# EDGAR Filing Document

**Accession Number:** 0001661779
**File Stem:** 0001104659-23-019873
**Filing Date:** 2023-2
**Character Count:** 485919
**Document Hash:** 1d87b64d83fa598cdb30fe9ba86de6c8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-019873.hdr.sgml**: 20230213

**ACCESSION NUMBER**: 0001104659-23-019873

**CONFORMED SUBMISSION TYPE**: 1-A POS

**PUBLIC DOCUMENT COUNT**: 8

**FILED AS OF DATE**: 20230213

**DATE AS OF CHANGE**: 20230213

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** STARTENGINE CROWDFUNDING, INC.
- **CENTRAL INDEX KEY:** 0001661779
- **STANDARD INDUSTRIAL CLASSIFICATION:** FINANCE SERVICES [6199]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 1-A POS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 024-11806
- **FILM NUMBER:** 23619936

**BUSINESS ADDRESS:**
- **STREET 1:** 4100 WEST ALAMEDA AVENUE
- **STREET 2:** 3RD FLOOR
- **CITY:** BURBANK
- **STATE:** CA
- **ZIP:** 91505
- **BUSINESS PHONE:** 800-317-2200

**MAIL ADDRESS:**
- **STREET 1:** 4100 WEST ALAMEDA AVENUE
- **STREET 2:** 3RD FLOOR
- **CITY:** BURBANK
- **STATE:** CA
- **ZIP:** 91505

## Part

**AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY'S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.**

**PRELIMINARY OFFERING CIRCULAR DATED FEBRUARY 13, 2023**

**STARTENGINE CROWDFUNDING, INC.**

![](tm236154d1_1aposimg01.jpg)

**4100 WEST ALAMEDA AVENUE, SUITE 300**

**BURBANK, CALIFORNIA 91505**

**800-317-2200**

**We are offering up 2,208,000 shares of Common Stock, including up to 368,000 shares of Common Stock to be sold by selling stockholders and up to 368,000 bonus shares, on a "best efforts" basis. (1)**

**SEE "SECURITIES BEING OFFERED" AT PAGE 44**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Price to<br> Public\*** | **Underwriting<br> discount and<br> commissions** |  | **Proceeds to<br> issuer (3)** | **Proceeds to<br> other<br> persons (4)** |
| Per share | $25.00 | $0.00 | (2) | $25.00 | $25.00 |
| Total Maximum | $46000000 | $30221 | (2) | $45969779 | $9200000 |

---

\* Shares of the company's stock are currently traded on an alternative trading platform; see "The Company's Business – Principal Products and Services – StartEngine Secondary." The company priced its shares internally and the price does not reflect the price on the secondary market, see "There is a limited current market for our Common Stock."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The company is offering up to 1,472,000 shares of Common Stock, plus up to 294,400 additional shares of Common Stock eligible to be issued as Bonus Shares (as defined in this Offering Circular) to investors based upon investment level. The selling stockholders are offering up to 368,000 shares of Common Stock, plus up to 73,600 additional shares of Common Stock eligible to be issued as Bonus Shares. See "Plan of Distribution and Selling Stockholders." As of February 9, 2023, the company issued 381,639 shares of Common Stock including 76,335 sold on behalf of selling stockholders, for aggregate gross proceeds of $8,615,975.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The company in not currently using a commissioned sales agents or underwriters. The company had previously engaged a broker-dealer to sell in certain states and the total amount paid for commissions and fees in this offering was $30,221. See "Plan of Distribution and Selling Stockholders."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Does not include expenses of the offering or reflect the Owner's Discount; see "Plan of Distribution and Selling Stockholders."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) The proceeds represent amounts to be paid to the selling stockholders listed in this Offering Circular. See "Plan of Distribution and Selling Stockholders."

The minimum investment amount for Common Stock is $500.

The company is seeking to raise up to $46,000,000 from the sale of Common Stock. All investors will be required to purchase securities pursuant to a subscription agreement which appears as an Exhibit to the Offering Statement of which this Offering Circular forms a part, and which is irrevocable. This contains exclusive forum and jury waiver provisions which are similarly irrevocable; see "Risk Factors," "Securities Being Offered – Common Stock – Forum Selection Provision," and "Plan of Distribution and Selling Stockholders – Jury Trial Waiver."

**This offering will terminate at the earlier of the date at which the maximum offering amount has been sold or the date at which the offering is earlier terminated by the company at its sole discretion. Unless terminated, at least every 12 months after the Offering Statement has been qualified by the United States Securities and Exchange Commission (the "SEC"), the company will file a post-qualification amendment to include the company's recent financial statements.**

The offering is being conducted on a best-efforts basis without any minimum target. The company has engaged Bryn Mawr Trust Company as an escrow agent (the "Escrow Agent" or "Bryn Mawr") to hold funds tendered by investors. We may hold a series of closings at which we receive the funds from the escrow agent and issue the shares to investors. We may undertake one or more closings on a rolling basis. After each closing, funds tendered by investors will be available to us, and since there is no minimum offering amount, we will have access to these funds even if they do not cover the expenses of this offering. After the initial closing of this offering, we expect to hold closings on at least a monthly basis.

**THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SEC; HOWEVER THE SEC HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION**

**GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO <u>www.investor.gov</u>.**

**This offering is inherently risky. See "Risk Factors" on page 12.**

**Sales of these securities commenced on March 14, 2022.**

**The company is following the "Offering Circular" format of disclosure under Regulation A.**

**We are an "emerging growth company" and a "smaller reporting company" as such terms are defined under federal securities laws, and, as such have elected to take advantage of certain reduced public company reporting requirements for our prior filings and may elect to do so in future filings.**

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| [**Summary**](#a_001) | [4](#a_001) |
| [**Risk Factors**](#a_002) | [8](#a_002) |
| [**Dilution**](#a_003) | [16](#a_003) |
| [**Plan of Distribution and Selling Stockholders**](#a_004) | [18](#a_004) |
| [**Use of Proceeds to Issuer**](#a_005) | [21](#a_005) |
| [**The Company's Business**](#a_006) | [22](#a_006) |
| [**The Company's Property**](#a_007) | [31](#a_007) |
| [**Management's Discussion and Analysis of Financial Condition and Results of Operations**](#AB1) | [32](#AB1) |
| [**Directors, Executive Officers and Significant Employees**](#AB2) | [40](#AB2) |
| [**Compensation of Directors and Officers**](#AB3) | [42](#AB3) |
| [**Security Ownership of Management and Certain Stockholders**](#AB4) | [44](#AB4) |
| [**Interest of Management and Others in Certain Transactions**](#AB5) | [44](#AB5) |
| [**Securities Being Offered**](#AB6) | [45](#AB6) |
| [**Financial Statements**](#fina_001) | [F-1](#fina_001) |

---

*In this Offering Circular, the term "StartEngine", "we", "us", "our", or "the company" refers to StartEngine Crowdfunding, Inc. and our subsidiaries on a consolidated basis. The terms "StartEngine Capital" or "our funding portal" refers to StartEngine Capital LLC, the terms "StartEngine Secure" or "our transfer agent" refer to StartEngine Secure LLC, the terms "StartEngine Primary" or "our broker-dealer" refer to StartEngine Primary LLC, and the term "StartEngine Assets" refers to StartEngine Assets LLC.*

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS "ESTIMATE," "PROJECT," "BELIEVE," "ANTICIPATE," "INTEND," "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

**SUMMARY**

**Summary**

StartEngine Crowdfunding, Inc. aims to revolutionize how startups and small businesses raise capital. We provide an online platform that connects businesses seeking capital with investors. Online investment by large numbers of investors in comparatively small amounts is often called crowdfunding.

