Messrs. Kyle and Jackson Fairbanks. Our executive team has also offered social media and marketing campaign
services to business clients. To the end of further capitalizing on our management’s social influencer backgrounds, we developed
our “SiN” or “Social Influencer Network,” our team of social influencer independent contractors. Our SiN social
influencer independent contractors can perform social media and marketing campaign services to expand our clients’ Discord server
bases and drive traffic to their businesses, as well as increase membership in our own servers.
In forming community groups
on Discord, we designed and developed 25 Asset Entities server communities and manage a combined server user membership of approximately
212,253 as of December 31, 2024. As a result, we have developed a high level of expertise in designing, developing, and managing Discord
servers. Having developed multiple Discord servers in a variety of fields, we have positioned ourselves as experts in the Discord space.
Further capitalizing on this experience, since January 2022, we have formally offered our “AE.360.DDM, Design Develop Manage”
service, or “AE.360.DDM”. AE.360.DDM is a suite of services to individuals and companies seeking to create a server on Discord.
We believe we are the first company to provide “Design, Develop and Manage,” or DDM, services for any individual, company,
or organization that wishes to join Discord and create their own community. We liken this service to that provided by companies like Register.com
and Godaddy.com during the dot.com era in the 1990s for companies looking to register their domain names, develop webpages and websites,
and manage and host those websites. With our AE.360.DDM rollout, we believe we are uniquely positioned to offer DDM services in the growing
market for Discord servers.
In addition, through Ternary
v2, our subscription management and payment processing solution for Discord communities, subscribers can monetize and manage their Discord
users. Ternary v2 simplifies the process for our subscribers to: (i) sell memberships to their Discord servers on their websites and collect
payments through Stripe with daily payouts; (ii) add digital products and services and designate purchase options to their Discord servers;
(iii) customize their user Discord permissions and roles and other Discord settings; and (iv) utilize our Discord bot to automatically
apply their Discord user settings to authenticate new users, apply customizable permission sets to users, and remove users when their
subscriptions expire. As a Stripe-verified partner through Ternary v2, we can also assist subscribers with integrating other platforms
into their Discord servers with open application programming interfaces, further extending our platform’s capabilities.
Fiscal Year 2024 Highlights
During 2024, we took the following initiatives
to expand our business:
● In March 2024, we launched our official YouTube channel, "The Lounge," which features podcast
interviews with celebrities, sports figures, business professionals, and more, and where interviews will focus on each guest's journey
through life. Previous guests have included Michael “the Playmaker” Irvin, former NFL superstar Hall
of Fame wide receiver and three-time Superbowl Champion; Jeff Blue, the Company’s Head of Entertainment and a multi-platinum music
producer; and Ray Crockett, a winner of two Super Bowl rings.
● In March 2024, we entered into an agreement with Zendrop, an industry leader in dropshipping and ecommerce.
We will provide its services and solutions to Zendrop through Ternary v2, our SaaS platform for payment processing and Stripe Verified
Partner for Discord communities. These services will include a suite of customer relationship management (CRM) solutions, Discord customer
analytics, and payment processing.
● In May 2024, we completed the first closing of our financing transaction involving the sale of shares
of the Company’s newly designated Series A Preferred Stock, for gross proceeds of $1.5 million, from an institutional
investor.
● In April 2024, we filed a Registration Statement on Form S-3 (File No. 333-278707) (the “Shelf Registration
Statement”) with the Securities and Exchange Commission (the “SEC”), which was declared effective by the SEC on
April 26, 2024. Pursuant to the Shelf Registration Statement, we may offer to the public from time to time, in one or more offerings,
shares of Class B Common Stock, preferred stock, debt securities, warrants, subscription rights, and units in up to a total aggregate
offering amount of $100,000,000, subject to the requirement that in no event may we sell shares having a value exceeding more than
one-third of our public float in any 12-month period under the Shelf Registration Statement so long as our public float remains below
$75,000,000. The securities will be offered at prices and on terms to be determined at the time of any such offering. The specifics of
any offerings, along with the use of proceeds of any such securities, will be described in detail in a prospectus supplement at the time
of any such offering.
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● In June 2024, we acquired the assets of TommyBoyTV, LLC (“TommyBoyTV”), a company engaged
in the business of Discord development, social media, online community management, marketing, and analytics, expanding the Company’s
share of the Discord community market.
● In July 2024, we completed the second closing of our financing transaction involving the sale of shares
of the Company’s newly designated Series A Preferred Stock, for gross proceeds of $1.5 million, from an institutional
investor, for a total of $3.0 million from sales of the Series A Preferred Stock to the investor.
● In September 2024, we commenced an “at the market offering”
(as defined in Rule 415(a)(4) under the Securities Act) of up to $1,791,704 of shares of Class B Common Stock, which, as of March 31,
2025, has been increased to $5,489,399 of shares of Class B Common Stock in November 2024 (the “ATM Financing”). Sales from
the offering will be made from time to time solely through or to A.G.P./Alliance Global Partners, as sales agent (“A.G.P.”
or the “Sales Agent”). These sales, if any, will be made pursuant to the terms of a sales agreement between us and the Sales
Agent, dated September 27, 2024 (the “ATM Sales Agreement”). Since the commencement of the ATM Financing, a total of 5,417,700
shares has been sold, for net proceeds to the Company of $4,830,648, after paying $329,362 in compensation to the Sales Agent and the
same amount to Boustead Securities, LLC (“Boustead”) under the Boustead ATM Waiver (as defined in Item 7. “ Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – ATM Financing
– Waivers and Consents to ATM Financing ”) with respect to such sales.
● In October-November 2024, we were selected to design, develop, and manage the Discord servers
for Maxx Talent Awards, a premier platform for showcasing the talents of aspiring actors, models, and singers; social media influencer, American
fitness model, training specialist, actor, and entrepreneur, Scott Mathison; Grammy Award-winning R&B and soul singer, songwriter,
producer and actress Macy Gray; and dog behavioralist Jas Leverette, star of the Netflix show Canine Intervention .
● In November 2024, we acquired the assets of the TikTok Shop space known as the TikTok Money Machine, which
included its Discord community. The Discord community teaches content creators how to sell products on TikTok Shop via the use of product
content videos. It also connects major consumer product brands with these content creators, offering the latter the opportunity to earn
sales commissions, via their TikTok accounts, on each product sale completed. We also secured consulting agreements with TikTokers and
lead creators of the Discord, who have an aggregate of approximately 280,000 followers on Instagram and 4,700,000 followers on TikTok.
