bnai-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-40130

_________________________

Brand Engagement Network Inc.

(Exact name of registrant as specified in its charter)

_________________________


Delaware						98-1574798
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

145 E. Snow King Ave PO Box 1045 Jackson, WY						83001
(Address of Principal Executive Offices)						(Zip Code)

(312) 810-7422

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	BNAI	The Nasdaq Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	BNAIW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of August 9, 2024, 35,963,169 shares of the Issuer’s common stock, $0.0001 par value per share, and 10,314,952 public warrants representing the right to acquire one share of the Issuer’s common stock for $11.50, were outstanding.

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			Page
Part I. Financial Information			4
Item 1. Financial Statements			4
Unaudited Condensed Consolidated Balance Sheets as of June 3 0 , 2024 and December 31, 2023			4
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 3 0 , 2024 and 2023			5
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 3 0 , 2024 and 2023			6
Unaudited Condensed Consolidated Statement of Cash Flows For the Six Months Ended June 30 , 2024 and 2023			8
Notes to Unaudited Condensed Consolidated Financial Statements			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			35
Part II. Other Information			37
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3. Defaults Upon Senior Securities			42
Item 4. Mine Safety Disclosures			42
Item 5. Other Information			42
Item 6. Exhibits			43
Signatures			45

Brand Engagement Network, BEN, our logo and our other trademarks or service marks appearing in this report are the property of Brand Engagement Network Inc. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names included in this report are without the ®, ™ or other applicable symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

Unless otherwise indicated, “Brand Engagement Network,” “BEN,” “the Company,” “our,” “us,” or “we,” refer to Brand Engagement Network Inc. and its consolidated subsidiaries.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “aims,” “anticipates,” “believes,” “contemplates,” “continue,” “could,” “estimates,” “expects,” “forecast,” “guidance,” “intends,” “may,” “plans,” “possible,” “potential,” “predicts,” “preliminary,” “projects,” “seeks,” “should,” “target,” “will” or “would” or the negative of these words, variations of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:

•the failure to realize the anticipated benefits of the Business Combination (as defined below);

•our ability to maintain the listing of our securities on Nasdaq;

•the attraction and retention of qualified directors, officers, employees and key personnel;

•our need for additional capital and whether additional financing will be available on favorable terms, or at all;

•the volatility of the market price and trading price for our Common Stock and Public Warrants (each as defined below);

•our limited operating history;

•the length of our sales cycle and the time and expense associated with it;

•our ability to grow our customer base;

•our dependence upon third-party service providers for certain technologies;

•competition from other companies offering artificial intelligence products that have greater resources, technology, relationships and/or expertise;

•our ability to compete effectively in a highly competitive market;

•our ability to protect and enhance our corporate reputation and brand;

•our ability to hire, retain, train and motivate qualified personnel and senior management and our ability to deploy our personnel and resources to meet customer demand;

•our ability to grow through acquisitions and successfully integrate any such acquisitions;

•the impact from future regulatory, judicial, and legislative changes in our industry;

•increases in costs, disruption of supply or shortage of materials, which could harm our business;

•our ability to successfully maintain, protect, enforce and grow our intellectual property rights;

•our future financial performance, including the ability of future revenues to meet projected annual bookings;

•our ability to forecast and maintain an adequate rate of revenue growth and appropriately plan our expenses;

•our ability to generate sufficient revenue from each of our revenue streams; and

•the other risks and uncertainties discussed in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this in this Quarterly Report on Form 10-Q, which is incorporated by reference herein. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Many of the important factors that will determine these results are beyond our ability to control or predict. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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Part I. Financial Information

Item 1. Financial Statements

BRAND ENGAGEMENT NETWORK INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2024		December 31, 2023*
ASSETS
Current assets:
Cash and cash equivalents	$	1,431,425	$	1,685,013
Accounts receivable, net of allowance	—		10,000
Due from Sponsor	3,000		—
Prepaid expenses and other current assets	1,011,125		201,293
Total current assets	2,445,550		1,896,306
Property and equipment, net	266,777		802,557
Intangible assets, net	17,866,317		17,882,147
Other assets	13,475,000		1,427,729
TOTAL ASSETS	$	34,053,644	$	22,008,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,574,255	$	1,282,974
Accrued expenses	5,834,362		1,637,048
Due to related parties	693,036		—
Deferred revenue	—		2,290
Convertible note	1,900,000		—
Short-term debt	891,974		223,300
Total current liabilities	12,893,627		3,145,612
Warrant liabilities	517,899		—
Note payable - related party	—		500,000
Long-term debt	—		668,674
Total liabilities	13,411,526		4,314,286
Commitments and contingencies (Note N)
Stockholders’ equity:
Preferred stock par value $0.0001 per share, 10,000,000 shares authorized, none designated. There are no shares issued or outstanding as of June 30, 2024 or December 31, 2023	—		—
Common stock par value of $0.0001 per share, 750,000,000 shares authorized. As of June 30, 2024 and December 31, 2023, respectively, 36,096,269 and 23,270,404 shares issued and outstanding	3,610		2,327
Additional paid-in capital	43,874,341		30,993,846
Accumulated deficit	(23,235,833)		(13,301,720)
Total stockholders’ equity	20,642,118		17,694,453
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	34,053,644	$	22,008,739