Nearly six million small businesses are organized in the United States according to the U.S. Census Bureau. Most of these companies are in need of capital, exacerbated by current events, and they are having difficulty finding it. Banks are reluctant to lend to small and risky companies. Venture capital funds flow to high growth-potential companies whose founders fit a particular profile in terms of education, age, gender and ethnicity. Founders who do not fit this profile risk their life savings to fund their companies and help them grow.

The JOBS Act, signed by President Obama in 2012, was intended to help solve the funding problems that early-stage and small companies encounter, by giving them access to a completely new source of funds: their friends and families, customers, fans and believers. In turn, those potential investors get the chance to invest in a company, team or idea they believe in, however uncertain eventual success might be.

StartEngine helps companies conduct crowdfunding offerings under the JOBS Act. Our wholly-owned subsidiary, StartEngine Primary, operates under Titles II and IV of the JOBS Act. Title II of the JOBS Act permitted companies to advertise offerings of securities on the internet while selling only to accredited investors. Title IV amended Regulation A under the Securities Act, allowing private companies to advertise the sale of securities to both accredited and non-accredited investors. Our wholly-owned subsidiary, StartEngine Capital, operates under Title III of the JOBS Act, which added Regulation Crowdfunding to the funding options for small companies.

We currently facilitate capital-raising under three different exemptions from registration under the Securities Act, all made possible by the JOBS Act:

· Title II of
 the JOBS Act led to Rule 506(c) of Regulation D under the Securities Act. Since September 23, 2013, start-ups have
 been able to broadly solicit potential investors for their offerings, including presenting their offerings on online platforms, such
 as ours, to sell securities in their company. Investors under this rule are required to be accredited investors, meaning they
 meet certain income, net worth or educational thresholds.

· Title III of the JOBS Act
 allowed for the adoption of Regulation Crowdfunding. Under Regulation Crowdfunding, companies can raise up to $5 million a year from
 accredited and non-accredited investors. Since the regulation went into effect on May 16, 2016, we have been facilitating these
 transactions through, StartEngine Capital which is a funding portal registered with the SEC and a member of the Financial Industry
 Regulatory Authority ("FINRA").

· Title IV of
 the JOBS Act required changes to improve Regulation A, the exemption that we are using for this offering. Under the amendments to
 Regulation A, companies can raise up to $75 million a year from accredited and non-accredited investors. Since StartEngine Primary
 became a registered broker-dealer in June 2019, we have been facilitating Regulation A offerings for other companies through
 StartEngine Primary.

In addition, companies may also utilize our technology platform to sell securities in offerings made outside the United States in reliance on Regulation S under the Securities Act.

We launched our crowdfunding operations in June 2015, as Regulation A went into effect. Elio Motors' equity crowdfunding offering, hosted on our site, eventually raised $16,917,576 from 6,345 investors. As of February 9, 2022, we have hosted 60 Regulation A offerings, which have raised a total of approximately $263 million on our platforms, not including five offerings for StartEngine itself and 33 offerings of series of companies sold through StartEngine Collectibles Fund I LLC. Regulation Crowdfunding went into effect on May 16, 2016 and as of February 9, 2023 we have acted as intermediary for 1,007 offerings. As of February 9, 2023, in addition to the funds we have raised in our offerings, companies on our platform have raised a total of $672 million from all offering types.

Our wholly-owned subsidiary StartEngine Secure began offering transfer agent services and became a registered transfer agent in 2017. As of February 9, 2022, we provide services for nearly 590 companies, and we anticipate that StartEngine Secure will be an important part of our operations in the future.

Our wholly-owned subsidiary StartEngine Assets securitizes assets.

StartEngine was founded by Howard Marks and Ron Miller. Howard Marks is Chief Executive Officer ("CEO"). Howard founded StartEngine with the mission of helping entrepreneurs achieve their dreams. Howard was the founder and CEO of Acclaim Games, a publisher of online games that is now part of The Walt Disney Company. Before Acclaim, Howard was Chairman of Activision Studios from 1991 until 1997. As a former Board Member, and Executive Vice-President of video game giant Activision, he and a partner took control in 1991 and turned the ailing company into the video game industry leader. As a games industry expert, Howard built one of the largest and most successful games studios in the industry, selling millions of games. He started StartEngine, an unrelated entity, in 2011 as the first startup accelerator in Los Angeles with the goal of helping to make Los Angeles a technology city. After investing in over 60 companies, Howard realized the difficulties entrepreneurs had with raising capital from angel investors and venture capitalists. With the advent of the JOBS Act, Howard realized he could help thousands of entrepreneurs by creating a new company focused on implementing the equity crowdfunding rules. Thus, StartEngine Crowdfunding, Inc. was born in March 2014. Howard is the 2015 "Treasure of Los Angeles" award recipient for his work to transform Los Angeles into a leading technology city, and was a member of Mayor Eric Garcetti's technology council.

Ron Miller is the chairman and cofounder of StartEngine. When Howard and Ron initially met in the fall of 2013, they recognized that the JOBS Act represented the greatest advancement for entrepreneurship in a generation. From direct experience as entrepreneurs, they recognized that the key to bringing new technologies and innovations to market required capital that is not readily available. As a serial start-up entrepreneur, Ron immediately went into action to advocate for SEC rulemaking to give life to the JOBS Act, raise the initial capital and built a leadership team to drive the sales and marketing plan to help StartEngine establish a leading position in the market.

Prior to StartEngine, Ron founded, built and sold five companies through management buyouts, private equity, private investors, and public markets. He was also nominated as a four-time Inc. 500/5000 award recipient and was an Ernst & Young entrepreneur of the year award finalist. As Chairman, Ron brings his deep experience as a leader and strategist to the company.

**The Offering**

The offering is for Common Stock of StartEngine Crowdfunding, Inc. The rights of the Common Stock are described more fully in "Securities Being Offered."

Securities offered (1) Maximum of 1,840,000 shares of Common Stock, plus an additional 368,000 shares of Common Stock which may be offered as Bonus Shares. See "Plan of Distribution and Selling Stockholders."