● In November 2024, we signed an agreement with our Head of Entertainment, Jeff Blue, to acquire a
50% ownership interest in all film, TV, streaming and media rights to Blue’s story, One Step Closer: From Xero
to #1: Becoming Linkin Park . Under the agreement, we also engaged with Mr. Blue to write the screenplay. Published by Simon &
Schuster/Posthill Press in 2020, One Step Closer: From Xero to #1: Becoming Linkin Park has been translated into seven different
languages.
● In December 2024, we were approved as a TikTok Shop Partner. We plan to work with TikTok to connect brands
with creators and help them collaborate further in the affiliate marketing space.
Our Historical Performance
As
of December 31, 2024, the Company had an accumulated deficit of $12,006,357 and a cash balance of $2,660,624. During the years ended
December 31, 2024 and 2023, we had a net loss of $6,393,932 and $4,931,197, respectively. To date, the Company has financed its
operations primarily through capital raises and sales of its services. In April 2024, the Company filed the Shelf Registration
Statement, which was declared effective by the SEC on April 26, 2024, for potential offerings of up to $100,000,000 in aggregate,
subject to the requirement that in no event may we sell shares having a value exceeding more than one-third of our public float in
any 12-month period under the Shelf Registration Statement so long as our public float remains below $75,000,000. In May 2024, the
Company completed the first of a two-part private placement of its Series A Preferred Stock for gross proceeds of $1.5 million, and
in July 2024, the Company completed the second part of the private placement for an additional $1.5 million in gross proceeds. In
September 2024, the Company entered into the ATM Sales Agreement, and filed a prospectus supplement to the Shelf Registration
Statement for the ATM Financing for gross proceeds of up to $1,791,704. In November 2024, the Company filed an additional prospectus
supplement to the Shelf Registration Statement to increase the maximum gross proceeds to $2,271,487. The
Company has received confirmation from the investor in its Series A Preferred Stock that it will invest up to an additional $3
million upon request by the Company. Based on the Company’s existing cash resources and the cash expected to be
received from the ATM Financing and other planned financings, it is expected that the Company will have sufficient funds to carry
out the Company’s planned operations through December 31, 2025 and for at least 12 months beyond that period. For further
discussion, see Part II. Item 7. “ Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources ”.
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Industry Overview
The social influencer and online media
presence on various platforms are expanding and evolving. More than any previous generation, Generation Z is immersed in social media
platforms like TikTok, X, and Meta Platforms’ Facebook and Instagram. This trend has generated opportunities for young adults to
become social influencers and to gain financial success. Many kids now want to be “tiktokers”, “instagrammers”,
and social media influencers. In addition to these platforms, the Reddit-based campaigns behind the GameStop, AMC and Koss meme stock
phenomena of 2021 demonstrated the power of social media to generate and destroy financial wealth relatively quickly. We believe that
these developments are together giving way to a new type of social media community. Social media was once occupied by influencers who
were showing off their latest snacks, clothes, makeup brands, and other products and services, but now, a new breed of influencers focus
on other subjects that are gaining mass interest, especially with Generation Z, including personal finance and investing.
As Bloomberg has reported (“Influencers
Are Luring Investors Flummoxed by Meme Stonks and Options,” June 18, 2021), in the U.S., there is relatively little formal personal-finance
education. Only 26 states require – or are in the process of mandating – a standalone high school course on the topic (Ramsey
Solutions, “Which States Require Financial Literacy for High School Students,” August 19, 2024). For most students, learning
about money means learning about topics like budgeting, understanding compound interest or opening a savings account. While this information
might be useful, there are many more complex and risky financial opportunities available to young, inexperienced investors who are digital
natives, i.e., most of Generation Z. $1 can be used to open financial accounts and buy fractions of shares or portions of cryptocurrencies
through companies like Robinhood, Cash App and others. With modestly more in their investment accounts, people can get access to higher-risk
strategies such as margin or option trading. Meanwhile, there is new jargon to decipher every day if investors want to understand chatter
about the markets. While banks and mutual fund companies offer advisory services to their members, they tend to reserve advisory services
for higher-net-worth individuals, and generally do not make their advice particularly entertaining or accessible to Generation Z consumers.
With the rise of free, fast trading
online and by phone, demand has surged for information about investing and markets, creating opportunities for a new generation of financial
influencers who are rushing to fill the gap in traditional education. With a massive, younger, financially uneducated market desperate
to learn about the financial markets, a deluge of new companies and their influencer leaders are fighting to be the first place individuals
turn to chat about stocks, budgets or finances.
More broadly, this trend towards relying
on social media and influencers means that skilled social media marketers and influencers can parlay their brands into multiple streams
of revenue including subscription-only content, promotional campaign contracts for business clients, and related consulting services.
As argued by a guest contributor’s article on Nasdaq.com (“How Gen Z Influencers Can Transform the Nature of Investing,”
June 2, 2021), Generation Z is asserting more influence over the social media influencer market, which has already surpassed $13 billion
in market size worldwide according to a research report published by Statista (“Influencer Marketing Worldwide - Statistics &
Facts,” September 27, 2021), and shows no signs of abating. Internet users look to niche influencers they trust as their go-to source
for new information and product recommendations. With such authority over the way consumers spend their money on commercial goods, Gen
Z influencers are bound to sway their followers’ interests in the area of financial education.
Gen Z’s social media habits are
distinctive from other generations. Their most-used social media platforms are Instagram, Snapchat, and TikTok, according to a 2021 Pew
Research survey. TikTok’s quick ascension to Gen Z dominance at comparable levels to other well-established online titans has captivated
potential investors, e-marketers, and others looking to profit from this bustling and youthful platform.
Given the growth of the influencer industry
across social media like Instagram and TikTok, the rapid influx of young retail investors into the stock and cryptocurrency markets, and
recent phenomena like meme stocks, we believe the stage is set for Gen Z to seek dedicated online community-based investment education
and entertainment services.
At the same time, a relatively new social
media app, Discord, has emerged and demonstrated unique appeal to younger people. As reported by The New York Times (“How
Discord, born from an obscure game, became a social hub for young people,” December 29, 2021), driven in part by the COVID-19 pandemic,
Discord “has exploded into the mainstream.” While parents working from home flocked to Zoom, many of their children were downloading
the Discord app to socialize with other young people through text and audio and video calls in groups known as servers. As of March 2025,
the platform has more than 259 million active users each month – up from 56 million in 2019. It has expanded from gamers to many
other groups including music aficionados, students, art communities, and cryptocurrency enthusiasts. According to Bloomberg, on September
15, 2021, Discord’s valuation doubled from $7 billion in 2020 to about $15 billion based on a $500 million capital raise.