* Derived from audited information

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BRAND ENGAGEMENT NETWORK INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues	$	—	$	—	$	49,790	$	—
Cost of revenues	—		—		—		—
Gross profit	—		—		49,790		—
Operating expenses:
General and administrative	5,255,136		2,779,722		11,765,671		5,396,446
Depreciation and amortization	682,244		220,702		799,591		239,934
Research and development	355,565		76,378		606,236		78,378
Total operating expenses	6,292,945		3,076,802		13,171,498		5,714,758
Loss from operations	(6,292,945)		(3,076,802)		(13,121,708)		(5,714,758)
Other income (expenses):
Interest expense	(19,403)		—		(44,453)		—
Interest income	114		—		3,232		—
Gain on debt extinguishment	1,847,992		—		1,847,992		—
Change in fair value of warrant liabilities	1,456,661		—		1,395,838		—
Other	(42,123)		(31,750)		(15,014)		(31,750)
Other income (expenses), net	3,243,241		(31,750)		3,187,595		(31,750)
Loss before income taxes	(3,049,704)		(3,108,552)		(9,934,113)		(5,746,508)
Income taxes	—		—		—		—
Net loss	$	(3,049,704)	$	(3,108,552)	$	(9,934,113)	$	(5,746,508)
Net loss per common share- basic and diluted	$	(0.09)	$	(0.15)	$	(0.34)	$	(0.31)
Weighted-average common shares - basic and diluted	33,993,867		20,193,447		29,635,857		18,662,480

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BRAND ENGAGEMENT NETWORK INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)


	Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Par Value		Shares	Par Value
Balance at December 31, 2023	—	$	—	23,270,404	$	2,327	$	30,993,846	$	(13,301,720)	$	17,694,453
Stock issued to DHC shareholders in reverse recapitalization	—	—		7,885,220	789		(10,722,277)		—		(10,721,488)
Issuance of common stock pursuant to Reseller Agreement	—	—		1,750,000	175		13,474,825		—		13,475,000
Sale of common stock	—	—		645,917	65		6,324,935		—		6,325,000
Warrant exercises	—	—		40,514	4		15,260		—		15,264
Stock-based compensation	—	—		—	—		698,705		—		698,705
Net loss	—	—		—	—		—		(6,884,409)		(6,884,409)
Balance at March 31, 2024	—	—		33,592,055	3,360		40,785,294		(20,186,129)		20,602,525
Stock issued in settlement of accounts payable and loans payable	—	—		93,333	9		321,999		—		322,008
Sale of common stock	—	—		877,500	198		1,993,552		—		1,993,750
Warrant exercises	—	—		13,505	1		4,999		—		5,000
Stock-based compensation, including vested restricted shares	—	—		381,915	42		768,497		—		768,539
Net loss	—	—		—	—		—		(3,049,704)		(3,049,704)
Balance at June 30, 2024	—	$	—	34,958,308	$	3,610	$	43,874,341	$	(23,235,833)	$	20,642,118

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	Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Par Value		Shares	Par Value
Balance at December 31, 2022	—	$	—	17,057,085	$	1,705	$	1,528,642	$	(1,570,454)	$	(40,107)
Warrant exercises	—	—		81,030	8		29,992		—		30,000
Stock issued in conversion of accounts payable and loans payable	—	—		135,050	14		49,986		—		50,000
Stock-based compensation	—	—		—	—		2,442,701		—		2,442,701
Net loss	—	—		—	—		—		(2,637,956)		(2,637,956)
Balance at March 31, 2023	—	—		17,273,165	1,727		4,051,321		(4,208,410)		(155,362)
Stock issued for DM Lab APA	—	—		4,325,043	433		16,012,317		—		16,012,750
Options and warrant exercises	—	—		56,552	10		20,928		—		20,938
Stock Issued in conversion of convertible notes	—	—		378,140	38		1,399,962		—		1,400,000
Stock issued in settlement of accounts payable and loans payable	—	—		103,439	10		382,953		—		382,963
Stock-based compensation	—	—		—	—		1,841,767		—		1,841,767
Net loss	—	—		—	—		—		(3,108,552)		(3,108,552)
Balance at June 30, 2023	—	$	—	22,136,339	$	2,218	$	23,709,248	$	(7,316,962)	$	16,394,504

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BRAND ENGAGEMENT NETWORK INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(9,934,113)	$	(5,746,508)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	799,591		239,934
Allowance for uncollected receivables	30,000		—
Write off of deferred financing fees	1,427,729		—

Change in fair value of warrant liabilities	(1,395,838)		—
Gain on debt extinguishment	(1,847,992)		—
Stock based compensation, including the issuance of restricted shares	1,262,090		4,284,468
Changes in operating assets and liabilities:
Prepaid expense and other current assets	(793,008)		(124,153)
Accounts receivable	(20,000)

SEC Form 10-Q filed by Brand Engagement Network Inc.