· Of the 1,840,000
 shares available in this offering, up to 1,472,000 shares are being offered by the company. The company may offer up to 368,000 additional
 shares of Common Stock as Bonus Shares.

· Of the 1,840,000 shares
 available in this offering, up to 294,400 shares are being offered by existing stockholders. The selling stockholders may offer up
 to 73,600 shares of Common Stock as Bonus Shares.

---

| | |
|:---|:---|
| Shares of Common Stock outstanding before February 9, 2023 (2) | 33,414,742 shares |
| Shares of Preferred Stock outstanding before February 9, 2023 (2) | 19,994,684 shares |
| Shares of Common Stock outstanding after the offering | 34,611,031 shares |
| Use of proceeds | The net proceeds of this offering will be used primarily to cover marketing costs and operating expenses, including salaries to our executive officers. The details of our plans are set forth in our "Use of Proceeds" section. |
| (1) As of February 9, 2023, the company issued 381,639 shares of Common Stock including 76,335 sold on behalf of selling stockholders, for aggregate gross proceeds of $8,615,975. | (1) As of February 9, 2023, the company issued 381,639 shares of Common Stock including 76,335 sold on behalf of selling stockholders, for aggregate gross proceeds of $8,615,975. |
| (2) Does not include shares issuable upon the exercise of options issued under the 2015 Equity Incentive Plan or shares into which our Preferred Shares may convert. | (2) Does not include shares issuable upon the exercise of options issued under the 2015 Equity Incentive Plan or shares into which our Preferred Shares may convert. |

---

**Implications of Being an Emerging Growth Company**

As an issuer with ongoing reporting requirements under the Securitites Exchange Act of 1934, as amended (the "Exchange Act") with less than $1.07 billion in total annual gross revenues during our last fiscal year, we qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As an emerging growth company we can advantage of certain reduced reporting requirements and arerelieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

· are not
 required to obtain an auditor attestation on our internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of
 2002;

· are not
 required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing
 how those elements fit with our principles and objectives (commonly referred to as "compensation discussion and analysis");

· are not
 required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly
 referred to as the "say-on-pay," "say-on-frequency" and "say-on-golden-parachute" votes);

· are exempt
 from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;

· may present
 only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial
 Condition and Results of Operations, or MD&A; and

· are eligible
 to claim longer phase-in periods for the adoption of new or revised financial accounting standards.

We are taking and intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our registration statement declared was effective under the Securities Act of 1933, as amended, which occurred in June 2022, or such earlier time that we no longer meet the definition of an emerging growth company. Note that this offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that we would cease to be an "emerging growth company" if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our common stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that we may qualify as a "smaller reporting company" under the SEC's rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

**Selected Risks Associated with Our Business**

Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following this summary. These risks include, but are not limited to, the following:

Risk Factors Related to the Company and its Business

· We are a relatively
 early stage company and have not yet generated any yearly profits;

· Any valuation
 of the company at this stage is difficult to assess;

· We operate
 in a regulatory environment that is evolving and uncertain;

· We operate
 in a highly regulated industry;

· We were approved
 as a broker-dealer in 2019, launched our alternative trading system in 2020, became a "carrying" broker-dealer in 2021,
 and are still in the process of adapting our business model and pricing structure;

· We may be liable
 for misstatements made by issuers;

· The company
 has recently become a reporting company with the SEC;

· Our compliance
 is focused on U.S. laws and we have not analyzed foreign laws regarding the participation of non-U.S. residents;

· StartEngine's
 product offerings are relatively new in an industry that is still quickly evolving;

· · We have an evolving business model; As we grow our business, we may not be able to manage our growth successfully;

· If we continue
 to have issues and/or fail to adapt our management information systems and financial and internal controls to our growth, or if we
 encounter other unexpected difficulties, our business, financial condition and operating results will suffer. We are primarily reliant
 on one main type of service;

· We depend on
 key personnel and face challenges recruiting needed personnel;

· StartEngine
 and its providers are vulnerable to hackers and cyber attacks;

· StartEngine
 currently relies on two vendors for escrow and technology services;

· We are dependent
 on general economic conditions;

· We face significant
 market competition;

· We may not
 be able to protect all of our intellectual property;

· Our revenues
 and profits (if any) are subject to fluctuations; and

· Natural disasters
 and other events beyond our control could materially adversely affect us.

Risk Factors Related to the Common Stock and the Offering

· There is uncertainty
 as to the amount of time it will take for us to deliver securities to investors under this offering;

---

| | |
|:---|:---|
| · ·  | Voting control is in the hands of a few large stockholders;<br>There is no minimum amount set as a condition to closing this offering; |

---

· We are offering a discount on our
 stock price to certain investors, including members of our StartEngine OWNers bonus programs.;

· The exclusive forum provision in the subscription agreements
 may have the effect of limiting an investor's ability to bring legal action against us and could limit an investor's
 ability to obtain a favorable judicial forum for disputes;

· Investors in this offering
 may not be entitled to a jury trial with respect to claims arising under the subscription agreements, which could result in less
 favorable outcomes to the plaintiff(s) in any action under the agreements;

· Future fundraising
 may affect the rights of investors;

· Holders of
 our Preferred Stock are entitled to potentially significant liquidation preferences over holders of our Common Stock if we are liquidated,
 including upon a sale of our company;

· There is a
 limited current market for our Common Stock;

· Investors will need to keep records
 of their investment for tax purposes;

· Using a credit card to
 purchase shares may impact the return on your investment as well as subject you to other risks inherent in this form of payment;
 and

· The price for our Common
 Stock may be volatile.

**RISK FACTORS**

*The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently more risky than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.*

**Risk Factors Related to the Company and its Business**

**We are a relatively early stage company and have not yet generated any yearly profits.**

StartEngine was formed in 2014 and is still working on fine tuning its business plan to one that will enable it to generate profits on an annual basis and to maintain profitability. Though our core business model of operating our funding portal and broker-dealer services have been receiving revenues for nearly eight years and three years, respectively, we are still evolving aspects of business model, including modifying our revenue models, adding additional products (e.g., StartEngine Secondary and our securitization products), and modifying our current offerings in light of regulatory changes and/or interactions with regulators (see, "The Company's Business – Regulation"). Accordingly, the company's operating history may not be indicative of future prospects. Our current and proposed operations are subject to all the business risks associated with relatively new enterprises that are still in growth and/or expansion phases. These include likely fluctuations in operating results as the company reacts to developments in its market, manages its growth, and develops new services as well as the entry of competitors into the market. We will only be able to pay dividends on any shares once our directors determine that we are financially able to do so. Since inception, StartEngine has not generated sufficient revenues to cover operational expenses. There is no assurance that we will be consistently profitable in the next three years or generate sufficient revenues to pay dividends to the holders of our shares.