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Discord is split into servers –
essentially chat rooms similar to the workplace tool Slack – which facilitate casual, free-flowing conversations about shared interests
such as gaming, music, art, school, and memes. Some servers are large and open to the public; others are private and invitation-only.
Another feature that significantly differentiates Discord from the established social media platforms like Facebook is that the service
does not have advertisements. It makes money through premium subscriptions that give users access to features like custom emoji for $5
or $10 per month. Discord also began experimenting in December 2021 with allowing some users to charge for access to their server, up
to $100 a month, of which Discord takes 10%.
Based on the above, social
influencers can generate revenues from Discord user subscriptions by drawing users in with their investment education and entertainment
content. Expert influencers on Discord and other social media can simultaneously use their social media expertise and brands to generate
social media marketing campaigns for business clients looking to attract more Generation Z consumers. Services, such as “AE.360.DDM,
Design Develop Manage”, covering all aspects of the design and implementation of the Discord servers themselves can attract subscribers
and, therefore, create a new source of revenue. We believe that we are a leading provider of all of these services, and that demand for
all of our services will continue to grow.
Our Services
We offer three types of services that
utilize Discord and other social media to younger generations and other social media users.
Discord Communities .
Our investment education and entertainment service aims to serve as an education and entertainment platform for investments in a way that
is accessible to Generation Z and other social media users. As one of the largest community-based education and entertainment platforms
on Discord, with ten separate servers with a combined user membership of approximately 206,899 as of December 31, 2024, we provide financial
literacy education and entertainment on trading and investment. Our largest Discord server, “STOCKS”, focuses on stock investing
education and entertainment, and we have smaller but growing real estate and cryptocurrency education and entertainment Discord servers.
One of the unique aspects of Discord is that the base access to certain materials is free to all users. Our Discord server subscription
fees currently range from $4.99 to $59.99, with a top tier that includes access to the OptionsSwing software platform of $120.00.
For monthly fees, paying subscribers
to our Discord servers can get access to live trading diaries, premium prerecorded investing and trading education video content, and
paying subscriber-only private group discussion channels relating to the general investment and trading education content on the Company’s
Discord servers. All members may watch nonpremium video education content, watch live day trading sessions during market hours, and participate
in live chat sessions with other members. We upload and manage all content on our Discord servers. There are no formal requirements for
our investment education and entertainment materials; however, we are selective with the content that we post on our servers.
We comply with Discord’s terms
of service, including minimum age requirements. Discord requires all users to be at least 13 years old, and we require users to be at
least 18 years old in order to participate in community discussions. Discord is in the process of creating a gateway to require age verification.
In addition, we maintain a set of community behavior rules for its servers which include bans on hate speech, harassment, spam, illegal
activities, and false information. All members must confirm that they have read and accept these rules in order to enter our Discord servers.
Our Discord moderators enforce these rules.
Social Media and Marketing .
We offer white-label marketing, content creation, content management, TikTok promotions, and TikTok consulting to clients in any industry
or market. Fees under our social media and marketing agreements are expected to range from $2,000 for small, short projects to $50,000
for more intricate and labor-intensive campaigns. Pricing depends on the amount of social media posts, length of the campaign, and product
placement.
Through social media, we have conducted
marketing and other social media campaigns on behalf of clients in investing, gaming, recreation, cryptocurrency assets, NFTs, and other
areas through our team of social media influencers, which we call our “Social Influencer Network,” or “SiN”.
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We utilize our “SiN” or
“Social Influencer Network,” our social influencer independent contractors, in part to increase social media reach for our
clients’ Discord servers or to drive traffic to their businesses. Both we and our clients generally have the right to preapprove
and remove the influencer’s posts at our and our clients’ discretion. They are generally paid on a commission-only basis.
Typical payment terms are a dollar amount for a certain number of new member signups, or in some cases a percentage, subject to a dollar
cap, on the server’s subscription net revenue. We or our clients may also commission the influencer to provide premium video education
series with revenue-sharing provisions for any related subscription fees. Depending on the particular contract, we, our client, or both
may own the content produced by our SiN influencers. Depending on each contract, we may require weekly meetings with the influencer. Our
SiN contractors’ work for clients are terminable by either us or our clients on 30 days’ notice, and are subject to customary
confidentiality, nondisclosure, and noncompete provisions.
Under our social media and marketing
agreements, we typically agree to produce a certain minimum number of posts, streams, or other social media and marketing content, at
a minimum required frequency for the agreed-upon period. We may agree to promote the products or services of the client by mentioning
the client or its products or services a certain number of times per post or stream, using products or service in our content in a designated
manner, or not using, mentioning or promoting competing products or services. Clients must generally preapprove our promotion-containing
content, subject to their reasonable discretion. Clients typically own any data generated by promotional posts or streams; however, we
retain the right to use the content created. Our social media and marketing agreements are subject to customary confidentiality, non-disparagement,
indemnification and other standard terms and social media policy compliance requirements. Other than as otherwise noted above, our influencers
are not exclusive to any social media and marketing client.
AE.360.DDM, Design Develop Manage .
AE.360.DDM is a suite of services to individuals and companies seeking to create their own server on Discord. We believe that we are the
first company to provide a full range of Discord DDM services for any individual, company, or organization that wishes to join Discord.
Since November 2021, we have worked with various communities on how to better manage their presence on Discord and have designed servers
for businesses and celebrities. We tailor our fees to the services requested and can range from set prices of $497 to $5,000 for each
Discord server design project. However, our fees may be higher based on the expected complexity, size, and management responsibilities
for the server. They may also be based on a percentage split of subscription revenues.
On Discord servers managed by our company
on behalf of clients, clients generally provide and own their servers’ content and control all rights to their servers, while we
provide management or other contracted services. If we are managing the Discord server under the AE.360.DDM service, we may upload content
for the server owner. The server owner may always upload content. Other server users may also upload content, but the server owner’s
moderators may remove it.
AE.360.DDM is a proprietary service
that is summarized below. The list of services below is not inclusive of our full suite of the AE.360.DDM services and processes by which
we design, develop and manage Discord servers on behalf of clients.
Our AE.360.DDM service includes any
or all of the following:
● “360.DD Level 1, 2 or 3” Design and Development service: We design and establish the client’s
Discord server under one of the following three “levels” of service:
● Level 1 includes a simple setup of the client’s server with base, or general-purpose, channels and
basic bots. Discord channels are topic-based chatrooms. Discord bots are user-like computer-simulated members of the server that can automate
various actions. Bots use Discord’s public application programming interface, or API, to perform actions like send messages, modify
roles, or automate moderation.
