bnai-20240331

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 March 31, 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)

(307) 699-9371

(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 May 10, 2024, 33,321,955 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.


			Page
Part I. Financial Information			4
Item 1. Financial Statements			4
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023			4
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023			5
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023			6
Unaudited Condensed Consolidated Statement of Cash Flows For the Three Months Ended March 31, 2024 and 2023			7
Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			28
Item 4. Controls and Procedures			28
Part II. Other Information			31
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3. Defaults Upon Senior Securities			34
Item 4. Mine Safety Disclosures			34
Item 5. Other Information			34
Item 6. Exhibits			35
Signatures			38


	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	3,304,283	$	1,685,013
Accounts receivable, net of allowance	7,500		10,000
Due from Sponsor	3,000		—
Prepaid expenses and other current assets	1,038,993		201,293
Total current assets	4,353,776		1,896,306
Property and equipment, net	1,176,235		802,557
Intangible assets, net	17,847,086		17,882,147
Other assets	13,475,000		1,427,729
TOTAL ASSETS	$	36,852,097	$	22,008,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,416,613	$	1,282,974
Accrued expenses	7,773,389		1,637,048
Due to related parties	693,036		—
Deferred revenue	—		2,290
Short-term debt	223,300		223,300
Total current liabilities	13,106,338		3,145,612
Warrant liabilities	1,974,560		—
Note payable - related party	500,000		500,000
Long-term debt	668,674		668,674
Total liabilities	16,249,572		4,314,286
Commitments and contingencies (Note M)
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 March 31, 2024 or December 31, 2023	—		—
Common stock par value of $0.0001 per share, 750,000,000 shares authorized. As of March 31, 2024 and December 31, 2023, respectively, 33,592,055 and 23,270,404 shares issued and outstanding	3,360		2,327
Additional paid-in capital	40,785,294		30,993,846
Accumulated deficit	(20,186,129)		(13,301,720)
Total stockholders’ equity	20,602,525		17,694,453
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	36,852,097	$	22,008,739


	Three Months Ended March 31,
		2024		2023
Revenues		$	49,790	$	—


Operating expenses:
General and administrative		6,480,535		2,616,724
Depreciation and amortization		117,347		19,232
Research and development		250,671		2,000
Total operating expenses		6,848,553		2,637,956
Loss from operations		(6,798,763)		(2,637,956)
Other income (expenses):
Interest expense		(25,050)		—
Interest income		3,118		—
Change in fair value of warrant liabilities		(60,823)		—
Other		(2,891)		—
Other income (expenses), net		(85,646)		—


Net loss		$	(6,884,409)	$	(2,637,956)
Net loss per common share- basic and diluted		$	(0.27)	$	(0.15)
Weighted-average common shares - basic and diluted		25,233,890		17,129,921


	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


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net loss	$	(6,884,409)	$	(2,637,956)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense	117,347		19,232
Allowance for uncollected receivables	30,000		—
Write off of deferred financing fees	1,427,729		—

Change in fair value of warrant liabilities	60,823		—
Stock based compensation	406,980		2,442,701
Changes in operating assets and liabilities:
Prepaid expense and other current assets	(820,876)		(51,100)
Accounts receivable	(27,500)		500
Accounts payable	783,637		108,890
Accrued expenses	358,630		53,413
Other assets	—		8,850
Deferred revenue	(2,290)		—
Net cash used in operating activities	(4,549,929)		(55,470)
Cash flows from investing activities:
Purchase of property and equipment	(13,037)		—

Capitalized internal-use software costs	(158,028)		—

Net cash used in investing activities	(171,065)		—
Cash flows from financing activities:
Cash and cash equivalents acquired in connection with the reverse recapitalization	858,292		—
Proceeds from the sale of common stock	6,325,000		—



Proceeds received from warrant exercise	15,264		—
Payment of deferred financing costs	(858,292)		—
Advances to related parties	—		(4,790)
Proceeds received from related party advance repayments	—		58,250
Net cash provided by financing activities	6,340,264		53,460
Net increase (decrease) in cash and cash equivalents	1,619,270		(2,010)
Cash and cash equivalents at the beginning of the period	1,685,013		2,010
Cash and cash equivalents at the end of the period	$	3,304,283	$	—
Supplemental Cash Flow Information
Cash paid for interest	$	—	$	—
Cash paid for income taxes	$	—	$	—
Supplemental Non-Cash Information
Capitalized internal-use software costs in accrued expenses	$	50,075	$	—
Stock-based compensation capitalized as part of capitalized software costs	$	291,725	$	—
Conversion of accounts payable and short-term debt into common shares	$	—	$	50,000