**Any valuation of the company at this stage is difficult to assess.**

The valuation for the offering was established by the company. Even though there has been trading of our shares on the alternative trading system run by our broker-dealer, to date we believe that the volume of trading has not been significant enough to use as the sole basis for our share price. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups such as ours, is difficult to assess and you may risk overpaying for your investment.

**We operate in a regulatory environment that is evolving and uncertain.**

The regulatory framework for online capital formation or crowdfunding is relatively new. The regulations that govern our operations have been in existence for a limited period. Further, there are constant discussions among legislators and regulators with respect to changing the regulatory environment. New laws and regulations could be adopted in the United States and abroad. Further, existing laws and regulations may be interpreted in ways that would impact our operations, including how we communicate and work with investors and the companies that use our platform's services and the types of securities that our clients can offer and sell on our platform. For instance, in prior years, there have been several attempts to modify the current regulatory regime. Some of those suggested reforms could make it easier for anyone to sell securities (without using our services). Any such changes would have a negative impact on our business.

**We operate in a highly regulated industry.**

We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Further, our subsidiary StartEngine Capital LLC is registered as a funding portal; our subsidiary StartEngine Secure LLC is registered as a transfer agent; and our subsidiary StartEngine Primary LLC is registered as a broker-dealer and operates an alternative trading system under the brand "StartEngine Secondary". As a funding portal and broker-dealer, we have to comply with stringent regulations, and the operation of our funding portal, broker-dealer and alternative trading system services exposes us to a significant amount of liability. Regulated entities are frequently subject to examination, constraints on their business, and in some cases fines. For instance, our subsidiary StartEngine Capital LLC submitted a Letter of Acceptance, Waiver and Consent ("AWC") on March 11, 2022, and FINRA accepted the AWC on May 4, 2022. The AWC provides for a censure, a $350,000 fine, and a certification to be made by our funding portal that it has established and implemented policies, procedures, and internal controls sufficient to address the issues identified in the AWC. Further we have seen increased regulations in this industry from regulators (both federal and state) and FINRA. In light of this, we expect increased compliance costs as well as potential subjecting us to additional liabilities. In addition, some of the restrictions and rules applicable to our subsidiaries could adversely affect and limit some of our business plans of other parts of our business.

**We were approved as a broker-dealer in 2019,** **launched our alternative trading system in 2020, became a "carrying" broker-dealer in 2021, and are still in the process of adapting our business model and pricing structure.**

Until June 2019, we were not a broker-dealer and had structured our business model in a way that we believe allowed us to act in this arena without registration. Since we began operating as a broker-dealer, we not only have been subjected to federal and state requirements but also have needed to comply with the requirements of FINRA, the self-regulatory organization, that apply to broker-dealers and the regulations that apply to the operation of alternative trading systems. In addition, we have expanded the scope of our operation including launching our alternative trading system in May 2020, and became a "carrying" broker-dealer at the end of September 2021, which increased our net capital requirements. We are still in the process of adapting to this evolution, but there have been and will be increased costs, including the need to hire personnel with specific qualifications and pay them in accordance with their experience. We are subjected to periodic examinations and we will be required to change aspects of our business processes and communications in response to the findings of those examinations. Becoming a broker-dealer has and will continue to lead to increases in our compliance costs as well as increases in our exposure to liabilities, including subjecting us to liability for misstatements made by issuers utilizing our services; see "Business – Regulations". .

**We may be liable for misstatements made by issuers.**

Under the Securities Act and the Exchange Act, issuers making offerings through our funding portal may be liable for including untrue statements of material facts or for omitting information that could make the statements misleading. This liability may also extend in Regulation Crowdfunding offerings to funding portals, such as our subsidiary. Further, as a broker-dealer, we may be liable for statements by issuers utilizing our services in connection with Regulation A and Regulation D offerings. See "Regulation – Regulation Crowdfunding – Liability" and "Regulation – Regulation A and Regulation D – Liability". Even though due diligence defenses may be available; there can be no assurance that if we were sued we would prevail. Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to such actions may cause us reputational harm that would negatively impact our business. Moreover, even if we are not liable or a party to a lawsuit or enforcement action, some of our clients have been and will be subject to such proceedings. Any involvement we may have, including responding to document production requests, may be time-consuming and expensive as well.

**The company has recently become a reporting company with the SEC.**

In June 2022, the company's class of Common Stock was registered with the SEC and, as a result, the company has become a reporting public company. Becoming a reporting company will subject the company to additional initial and on-going compliance and reporting costs and administrative burdens, additional professional fees (legal and accounting) as well as costs associated with internal staff. Therefore, the costs for these functions in previous years is not indicative of future costs.

**Our compliance is focused on U.S. laws and we have not analyzed foreign laws regarding the participation of non-U.S. residents.**

Some of the investment opportunities posted on our platform are open to non-U.S. residents. We have not researched all the applicable foreign laws and regulations, and we have not set up our structure to be compliant with foreign laws. It is possible that we may be deemed in violation of those laws, which could result in fines or penalties as well as reputational harm. This may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulations may limit our business operations and plans for future expansion.

**StartEngine's product offerings are relatively new in an industry that is still quickly evolving**.

The principal securities regulations that we work with, Rule 506(c), Regulation A and Regulation Crowdfunding, have only been in effect in their current form since 2013, 2015 and 2016, respectively. StartEngine's ability to continue to penetrate the market remains uncertain as potential issuer companies may choose to use different platforms or providers (including, in the case of Rule 506(c) and Regulation A, using their own online platform), or determine alternative methods of financing. Investors may decide to invest their money elsewhere. Further, our potential market may not be as large, or our industry may not grow as rapidly, as anticipated. With a smaller market than expected, we may have fewer customers. Success will likely be a factor of investing in the development and implementation of marketing campaigns, subsequent adoption by issuer companies as well as investors, and favorable changes in the regulatory environment.

**We have an evolving business model.**

Our business model is one of innovation, including continuously working to expand our product lines and services to our clients, such as our expansion into the transfer agent and broker-dealer space as well as our foray into becoming an alternative trading system and acting as an administrative manager for companies; see the "The Company's Business – Principal Products and Services". It is unclear whether these services will be successful. Further, we continuously try to offer additional types of services, and we cannot offer any assurance that any of them will be successful. From time to time we may also modify aspects of our business model relating to our service offerings. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage this evolution effectively, which could damage our reputation, limit our growth, and negatively affect our operating results.

**As we grow our business, we may not be able to manage our growth successfully.**

If we are able to increase the scope of our business offerings, our customer base, the volume of our transactions and grow our business, we will face business risks commonly associated with rapidly growing companies, including the risk that existing management, information systems and financial and internal controls may be inadequate to support our growth. We cannot predict whether we will be able to respond on a timely basis, or at all, to the changing demands that our growth may impose on our existing management and infrastructure. For example, increasing demands on our infrastructure and management could cause any of the following to occur or increase:

● inadequate internal controls required for a regulated entity;

● inadequate financial controls needed as we transition to become a reporting company;

● delays in our ability to handle the volume of customers, including issuers; and

● failure to properly review and supervise personnel to make sure we are compliant with our duties as regulated entities.