● Level 2 includes both Level 1 services and more advanced server features.
● Level 3 includes Level 1 and Level 2 services, and adds the following key features:
● Enhancements taking advantage of premium Discord features.
● Setup of a number of private channels. A private channel on Discord only allows selected members to join
it or limits what users may view and post without special permissions. Discord server members who are not added to the channel will not
be able to see it on the server’s sidebar. Private chat channels may be used to offer premium content to users.
● Third-party integrations, which may be used to integrate the use of complimentary apps into the Discord
server such as other social media platforms, productivity or data-management apps, and others.
● Special-purpose community bot and chat features.
● External links to websites that a client wishes to promote may also be included.
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● “360.M” Management service: We will act as the lead moderator and community manager of the
client’s Discord server. Features may include the following:
● Moderating and interacting in daily chats;
● Answering support tickets;
● Acting as a moderator and team leader; team leaders usually have the ability to create channels, create
and delete roles, and perform other administrative functions;
● Provide informative, fun, and interactive announcements;
● Make suggestions on how to improve the Discord community based on performance over time;
● Add all necessary bots for security, gaming, fun and so on.
● Managing the Discord server through moderation and maintenance through a proprietary process.
● ChatGPT AI bot as an AE.360.DDM Discord server customer service feature.
Since February 2024, we also offer Ternary V2,
the next generation of Ternary’s Stripe-verified payment processing platform for Discord communities. Ternary V2 provides additional
CRM tools, allowing community owners the ability to scale, manage, and transact payments all in a single platform.
Our Market Opportunity and Customers
We market our services primarily to
“Generation Z” users and businesses seeking to market their services to these users. As the first generation to have grown
up with access to the Internet and portable digital technology from a young age, members of Generation Z have been dubbed “digital
natives”. Around the world, it has been reported that members of Generation Z are spending more time on electronic devices and less
time reading books than before, with implications for their attention span and vocabulary, as well as their future in the modern economy.
As discussed above, Gen Z users are often bereft of the financial literacy needed to invest, in spite of growing demand for financial
services especially in an era of meme stocks and stock trading apps like Webull, Robinhood, and E*Trade. With our emphasis on video, chat,
and other social media education, entertainment and marketing, and deep knowledge of Discord server design and trending investment topics,
we have positioned ourselves to attract younger investors and businesses seeking to market to them.
We also target millennials, Generation X, and
older generations.
Sales, Marketing and Customer Acquisition
We will continue to seek customers by
producing content for our Discord servers and other social media accounts and using our Social Influencer Network to increase our Discord
members and to provide marketing services. To that end, we frequently engage in social media campaigns for our Discord servers by posting
free videos, tweets, and other social media content on Discord, TikTok, X, Instagram, and YouTube. We use search engine optimization,
or SEO, to gain further reach in acquiring paying subscribers and other members to our Discord servers and potential customers of our
other services. We expect that we will increase sales and revenues from increased Discord members and customers of our paid services from
the expansion of our AE.360.DDM service and expansion of our Discord servers.
One of the ways we can increase our
Discord users and customer base is to utilize our “SiN” or “Social Influencer Network,” our social influencer
independent contractors. Each of our SiN social influencer independent contractors can perform social media outreach to expand our Discord
server bases and increase membership in our Discord servers. When we use our social influencers to increase our user base, we have the
right to preapprove and remove the influencer’s posts at our discretion. They are generally paid on a commission-only basis. Typical
payment terms are a dollar amount for a certain number of new member signups or subscription net revenue. We may also commission them
to provide premium video education series with revenue-sharing provisions for any related subscription fees. We generally own all content
produced by our SiN influencers. Depending on each contract, we may require weekly meetings with the influencer. Our SiN contracts are
terminable on 30 days’ notice and have customary confidentiality, nondisclosure, and noncompete provisions.
As discussed above, we likewise offer
the services of our SiN independent contractors to current and potential social media and marketing customers. We are also working to
expand our user base by contracting with trained social media analysts in order to develop larger and more long-term campaigns to promote
our business. We expect that these offerings may accelerate growth in client contracts for our social media and marketing customer services.
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Our AE.360.DDM service is expected to grow through
multiple avenues including the use of SEO with Facebook and Google Ads, as well as our targeted outreach to venture capitalists, social
media influencers, digital technology brands, and other businesses. We also expect that revenues from this service will increase organically
by showing our expertise in Discord design, development and management through our own growing Discord communities.
During 2023 and the first quarter of 2024, we
initiated an online marketing campaign and expanded use of SEO, Facebook Ads, Google Ads and Google Analytics to accelerate customer acquisition
for our AE.360.DDM service; launched a new AE.360.DDM website; engaged music producer Jeff Blue as Head of Entertainment to lead the development
of the AE.360.DDM Music and Entertainment A&R service; hired a Senior Project Manager for all Discord servers under the AE.360.DDM
suite of services; introduced a ChatGPT AI bot as an AE.360.DDM Discord server customer service feature; engaged professional golfers
Bryson DeChambeau and Scott Verplank to promote the AE.360.DDM service; and engaged Michael Irvin, American sports commentator and former
professional football player, to provide marketing services for the AE.360.DDM service; launched an official YouTube channel, “The
Lounge,” which has featured podcast interviews with celebrities, sports figures, business professionals, and more, and where interviews
will focus on each guest’s journey through life; expanded the AE.360.DDM service with Ternary V2, the next generation of the Ternary
Stripe-verified payment processing platform for Discord communities; introduced a ChatGPT AI bot as an AE.360.DDM Discord server customer
service feature; and entered into an agreement with Zendrop, an industry leader in dropshipping and ecommerce, to provide CRM, Discord
customer analytics, payment processing, and related services.
In June 2024, we acquired the assets of TommyBoyTV,
a company engaged in the business of Discord development, social media, online community management, marketing, and analytics, expanding
the Company’s share of the Discord community market.
In October-November 2024, we were selected to design, develop,
and manage the Discord servers for Maxx Talent Awards, a premier platform for showcasing the talents of aspiring actors, models,
and singers; social media influencer, American fitness model, training specialist, actor, and entrepreneur, Scott Mathison;
Grammy Award-winning R&B and soul singer, songwriter, producer and actress Macy Gray; and dog behavioralist Jas Leverette,
star of the Netflix show Canine Intervention .