Warrants exercise through settlement of accounts payable	$	—	$	30,000


Issuance of common stock pursuant to Reseller Agreement	$	13,475,000	$	—


	Fair value measurement at reporting date using
March 31, 2024	(Level 1)		(Level 2)		(Level 3)
Liabilities:
Warrant liabilities - Public Warrants	$	—	$	1,238,826	$	—
Warrant liabilities - Private Placement Warrants	$	—	$	735,734	$	—


	March 31,
	2024	2023
Options	2,538,940	1,620,600
Warrants	4,749,370	283,605
Total	7,288,310	1,904,205


	March 14, 2024
Cash and cash equivalents	$	858,292
Due from Sponsor	3,000
Prepaid and other current assets	16,824
Accounts payable	(2,352,328)
Accrued expenses	(5,782,211)
Due to related parties	(693,036)
Warrant liability	(1,913,737)
Net liabilities assumed	$	(9,863,196)


Assets Acquired	Amount Recognized
In-process research and development intangible asset	$	17,000,000
Property and equipment	721,916
Liabilities assumed
Accounts payable	(57,700)
Accrued expenses	(249,779)
Short-term debt	(1,144,575)
Total assets acquired and liabilities assumed	16,269,862
Total consideration	$	16,269,862


	March 31, 2024		December 31, 2023
Security deposits	$	46,300	$	71,300
Prepaid VAT	17,785		7,821
Prepaid professional fees	206,797		43,712


Years Ending December 31:
2024 (remaining 9 months)	$	105,182
2025	140,243
2026	140,243
2027	140,243
2028	140,243
Thereafter	180,932
	$	847,086


Risk-free interest rate	4.13	%	3.59	%
Dividend yield	0.00	%	0.00	%
Volatility	54.79	%	49.94	%


	Number of Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in years)
Outstanding as of December 31, 2023	2,430,900	$	4.19	$	—	—
Granted	108,040	$	8.10	$	4.18	—


Outstanding as of March 31, 2024	2,538,940	$	4.31	$	2.19	9.01
Vested and expected to vest as of March 31, 2024	2,538,940	$	4.31	$	2.19	9.01
Exercisable as of March 31, 2024	1,850,748	$	3.89	$	1.90	8.95


	Three Months Ended March 31,
	2024		2023
Expected term	3 years		10 years
Risk-free interest rate	4.46	%	3.74	%
Dividend yield	0.00	%	0.00	%
Volatility	55.14	%	45.86	%


Prepaid insurance	574,236		—
Prepaid other	193,875		78,460
Prepaid expenses and other current assets	$	1,038,993	$	201,293


	March 31, 2024		December 31, 2023
Equipment	$	436,711	$	426,000
Furniture	346,591		346,591
Capitalized software	1,015,176		569,923
Total	1,798,478		1,342,514
Accumulated depreciation and amortization	(622,243)		(539,957)
Property and equipment, net of accumulated depreciation and amortization	$	1,176,235	$	802,557


	March 31, 2024
	Gross		Accumulated Amortization		Net
Amortizing intangible assets:
Patent portfolio	$	1,259,863	$	(412,777)	$	847,086
Indefinite-lived intangible assets:
In-process research and development	17,000,000		—		17,000,000
Total	$	18,259,863	$	(412,777)	$	17,847,086


	December 31, 2023
	Gross		Accumulated Amortization		Net
Amortizing intangible assets:
Patent portfolio	$	1,259,863	$	(377,716)	$	882,147
Indefinite-lived intangible assets:
In-process research and development	17,000,000		—		17,000,000
Total	$	18,259,863	$	(377,716)	$	17,882,147


	March 31, 2024		December 31, 2023
Accrued professional fees	$	6,231,205	$	245,751
Accrued compensation and related expenses	1,137,944		1,146,435
Due to related party	373,450		178,723
Accrued other	30,790		66,139
Accrued expenses	$	7,773,389	$	1,637,048


	Three Months Ended March 31,				Increase (Decrease)
	2024		2023
Revenues	$	49,790	$	—	$	49,790


Operating expenses:
General and administrative	6,480,535		2,616,724		3,863,811
Depreciation and amortization	117,347		19,232		98,115
Research and development	250,671		2,000		248,671
Total operating expenses	6,848,553		2,637,956		4,210,597
Loss from operations	(6,798,763)		(2,637,956)		(4,160,807)

SEC Form 10-Q filed by DHC Acquisition Corp.