This risk is illustrated by the fact that, during preparation for financial reporting related to the quarter ended March 31, 2022, and based on comments received from the Securities and Exchange Commission, the company discovered certain classification errors (specifically for subscriptions receivable, allocated noncontrolling interest loss, and marketable securities as well as an error in using aggregation of the fair value of warrants issued instead of segregating those amounts) in its previously reported financial statements for the year ended December 31, 2021. The company's management has concluded that, in light of the classification errors and aggregation error described above, the company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective. To address this material weakness, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of the company's internal control over financial reporting. While the company has processes to identify and appropriately apply applicable accounting requirements, management has enhanced these processes in the past year by hiring an additional employee with a public accounting background specifically for the preparation of financial statements, and has begun working with an external consultant.

**If we** **continue to have issues and/or fail to adapt our management, information systems and financial and internal controls to our growth, or if we encounter other unexpected difficulties, our business, financial condition and operating results will suffer. We are primarily reliant on one main type of service.**

Most of current services are variants on one type of service — providing a platform for online capital formation and ancillary services. Our revenues are therefore dependent upon the market for online capital formation.

**We depend on key personnel and face challenges recruiting needed personnel.**

Our future success depends on the efforts of a small number of key personnel, including our founder and Chief Executive Officer, Howard Marks, and our compliance, engineering and marketing teams. Expanding our compliance team in response to the growth in our business and the regulatory issues we have faced to date, is essential to our success, and recruiting and training compliance personnel will place demands on financial and management resources. Our software engineer team, as well as our marketing team led by Johanna Cronin, are critical to continually innovate and improve our products while operating in a highly regulated industry. In addition, due the specialized expertise required, we may not be able to recruit the individuals needed for our business needs. There can be no assurance that we will be successful in attracting and retaining the personnel we require to operate and be innovative.

**StartEngine and its providers are vulnerable to hackers and cyber attacks.**

As an internet-based business, we may be vulnerable to hackers who may access the data of our investors and the issuer companies that utilize our platform. Further, any significant disruption in service on the StartEngine platform or in its computer systems could reduce the attractiveness of the StartEngine platform and result in a loss of investors and companies interested in using our platform. Further, we rely on a third-party technology provider to provide some of our back-up technology as well as act as our escrow agent. Any disruptions of services or cyber attacks either on our technology provider or on StartEngine could harm our reputation and materially negatively impact our financial condition and business.

**StartEngine currently relies on two vendors for escrow and technology services.**

We currently rely on Prime Trust and Bryn Mawr Trust Company to provide technology services for processing investment transactions (e.g., processing credit card and payments, electronic execution of the subscription agreements, etc.). Any change in these relationships will require us to find another technology service provider, escrow agent and escrow bank. This may cause us delays as well as additional costs in transitioning our technology.

**We are dependent on general economic conditions.**

Our business model is dependent on investors investing in the companies presented on our platforms. Investment dollars are disposable income. Our business model is thus dependent on national and international economic conditions. Adverse national and international economic conditions may reduce the future availability of investment dollars, which would negatively impact our revenues and possibly our ability to continue operations. It is not possible to accurately predict the potential adverse impacts on the company, if any, of current economic conditions on its financial condition, operating results and cash flow.

**We face significant market competition.**

We facilitate online capital formation. Though this is a relatively new market, we compete against a variety of entrants in the market as well likely new entrants into the market. Some of these follow a regulatory model that is different from ours and might provide them competitive advantages. New entrants could include those that may already have a foothold in the securities industry, including some established broker-dealers. Further, online capital formation is not the only way to address helping start-ups raise capital, and the company has to compete with a number of other approaches, including traditional venture capital investments, loans and other traditional methods of raising funds and companies conducting crowdfunding raises on their own websites. Additionally, some competitors and future competitors may be better capitalized than us, which would give them a significant advantage in marketing and operations.

Moreover, as we continue to expand our offerings, including providing administrative services to issuers, securitizing various asset classes and transfer agent services, we will continue to face headwinds and compete with companies that are more established and/or have more financial resources than we do and/or new entrants bringing disruptive technologies and/or ideas.

**We may not be able to protect all of our intellectual property.**

Our profitability may depend in part on our ability to effectively protect our proprietary rights, including obtaining trademarks for our brand names, protecting our products and websites, maintaining the secrecy of our internal workings and preserving our trade secrets, as well as our ability to operate without inadvertently infringing on the proprietary rights of others. There can be no assurance that we will be able to obtain future protections for our intellectual property or defend our current trademarks and future trademarks and patents. Further, policing and protecting our intellectual property against unauthorized use by third parties is time-consuming and expensive, and certain countries may not even recognize our intellectual property rights. There can also be no assurance that a third party will not assert infringement claims with respect to our products or technologies. Any litigation for both protecting our intellectual property or defending our use of certain technologies could have material adverse effect on our business, operating results and financial condition, regardless of the outcome of such litigation.

**Our revenues and profits (if any) are subject to fluctuation.**

It is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors. These factors may include adverse changes in: number of investors and amount of investors' dollars, the success of world securities markets, general economic conditions, our ability to market our platform to companies and investors, headcount and other operating costs, and general industry and regulatory conditions and requirements. The company's operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant and could impact our ability to operate our business.

**Natural disasters and other events beyond our control could materially adversely affect us.**

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services. Since the spring of 2020, large segments of the U.S. and global economies were impacted by COVID-19, a significant portion of the U.S. population were subject to "stay at home" or similar requirements. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers (both issuers using our services and investors investing on our platform) and our sales cycles, impact on our customer, employee or industry events, and effect on our vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. To date, the COVID-19 outbreak has significantly impacted global markets, U.S. employment numbers, as well as the business prospects of many small business (our potential clients). A significant part of our business model is based on receiving a percentage of the investments made through our platform and services. Further, we are dependent on investments in our offerings to fund our business. However, to date, other than working remotely, COVID-19 has not had a negative impact on the company itself. To the extent COVID-19 continues to wreak havoc on the markets and limits investment capital or personally impacts any of our key employees, it may have significant impact on our results and operations.

**Risk Factors Related to the Common Stock and the Offering**

**There is uncertainty as to the amount of time it will take for us to deliver securities to investors under this offering.**

The process for issuance of Common Stock is set out in "Plan of Distribution and Selling Stockholders." There may be a delay between the time you execute your subscription agreement and tender funds and the time securities are delivered to you, while we and the Escrow Agent complete our subscription and due diligence process and we submit a disbursement request to the Escrow Agent. Although, based on our experience in our prior offering, investors who provide the information required by the subscription agreement and give accurate instructions for the payment of the subscription price should receive their securities in no more than six months, we cannot guarantee that you will receive your securities by a specific date or within a specific timeframe.