In November 2024, we acquired the assets of the
TikTok Shop space known as the TikTok Money Machine, which included its Discord community. The Discord community teaches content creators
how to sell products on TikTok Shop via the use of product content videos. It also connects major consumer product brands with these content
creators, offering the latter the opportunity to earn sales commissions, via their TikTok accounts, on each product sale completed. We
also secured consulting agreements with TikTokers and lead creators of the Discord, who have an aggregate of approximately 280,000 followers
on Instagram and 4,700,000 followers on TikTok.
In November 2024, we signed an agreement with
our Head of Entertainment, Jeff Blue, to acquire a 50% ownership interest in all film, TV, streaming and media
rights to Blue’s story, One Step Closer: From Xero to #1: Becoming Linkin Park . Under the agreement, we also engaged
with Mr. Blue to write the screenplay. Published by Simon & Schuster/Posthill Press in 2020, One Step Closer: From Xero to #1:
Becoming Linkin Park has been translated into seven different languages.
In December 2024, we were approved as a TikTok
Shop Partner. We plan to work with TikTok to connect brands with creators and help them collaborate further in the affiliate marketing
space.
Competition
While we do not have any competitors
that compete with us across our business in its entirety, we face competition in certain aspects of our business. Our products and services
face competition from different businesses depending on the offering.
The education components of our investment
education and entertainment services have the following primary competitors:
● Xtrades Discord Server – Stocks and options trading communities with real traders providing
analysis; their advertised monthly fee is $38. Their Discord server had approximately 110,000 members as of March 2025.
● WallStreetBets Discord Server and Subreddit – These are generally free services where anyone
can offer advice on high-risk investing in stocks, options, and futures trading. Their Discord server has approximately 484,305 members
and their subreddit had approximately 18 million registered users as of March 2025.
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● Eagle Investors – An online investment education service provided by investment advisory
firm Eagle Investments LLC. They manage a Discord server which includes a free investor community, a number of channels on diverse topics,
and free webinars. They also offer premium-only content for $67 to $140 per month for different levels of access to trading alerts on
their Discord server. They also offer paid stocks and options training courses for $400 per course not including discounts, and private
one-on-one sessions ranging from one to eight hours with expert traders at varying prices. Their Discord server had approximately 156,000
members as of March 2025.
Our social media marketing and advertising
competitors primarily include social media influencers who are the owners of alternative Discord servers and social media education and
entertainment services, which may detract from our current and potential paying subscriber base and customers of our other services. These
competitors include:
● @Fourtoeight – A social influencer who is the owner of the Discord server Wiseguyinvesting.
Wiseguyinvesting offers several payment plans for investment education resources and other features. Its community size is similar to
ours. Its plans range from $25 per week to $800 per year as of March 2025.
● @moneylinemark – A social influencer who owns the “StockVIP”
Discord server with approximately 254,000 members as of March 2025. Their revenue model relies 100% on Discord memberships. We are not
aware of any competitors for our AE.360.DDM suite of services.
We believe that we have other competitive strengths,
some of which are discussed below, that position us favorably in each aspect of our business. However, the technology industry is evolving
rapidly and is increasingly competitive. A variety of business models are being pursued or may be considered for the provision of digital
learning tools, some of which may be more profitable or successful than our business model.
Our Strengths
We believe that we have competitive
strengths, some of which are discussed below, that position us favorably in each aspect of our business. We believe our key competitive
strengths include the following:
● Superior Social Influencer Team . We believe that our greatest competitive strength is our
people. Our blend of young, dynamic, entrepreneurial executive social influencers are part of Generation Z and understand their needs
and interests. Moreover, our executive team includes professionals with two or more decades of accounting, legal, technology, sales, and
management experience including our Executive Chairman, who has practiced law for over 25 years; our Chief Financial Officer, a Certified
Public Accountant, or CPA, with over ten years of experience in finance and accounting; and our Chief Technology Officer, a former Salesforce
Inc. Senior Solution Engineer. We believe that we have a unique combination of knowledge, global experience and business acumen to sustain
long-term growth.
● First-Mover Advantage . We believe that our AE.360.DDM service is a first-of-its-kind business
developed by our company to design, develop, and manage Discord servers for customers wanting to create their own Discord communities
for their business. With our superior understanding of the Discord platform, we can provide the technology and speed to market which customers
require to set up successful Discord servers.
● Best-in-Class Investment Education, Entertainment and Technology . Our insights into compelling
investment education and entertainment methods and subjects for Gen Z and other types of interested customers; experience creating communities
for Gen Z and social media consumers; and our social influencer network, or “SiN”, and related content publishing network,
are some of the hallmarks of our business.
● Service Synergy . Each of our operating business categories has the ability to be a standalone
business, but all are housed within our single Asset Entities enterprise. With each deployment of additional services, we have historically
experienced organic growth in our other businesses.
Our Growth Strategies
The key elements of our strategy to expand our
business include the following:
● Expand Our Social Influencer Network . Our growth has been grounded on our team of social
influencers. In order to generate even greater momentum for the growth of our services, we will seek to expand our “SiN” social
influencer network. We plan to continue to bring top current and former athletes, celebrities, and rising and high-profile social influencers
into our SiN network to promote our established and newer Discord servers. We have also begun utilizing our SiN network to accelerate
the growth of our social media and marketing service.
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● Leverage Discord Server Community Outreach . We will continue to seek accelerated growth
in Discord server paying subscriber revenues from strategic pricing of varying levels of access to our Discord communities. Moreover,
we will leverage our Discord servers to help increase our social media reach and cross-market to our other services.
● Expand the AE.360.DDM Service . During 2023 and through March
2024, we initiated an online marketing campaign and expanded use of SEO, Facebook Ads, Google Ads and Google Analytics to accelerate customer
acquisition for our AE.360.DDM service; launched a new AE.360.DDM website; engaged music producer Jeff Blue as Head of Entertainment to
lead the development of the AE.360.DDM Music and Entertainment A&R service; hired a Senior Project Manager for all Discord servers
under the AE.360.DDM suite of services; introduced a ChatGPT AI bot as an AE.360.DDM Discord server customer service feature; engaged
professional golfers Bryson DeChambeau and Scott Verplank to promote the AE.360.DDM service; and engaged Michael Irvin, American sports
commentator and former professional football player, to provide marketing services for the AE.360.DDM service; launched an official YouTube
channel, “The Lounge,” which will feature podcast interviews with celebrities, sports figures, business professionals, and
more, and where interviews will focus on each guest’s journey through life; expanded the AE.360.DDM service with Ternary V2, the
next generation of the Ternary Stripe-verified payment processing platform for Discord communities; introduced a ChatGPT AI bot as an
AE.360.DDM Discord server customer service feature; and entered into an agreement with Zendrop, an industry leader in dropshipping and
ecommerce, to provide CRM, Discord customer analytics, payment processing, and related services. In June
2024, we acquired the assets of TommyBoyTV, a company engaged in the business of Discord development, social media, online community
management, marketing, and analytics, expanding the Company’s share of the Discord community market. In October-November 2024, we
were selected to design, develop, and manage the Discord servers for Maxx Talent Awards, a premier platform for showcasing
the talents of aspiring actors, models, and singers; social media influencer, American fitness model, training specialist, actor,
and entrepreneur, Scott Mathison; Grammy Award-winning R&B and soul singer, songwriter, producer and actress Macy Gray;
and dog behavioralist Jas Leverette, star of the Netflix show Canine Intervention .
● Market and Leverage Synergies from the AE.360.DDM Service . We will further use and expand
this service to create synergies and income-producing revenue streams that complement our other business categories.
Intellectual Property
We own common law rights to certain
marks, including “Asset Entities Where Assets Are Created”, “SiN”, “Social Influencer Network”, and
“AE 360 DDM”. We also own rights to the assetentities.com Internet domain name.
We own the trademarks “Ternary
D” and “OptionsSwing”, the domain names ternarydev.com and optionsswing.com, the social media handle @optionsswing on
Instagram, Facebook, TikTok, YouTube, and X, the social media handle @TernaryDevelopments on Instagram, the social media handle @TernaryDev
on Facebook, TikTok and X, and the Ternary Developments and OptionsSwing Discord servers. We also own The Whop, Instagram, TikTok, YouTube,
and Facebook social media accounts and PayPal and Stripe accounts relating to the Pure Profits Group Discord and TikTok Shop services.
Human Capital
As of March 25, 2025, we had nine full-time employees, one executive
consultant, and 41 independent contractors, some of which serve as Discord server moderators, analysts, server developers, customer service,
sales, and marketing outreach. None of our personnel are represented by labor unions, and we believe that we have an excellent relationship
with everyone who works with us. We operate the Company under remote-first principles.
Seasonality
We do not experience significant seasonality in
our sales cycle.
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Government Regulation
We are subject to several laws and regulations
that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could
harm our business. The way existing laws and regulations will be applied to the Internet and how they will relate to our business, are
often unclear. For example, we often cannot be certain how existing laws will apply in the e-commerce and online context, including with
respect to such topics as privacy, defamation, pricing, credit card fraud, advertising, taxation, sweepstakes, promotions, content regulation,
quality of products and services, and intellectual property ownership and infringement.
Numerous laws and regulatory schemes
have been adopted at the national and state level in the United States, and in some cases internationally, that have a direct impact on
our business and operations. For example:
● The Protecting Americans from Foreign Adversary Controlled Applications Act (the “PAFACA
Act”) was adopted on April 24, 2024, and bans social networking services within 270 to 360 days if they are determined by the president
of the United States and relevant provisions to be a “foreign adversary controlled application”. The definition covers websites
and application software, including mobile apps. The PAFACA Act explicitly applies to ByteDance Ltd. and its subsidiaries, including TikTok,
without the need for additional determination. It ceases to be applicable if the foreign adversary-controlled application is divested
and no longer considered to be controlled by a foreign adversary of the United States.
● The Controlling the Assault of Non-Solicited Pornography And Marketing Act, as amended (the “CAN-SPAM
Act”), and similar laws adopted by several states, regulate unsolicited commercial emails, create criminal penalties for emails
containing fraudulent headers, and control other abusive online marketing practices. The law also restricts data collection and use in
connection with its opt-out process requirements for senders of commercial emails. Similarly, the U.S. Federal Trade Commission (“FTC”)
has guidelines that impose responsibilities on us with respect to communications with consumers and impose fines and liability for failure
to comply with rules with respect to advertising or marketing practices it may deem misleading or deceptive.
● The federal Telephone Consumer Protection Act of 1991 (“TCPA”) restricts telemarketing and
the use of automated telephone equipment. The TCPA limits the use of automatic dialing systems, artificial or prerecorded voice messages,
SMS text messages, and fax machines. It also applies to unsolicited text messages advertising the commercial availability of goods or
services. Additionally, several states have enacted statutes that address telemarketing. For example, some states, such as California,
Illinois, and New York, have created do-not-call lists. Other states, such as Oregon and Washington, have enacted “no rebuttal statutes”
that require the telemarketer to end the call when the consumer indicates that such person is not interested in the product being sold.
Restrictions on telephone marketing, including calls and text messages, are enforced by the FTC, the Federal Communications Commission,
states, and through the availability of statutory damages and class action lawsuits for violations of the TCPA.
● The Credit Card Accountability Responsibility and Disclosure Act of 2009, and similar laws and regulations
adopted by several states regulate credit card and gift certificate use fairness, including expiration dates and fees. Our business also
requires that we comply with payment card industry data security and other standards. We are subject to payment card association operating
rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult
or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or
compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability
to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments,
and our business and results of operations could be adversely affected.
● The Digital Millennium Copyright Act provides relief for claims of circumvention
of copyright protected technologies and includes a safe harbor intended to reduce the liability of online service providers for hosting,
listing, or linking to third-party content that infringes copyrights of others.
● The Communications Decency Act provides that online service providers will not be
considered the publisher or speaker of content provided by others, such as individuals who post content on an online service provider’s
website.
● The California Consumer Privacy Act (“CCPA”), which went into effect
on January 1, 2020, provides consumers the right to know what personal data companies collect, how it is used, and the right to access,
delete, and opt out of the sale of their personal information to third parties. It also expands the definition of personal information
and gives consumers increased privacy rights and protections for that information. The CCPA also includes special requirements for California
consumers under the age of 16. In addition, the European Union and United Kingdom have adopted the General Data Protection Regulation
(“GDPR”), which likewise impose significant data protection obligations on enterprises, including limitations on data uses
and constraints on certain uses of sensitive data. Effective January 1, 2023, we also became subject to the California Privacy Rights
Act (“CPRA”), which expands upon the consumer data use restrictions, penalties and enforcement provisions under the CCPA.
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● Virginia’s Consumer Data Protection Act (“VCDPA”) establishes
rights for Virginia consumers to control how companies use individuals’ personal data. The VCDPA dictates how companies must protect
personal data in their possession and respond to consumers exercising their rights, as prescribed by the law, regarding such personal
data. The VCDPA went into effect on January 1, 2023.