**Voting control is in the hands of a few large stockholders.**

Voting control is concentrated in the hands of a small number of stockholders. Our CEO and Chairman currently hold approximately 42% of our voting shares in aggregate, including shares of our Common Stock and (on an as-converted basis) shares of our Series Seed Preferred Stock, Series A Preferred Stock and Series Seed Preferred Stock; and two other shareholders, SE Agoura Investment LLC and The Lee Miller Trust UA 09/05/2020, own approximately 22% and 12.4%, respectively, of our voting shares in aggregate. None of SE Agoura Investments LLC, The Lee Miller Trust UA 09/05/2020 or their beneficial owners are on our board or are employees of our company. Those four shareholders in aggregate control approximately 49% of our voting shares and approximately 50% of our preferred stock. See "Security Ownership of Management and Certain Stockholders." Investors will not be able to influence our policies or any other corporate matter, including the election of directors, changes to our company's governance documents, expanding the employee option pool, and any merger, consolidation, sale of all or substantially all of our assets, or other major action requiring stockholder approval. Some of the larger stockholders include, or have the right to designate, executive officers and directors of our Board. These few people and entities make all major decisions regarding the company. As a minority stockholder, you will not have a say in these decisions.

**There is no minimum amount set as a condition to closing this offering.**

Because this is a "best efforts" offering with no minimum, we will have access to any funds tendered. This might mean that any investment made could be the only investment in this offering, leaving the company without adequate capital to pursue its business plan or even to cover the expenses of this offering.

**We are offering a discount on our stock price to certain investors, including members of our StartEngine OWNers bonus programs.**

Certain investors, specifically those that invest at least above a certain amount, members of the StartEngine OWNers bonus programs and those who have indicated interest on our offering page, are entitled to a discount to the share price in this offering; see "Plan of Distribution and Selling Stockholders". Therefore, the value of shares of investors who pay the full price in this offering will be immediately diluted by investments made by investors entitled to the discount, who will pay less for the same stake in the company.

**The exclusive forum provision in the subscription agreements may have the effect of limiting an investor's ability to bring legal action against us and could limit an investor's ability to obtain a favorable judicial forum for disputes.**

Section 7 in the subscription agreement for this offering includes a forum selection provision that requires any claims against the company based on the subscription agreement be brought in a court of competent jurisdiction in the State of California; see "Securities Being Offered – Common Stock – Forum Selection Provision". The forum selection provision will not be applicable to lawsuits arising from the federal securities laws. The provision may have the effect of limiting the ability of investors to bring a legal claim against us due to geographic limitations. There is also the possibility that the exclusive forum provision may discourage stockholder lawsuits with respect to matters arising under laws other than the federal securities laws, or limit stockholders' ability to bring such claims in a judicial forum that they find favorable for disputes with us and our officers and directors. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

**Investors in this offering may not be entitled to a jury trial with respect to claims arising under the subscription agreement, which could result in less favorable outcomes to the plaintiff(s) in any action under the agreement.**

Investors in this offering will be bound by the subscription agreement, which includes a provision under which investors waive the right to a jury trial of any claim they may have against the company arising out of or relating to the subscription agreement, including any claims made under the federal securities laws.

If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which governs the subscription agreement, in a court of competent jurisdiction in the State of California. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the subscription agreement. You should consult legal counsel regarding the jury waiver provision before entering into the subscription agreement.

If you bring a claim against the company in connection with matters arising under the subscription agreement, including claims under federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the company. If a lawsuit is brought against the company under the subscription agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in such an action.

Nevertheless, if the jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription agreement with a jury trial. No condition, stipulation or provision of the subscription agreement serves as a waiver by any holder of Common Stock or by us of compliance with any provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when our Common Stock is transferred, the transferee is required to agree to all the same conditions, obligations and restrictions applicable to those securities or to the transferor with regard to ownership of those securities, that were in effect immediately prior to the transfer of the Common Stock, including but not limited to the subscription agreement. Therefore, purchasers in secondary transactions will be subject to this provision.

**Future fundraising may affect the rights of investors.**

In order to expand, the company is likely to raise funds again in the future, either by offerings of securities (including post-qualification amendments to this offering) or through borrowing from banks or other sources. The terms of future capital raising, such as loan agreements, may include covenants that give creditors greater rights over the financial resources of the company.

**Holders of our Preferred Stock are entitled to potentially significant liquidation preferences over holders of our Common Stock if we are liquidated, including upon a sale of our company.**

Holders of our outstanding Preferred Stock have liquidation preferences over holders of Common Stock being offered in this offering. This liquidation preference is paid if the amount a holder of Preferred Stock would receive under the liquidation preference is greater than the amount such holder would have received if such holder's shares of Preferred Stock had been converted to Common Stock immediately prior to the liquidation event. Holders of Series A Preferred Stock and Series T Preferred Stock are entitled to liquidation preferences superior to Series Seed Preferred Stock. See "Securities Being Offered – Preferred Stock – Right to Receive Liquidation Distributions". If a liquidation event, including a sale of our company, were to occur that resulted in a distribution of less than approximately $8 million, the holders of our Preferred Stock could be entitled to all proceeds of cash distributions.

**There is a limited current market for our Common Stock.**

Currently, the only marketplace for our Common Stock is and will be our alternative trading system or "ATS" branded as "StartEngine Secondary." To date, we only have limited experience selling our shares on StartEngine Secondary; see "The Company's Business – Principal Products and Services – StartEngine Secondary" and trading of our securities will only be available on StartEngine Secondary during limited periods, including periods where we do not have an open offering. To date, there has not been frequent enough trading to establish a market price. The limited volume of trading means that investors should assume that they may not be able to liquidate their investment for some time or to liquidate at their desired price. Further, it is unlikely that they will be able to pledge their shares as collateral. Further, investors are required to assign their voting rights as a condition to investing; see "Risk Factors — Investors in our Common Stock will have to assign their voting rights." This assignment of their voting rights may further limit an investor's ability to liquidate their investment.

**Investors** **will need to keep records of their investment for tax purposes.**

As with all investments in securities, investors who sell the Common Stock will probably need to pay tax on the long- or short-term capital gains that you realize if sold at a profit or set any loss against other income. If investors do not have a regular brokerage account, or their regular broker will not hold the Common Stock for them (and many brokers refuse to hold Regulation A securities for their customers) there will be nobody keeping records for investors for tax purposes and they will have to keep their own records, and calculate the gain on any sales of any securities they sell.

**Using a credit card to purchase shares may impact the return on your investment as well as subject you to other risks inherent in this form of payment.**

Investors in this offering have the option of paying for their investment with a credit card, which is not usual in the traditional investment markets. Transaction fees charged by your credit card company (which can reach 5% of transaction value if considered a cash advance) and interest charged on unpaid card balances (which can reach almost 25% in some states) add to the effective purchase price of the shares you buy. See "Plan of Distribution and Selling Securityholders." The cost of using a credit card may also increase if you do not make the minimum monthly card payments and incur late fees. Using a credit card is a relatively new form of payment for securities and will subject you to other risks inherent in this form of payment, including that, if you fail to make credit card payments (e.g. minimum monthly payments), you risk damaging your credit score and payment by credit card may be more susceptible to abuse than other forms of payment. Moreover, where a third-party payment processor is used, as in this offering, your recovery options in the case of disputes may be limited. The increased costs due to transaction fees and interest may reduce the return on your investment.

The SEC's Office of Investor Education and Advocacy issued an Investor Alert dated February 14, 2018 entitled "Credit Cards and Investments – A Risky Combination," which explains these and other risks you may want to consider before using a credit card to pay for your investment.

**The price for our Common Stock may be volatile.**

To date, there has not been enough trading of our shares to establish a market price. The market price of our Common Stock may be highly volatile, if and when any trading begins again in the future and there is sufficient volume of trading to establish a market price, is likely to be continue to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

· We may not
 be able to compete successfully against current and future competitors.

· Our ability
 to obtain working capital financing.

· Additions or
 departures of key personnel.

· Sales of our
 shares.

· Our ability
 to execute the business plan.

· Operating results
 that fall below expectations.

· Regulatory
 developments.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our securities. As a result, investors may be unable to resell your securities at a desired price.

**DILUTION**

Dilution means a reduction in value, control or earnings of the shares the investor owns.

*Immediate dilution*

An early-stage company typically sells its shares (or grants options exercisable for its shares) to its founders and early employees at a very low cash cost because they are, in effect, putting their "sweat equity" into the company. When the company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares.

The following table demonstrates the price that new investors are paying for their shares and the immediate dilution under various total investment scenarios. The dilution is based on the company's net asset value at December 31, 2022 after giving effect to the stock split. We believe this method gives investors a better picture of what they will pay for their investment compared to previous investors and company insiders than simply listing such transactions for the last 12 months.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **5000000**<br>**Raise** | **20000000**<br>**Raise** | **37384025**<br>**Raise** | **37384025**<br>**Raise(1)** |
| Price per share | $25.00 | $25.00 | $25.00 | $25.00 |
| Shares issued | 200000 | 800000 | 1495361 | 1644897 |
| Capital raised | $5000000 | $20000000 | $37384025 | $37384025 |
| Less: Offering costs | $(595000) | $(2380000) | $(5233763) | $(5233763) |
| Less: Sales by selling stockholders | $(1000000) | $(4000000) | $(7476805) | $(7476805) |
| Net offering proceeds to Company | $3405000 | $13620000 | $24673457 | $24673457 |
| Proceeds from option exercises(2) | $25775066 | $25775066 | $25775066 | $25775066 |
| Net tangible book value at December 31, 2022 (3) | $32504215 | $32504215 | $32504215 | $32504215 |
| Share issued and outstanding at December 31, 2022(4) | 59788806 | 59788806 | 59788806 | 59788806 |
| Shares issued in financing from Company | 160000 | 640000 | 1196289 | 1315918 |
| Post financing shares issued and outstanding | 59948806 | 60428806 | 60985095 | 61104724 |
| Net tangible book value per share prior to offering | $0.54 | $0.54 | $0.54 | $0.54 |
| Increase/(decrease) per share attributable to new investors | $0.49 | $0.65 | $0.82 | $0.81 |
| Net tangible book value after offering | $1.03 | $1.19 | $1.36 | $1.36 |
| Dilution per share to new investors | $23.97 | $23.81 | $23.64 | $23.64 |

---

(1) Certain investors receive bonus shares of either 10% or 20%. If half of the investors in this offering receive bonus shares of 10% and other quarter receive bonus shares of 20%, and the Company sells the remaining $37,384,025 available in this offering, the dilution to new investors will be $23.64 per share.

(2) Assumes 6,492,460 options are exercised at a weighted average exercise price of $3.97 per share.

(3) Net tangible book value is calculated as follows.

---

| | |
|:---|:---|
| Total stockholders' equity at December 31, 2022 | $32524215 |
| Less: intangible assets | (20000) |
| Equals tangible book value at December 31, 2022 | $32504215 |

---

(4) Shares issued and outstanding at December 31, 2022 is calculated as follows.

---

| | |
|:---|:---|
| Series A Preferred outstanding at December 31, 2022 | 9272044 |
| Series T Preferred outstanding at December 31, 2022 | 482104 |
| Series Seed Preferred outstanding at December 31, 2022 | 10240536 |
| Common stock outstanding at December 31, 2022 | 33301662 |
| Options outstanding at December 31, 2022 | 6492460 |
|  | 59788806 |

---

*Future dilution*

Another important way of looking at dilution is the dilution that happens due to future actions by the company. The investor's stake in a company could be diluted due to the company issuing additional shares. In other words, when the company issues more shares, the percentage of the company that you own will go down, even though the value of the company may go up. You will own a smaller piece of that company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, or angel investment), employees exercising stock options, or by conversion of certain instruments (e.g., convertible bonds, preferred shares or warrants) into stock.

If the company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends, and most companies until they are mature are unlikely to offer dividends, preferring to invest any earnings into the company).

The type of dilution that hurts early-stage investors most occurs when the company sells more shares in a "down round," meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):

· In June 2021
 Jane invests $20,000 for shares that represent 2% of a company valued at $1 million.

· In December the
 company is doing very well and sells $5 million in shares to venture capitalists on a valuation (before the new investment) of $10
 million. Jane now owns only 1.3% of the company but her stake is worth $200,000.

· In June 2022
 the company has run into serious problems and in order to stay afloat it raises $1 million at a valuation of only $2 million (the
 "down round"). Jane now owns only 0.89% of the company and her stake is worth only $26,660.

This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a "discount" to the price paid by the new investors (i.e., they get more shares than the new investors would for the same price). Additionally, convertible notes may have a "price cap" on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a "down round", the holders of the convertible notes will dilute existing equity holders, even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue in the future), and the terms of those notes.

If you are making an investment expecting to own a certain percentage of the company or expecting each share to hold a certain amount of value, it's important to realize how the value of those shares can decrease by actions taken by the company. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

**PLAN OF DISTRIBUTION AND SELLING STOCKHOLDERS**

**Plan of Distribution**

StartEngine and the selling stockholders are seeking to raise up to $46,000,000 in total through the sale of Common Stock, which represents the value of securities available to be offered as of the date of this Offering Circular. Under Regulation A, the company may only offer $75 million in securities during a rolling 12-month period. From time to time, we may seek to qualify additional shares.

The company is offering a maximum of 2,208,000 shares of Common Stock on a "best efforts" basis, which reflects the Bonus Shares. As of February 9, 2023, the company issued 381,639 shares of Common Stock including 76,335 sold on behalf of selling stockholders, for aggregate gross proceeds of $8,615,975.