● The Colorado Privacy Act (the “CPA”) and
Connecticut’s An Act Concerning Personal Data Privacy and Online Monitoring (“CDPA”) ,
effective as of July 1, 2023, are similar comprehensive consumer privacy laws in Colorado and Connecticut, respectively.
● Effective as of December 31, 2023 , the Utah Consumer Privacy
Act (“UCPA”) regulates business handling of consumers’ personal data in Utah.
● In addition, the following other state laws have become effective
or will become effective within the next 12 months:
o The Texas Data Privacy and Security Act (effective as of July 1,
2024)
o The Oregon Consumer Privacy Act (effective as of July 1, 2024)
o The Montana Consumer Data Privacy Act ( effective
as of October 1, 2024)
● Effective as of January 1, 2025, the Iowa Consumer Privacy
Act (“ICPA”), the Delaware Personal Data Privacy Act (“DPDPA”), the Nebraska Data Privacy Act (“NEDPA”),
the New Hampshire Data Privacy Act (“NHDPA”), became comprehensive privacy laws
in Iowa, Delaware, Nebraska, and New Hampshire , respectively.
● Effective as of January 15, 2025, the New Jersey Data Protection
Act (“NJDPA”) became a comprehensive privacy law in New Jersey.
● Effective as of July 1, 2025, the Minnesota Consumer Data Privacy Act (“MCDPA”) and the Tennessee
Information Protection Act (“TIPA”) will become comprehensive privacy laws in Minnesota and Tennessee, respectively.
● Effective as of October 1, 2025, the Maryland Online Data Privacy Act of 2024 (“MODPA”)
will become a comprehensive privacy law in Maryland.
● Effective as of January 1, 2026, the Indiana Consumer Data Protection Act (“ICDPA”),
the Kentucky Consumer Data Protection Act (“KCDPA”), and the Rhode Island Data Transparency and Privacy Protection Act (“RIDTPPA”)
will become comprehensive privacy laws in Indiana, Kentucky, and Rhode Island, respectively.
● The European Union (the “EU”) General Data Protection Regulation (“GDPR”)
imposes stringent requirements for controllers and processors of personal data of persons in the EU, including, for example, more robust
disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations
on retention of information, increased requirements pertaining to special categories of data, and additional obligations when we contract
with third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer
of personal data out of the EU to the United States and other third countries. In addition, the GDPR provides that EU member states may
make their own further laws and regulations limiting the processing of personal data.
The GDPR applies extraterritorially,
and we may be subject to the GDPR because of our data processing activities that involve the personal data of individuals located in the
EU, such as in connection with our EU-based students. Failure to comply with the requirements of the GDPR and the applicable national
data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover
of the preceding financial year, whichever is higher, and other administrative penalties. GDPR regulations may impose additional responsibility
and liability in relation to the personal data that we process, and we may be required to put in place additional mechanisms to ensure
compliance with the new data protection rules.
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Following the withdrawal of the
United Kingdom from the EU and the expiry of the transition period, from January 1, 2021, the United Kingdom Data Protection Act 2018
(“UK GDPR”) retains in large part the GDPR in United Kingdom national law. The UK GDPR mirrors the fines under the GDPR, e.g.,
we could be fined up to the greater of €20 million/£17.5 million or 4% of global turnover under each regime.
The federal U.S. Children’s
Online Privacy Protection Act (“COPPA”), the GDPR, and the UK GDPR impose additional restrictions on the ability of online
services to collect information from minors. In addition, certain states, including Utah and Massachusetts, have laws that impose criminal
penalties on the production and distribution of content that is “harmful to a minor.”
Investment Advisers Act of 1940
Under the Investment Advisers Act of 1940 (the “Investment Advisers
Act”), and the rules adopted under that statute, a person or firm is required to register with the SEC if the person or firm
is:
● an “investment adviser” under Section 202(a)(11) of the Investment Advisers Act;
● not excepted from the definition of investment adviser by Section 202(a)(11)(A) through (E) of the Investment Advisers Act;
● not exempt from SEC registration under Section 203(b) of the Investment Advisers Act; and
● not prohibited from SEC registration by Section 203A of the Investment Advisers Act.
Applicable state laws
may have similar registration requirements.
Subject to certain limited
exclusions, Section 202(a)(11) of the Investment Advisers Act generally defines an “investment adviser” as any person or firm
that: (1) for compensation; (2) is engaged in the business of; (3) providing advice, making recommendations, issuing reports, or furnishing
analyses on securities, either directly or through publications. A person or firm must satisfy all three elements to be regulated under
the Investment Advisers Act.
The SEC’s Division
of Investment Management construes these elements broadly. For example, with respect to “compensation,” the receipt of any
economic benefit suffices. To be deemed compensation, a fee need not be separate from other fees charged, it need not be designated as
an advisory fee, and it need not be received directly from a client. With respect to the “business” element, an investment
advisory business need not be the person’s or firm’s sole or principal business activity. Rather, this element is satisfied
under any of the following circumstances: the person or firm holds himself or itself out as an investment adviser or as providing investment
advice; the person or firm receives separate or additional compensation for providing advice about securities; or the person or firm typically
provides advice about specific securities or specific categories of securities. Finally, a person or firm satisfies the “advice
about securities” element if the advice or reports relate to securities. The Division has stated that providing one or more of the
following also could satisfy this element: advice about market trends; advice in the form of statistical or historical data (unless the
data is no more than an objective report of facts on a non-selective basis); advice about the selection of an investment adviser; advice
concerning the advantages of investing in securities instead of other types of investments; and a list of securities from which a client
can choose, even if the adviser does not make specific recommendations from the list. An employee of an SEC-registered investment adviser
does not need to register separately, so long as all of the employee’s investment advisory activities are within the scope of his
employment.
One of the statutory
exclusions from the definition of “investment adviser” is the “publisher’s exclusion”. Under Section 202(a)(11)(D)
of the Investment Advisers Act, “the publisher of any bona fide newspaper, news magazine or business or financial publication of
general and regular circulation” is excluded from the “investment adviser” definition. This “publisher’s
exclusion” requires that product or service offerings must be: (1) of a general and impersonal nature, in that the research provided
is not adapted to any specific portfolio or any client’s particular needs; (2) “bona fide” or genuine, in that it contains
disinterested discussion and analysis as opposed to promotional material; and (3) of general and regular circulation, in that it is not
timed to specific market activity or to events affecting, or having the ability to affect, the securities industry. The basis for reliance
on such exclusion will depend on a facts-and-circumstances analysis.
Certain services provided
by the Company may cause the Company to meet the definition of “investment adviser” in the Investment Advisers Act and similar
state laws. Under the Investment Advisers Act, an “investment adviser” is defined as a “person who, for compensation,
engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to
the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues
or promulgates analyses or reports concerning securities.” In particular, certain of the content on the Company’s Discord
servers, such as trading diaries posted by the Company’s personnel, and other content available on the Company’s social media
channels, may constitute investment advice. In addition, in general, disclaimers, such as those included with the Company’s posts
on Discord and other social media, do not change the character of the advice provided for Investment Advisers Act purposes. The Company
relies on the “publisher’s exclusion” from the definition of “investment adviser” under Section 202(a)(11)(D)
of the Investment Advisers Act, as described above and as interpreted by legal precedent. We intend at all times to operate our business
in a manner as to not become inadvertently subject to the regulatory requirements under the Investment Advisers Act.
13
If we meet the definition of “investment
adviser” in the Investment Advisers Act, and do not meet the requirements for reliance on the “publisher’s exclusion”
from the definition of “investment adviser” or another exclusion, exemption, or exception from the registration requirements
under the Investment Advisers Act, we will have to register as an investment adviser with the SEC pursuant to the Investment Advisers
Act and potentially with one or more states under similar state laws. Registration requirements for investment advisers are significant.
If we are deemed to be an investment adviser and are required to register with the SEC and potentially one or more states as an investment
adviser, we will become subject to the requirements of the Investment Advisers Act and the corresponding state laws. The Investment Advisers
Act requires: (i) fiduciary duties to clients; (ii) substantive prohibitions and requirements; (iii) contractual requirements; (iv) record-keeping
requirements; and (v) administrative oversight by the SEC, primarily by inspection. Requirements and obligations imposed on investment
advisers can be burdensome and costly. If it is deemed that we are out of compliance with such rules and regulations, we may also be subject
to civil and/or criminal penalties. Applicable state laws may have similar or additional requirements. If we are required to register
under these laws, we may no longer be able to continue to offer our investment education and entertainment services, which may have a
significant adverse impact on our business and results of operations.
Corporate History and Structure
Formation and Merger into Asset Entities
Inc.
We began our operations as a general partnership
on August 1, 2020. Asset Entities Limited Liability Company, a California limited liability company (“California LLC”), was
formed on October 20, 2020 to operate our business. Asset Entities Inc., a Nevada corporation, was incorporated on March 9, 2022. Immediately
after the incorporation of Asset Entities Inc., all of the issued and outstanding stock of Asset Entities was purchased by California
LLC in exchange for $1.00. On March 28, 2022, in accordance with Sections 17710.01-17710.19, inclusive, of the California Corporation
Code and Chapter 92A of the Nevada Revised Statutes (the “NRS”), California LLC was merged with and into Asset Entities. As
a result of the merger, Asset Entities acquired the business of California LLC. Pursuant to the Agreement and Plan of Merger, the units
of California LLC were automatically converted into shares of Asset Entities. in the same proportion as the percentage interests of California
LLC represented by such units. As a result and as further provided in the Agreement and Plan of Merger, on March 28, 2022, Asset Entities
Holdings, LLC, a Texas limited liability company (“AEH”), which owned 97.56% of California LLC’s units, became the holder
of 1,951,200 shares of Class A Common Stock of Asset Entities, or 97.56% of the total issued and outstanding post-merger shares of common
stock of Asset Entities, and a holder of 2.44% of California LLC’s units became the holder of 48,800 shares of Class B Common Stock
of Asset Entities, or 2.44% of the total issued and outstanding post-merger shares of common stock of Asset Entities.
Capital Structure
Under the Company’s Articles of Incorporation,
as amended (the “Articles of Incorporation”), we are authorized to issue two classes of common stock, Class A Common Stock
and Class B Common Stock, and any number of classes of preferred stock. Class A Common Stock is entitled to ten votes per share on proposals
requiring or requesting stockholder approval, and Class B Common Stock is entitled to one vote on any such matter. A share of Class A
Common Stock may be voluntarily converted into a share of Class B Common Stock. A transfer of a share of Class A Common Stock will result
in its automatic conversion into a share of Class B Common Stock upon such transfer, subject to certain exceptions, including that the
transfer of a share of Class A Common Stock to another holder of Class A Common Stock will not result in such automatic conversion. Class
B Common Stock is not convertible. Other than as to voting and conversion rights, the Company’s Class A Common Stock and Class B
Common Stock have the same rights and preferences and rank equally, share ratably and are identical in all respects as to all matters.
Holders of the Series A Preferred Stock generally
have the right to vote on an as-converted basis with the Class B Common Stock, to the extent that such conversion would not cause such
holder’s beneficial ownership of Class B Common Stock to exceed 4.99% of the outstanding Class B Common Stock, which may be increased
by the holder to up to 9.99% upon no fewer than 61 days’ prior notice.
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As of March 25, 2025, AEH owns all of the 1,000,000
shares of our outstanding Class A Common Stock. The shares of Class A Common Stock held by AEH are controlled by its officers and managers,
all of whom are also some of our officers and directors. AEH also owns 250,000 shares of our Class B Common Stock. There are 13,413,162
shares of Class B Common Stock issued and outstanding as of March 25, 2025. AEH therefore controls 10,250,000 votes, or approximately
42.6% of all voting rights. In addition, our directors and officers collectively hold 260,689 shares of Class B Common Stock. Combining
their control of AEH’s shares of Class A Common Stock and Class B Common Stock and their own shares of Class B Common Stock, our
officers and directors collectively control 10,510,689 votes, or approximately 43.6% of total voting power. Management’s concentrated
voting power may limit or preclude the ability of others to influence corporate matters including significant business decisions for the
foreseeable future.
Organizational Structure
The following diagram depicts our organizational structure as of March
25, 2025. This diagram includes our stockholder of Class A Common Stock, stockholders of Class B Common Stock subject to restrictions
on transfer, as a group, and our public stockholders of Class B Common Stock, as a group. The Class A Common Stock and Class B Common
Stock holdings of these stockholders is also depicted.
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As of the date of this Annual Report, we have no subsidiaries.
Our principal executive offices are located at
100 Crescent Ct, 7th Floor, Dallas, TX 75201 and our telephone number is (214) 459-3117. We maintain a website at https://www.assetentities.com.
Information available on our website is not incorporated by reference in and is not deemed a part of this Annual Report. Our fiscal year
ends December 31. Neither we nor any of our predecessors have been in bankruptcy, receivership or any similar proceeding.