The minimum investment is $500 for the Common Stock.

The company will use its existing website, www.startengine.com, to provide information with respect to the offering.

The company's Offering Circular will be furnished to prospective investors in this offering via download 24 hours a day, 7 days a week on its startengine.com website. StartEngine is not currently selling the shares through commissioned sales agents or underwriters.

**Bonus Shares; Discounted Price for Certain Investors**

"Bonus Shares" are additional shares of Common Stock that are issued to investors purchasing shares in this offering for no additional monetary compensation, therefore those investors are effectively receiving a discount on the shares of Common Stock they purchase. Bonus Shares have identical rights, privileges and preferences to the shares of Common Stock purchased. All investors in this offering are eligible to receive Bonus Shares equal to 10% of the shares they purchase if they:

● Are a member of the StartEngine OWNers bonus program\*;

● Indicated interest in this offering on our website; or

● Invest at least $5,000 in this offering.\*\*

The Bonus Shares are stackable; however, the maximum amount of Bonus Shares that an investor can receive in this offering is 20%. Specifically, any investor who falls into two or three of the categories above will receive 20% Bonus Shares. For example, anyone who indicated interest in this offering on our website will receive a total of 110 shares for every 100 shares they purchase in the offering; further, if that investor invested at least $5,000 in this offering, that individual will receive a total of 120 shares for every 100 shares they purchase in the offering. Fractional shares will not be distributed and share bonuses will be determined by rounding down to the nearest whole share.

To the extent any Bonus Shares are issued, it will reduce the proceeds that the company and selling stockholders receive. Of the 368,000 Bonus Shares available in this offering, 294,400 are being sold by the company and 73,600 are being sold by the selling stockholders.

\**The general public can become members of the StartEngine OWNers bonus program on StartEngine's website for $275 per year. Membership will auto renew every year. A member of the program can cancel their renewal at any time. Once the individual cancels, their membership will expire on the next anniversary of their membership. With the OWNer's Bonus, the investor will earn 10% bonus shares on all investments they make in participating campaigns on StartEngine. StartEngine Crowdfunding, Inc. will determine whether an investor qualifies as a StartEngine OWNer.*

*\*\* Must be done in a single transaction.*

**Process of Subscribing**

Prospective investors who submitted non-binding indications of interest during the "test the waters" period, will receive an automated message from us indicating that the offering is open for investment. You will be required to complete a subscription agreement in order to invest. Investors in Common Stock can only complete the subscription agreement on our website.

The subscription agreement must be delivered to us and funds for the subscribed amount must be delivered in accordance with the instructions stated in the subscription agreement. Investors will specify whether they will purchase shares via credit card, wire transfer, or ACH transfer. The company estimates that processing fees for credit card subscriptions will be approximately 2.5% of total funds invested per transaction, although credit card processing fees may fluctuate. The company estimates that approximately 70% of the gross proceeds raised in this offering will be paid via credit card. This assumption was used in estimating the payment processing fees included in the total offering expenses set forth in "Use of Proceeds."

The subscription agreement includes a representation by the investor to the effect that, if you are not an "accredited investor" as defined under securities law, you are investing an amount that does not exceed the greater of 10% of your annual income or 10% of your net worth (excluding your principal residence).

The company has entered into an Escrow Services Agreement with Bryn Mawr Trust Company ("Bryn Mawr" or the "Escrow Agent"). Bryn Mawr is a Delaware registered trust company that offers escrow services as well as an integrated technology platform for processing investment transactions. The company has agreed to pay Bryn Mawr an escrow administration fee of $100 for each break letter after the first four $750 per year escrow account fee. The first year is non-refundable. Each series will generally be responsible for fees due to the Escrow Agent, which are categorized as Offering Expenses.

Investor funds will be held by the Escrow Agent pending closing or termination of the offering. All subscribers will be instructed by the company or its agents to transfer funds by wire, credit or debit card, or ACH transfer directly to the escrow account established for this offering. The company may terminate the offering at any time for any reason at its sole discretion. Investors should understand that acceptance of their funds into escrow does not necessarily result in their receiving shares; escrowed funds may be returned.

Bryn Mawr is not participating as an underwriter or placement agent or sales agent of this offering and will not solicit any investment in the company, recommend the company's securities or provide investment advice to any prospective investor, and no communication through any medium, including any website, should be construed as such, or distribute this Offering Circular or other offering materials to investors. The use of Bryn Mawr's technology should not be interpreted and is not intended as an endorsement or recommendation by it of the company or this offering. All inquiries regarding this offering or escrow should be made directly to the company.

In the event that the company terminates the offering while investor funds are held in escrow, those funds will promptly be refunded to each investor without deduction or interest and in accordance with Rule 10b-9 under the Exchange Act.

**Issuance of Shares**

Information regarding the ownership of the Common Stock will be recorded with the stock transfer agent.

**Jury Trial Waiver**

The subscription agreement provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the subscription agreement, including any claim under federal securities laws. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law.

**Selling Stockholders**

Certain stockholders of the company intend to sell up to 368,000 shares of Common Stock in this offering, plus up to 73,600 Bonus Shares or up to $9,200,000 in gross proceeds. As of February 9, 2023, those stockholders have sold 76,335 shares (including 7,394 Bonus Shares) for gross proceeds of $1,723,400.00 on a pro rata basis.. The gross proceeds raised in this offering will be split as follows: 20% to the selling stockholders (on a pro-rata basis) and 80% to the company. Selling stockholders will participate on a pro rata basis, which means that at each closing in which selling stockholders are participating, a stockholder will be able to sell its pro rata portion of the shares that the stockholder is offering (as set forth in the table below) of the number of securities being issued to investors. For example, if the company holds a closing for $1 million in gross proceeds, the company will issue shares and receive gross proceeds of $800,000 while each of the selling stockholders will receive their Pro Rata Portion of the remaining $200,000 in gross proceeds and will transfer their shares to investors in this offering. Selling stockholders will not offer fractional shares and the shares represented by a stockholder's pro rata portion will be determined by rounding down to the nearest whole share.

After qualification of the Offering Statement, the selling stockholders will enter into an irrevocable power of attorney ("POA") with the company and two employees of the company as attorneys-in-fact, in which they direct the company and either attorney-in-fact to take the actions necessary in connection with the offering and sale of their shares. A form of the POA is filed as an exhibit to the Offering Statement of which this Offering Circular forms a part. Selling stockholders who hold shares of the company's Series Seed Preferred Stock or Series A Preferred Stock will convert their shares into shares of Common Stock immediately before participating in any closing. Selling stockholders who hold vested options for the purchase of Common Stock will exercise their options and pay for their shares before participating in any closing.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Selling Stockholder** | **Shares<br> owned<br> prior to <br> Offering** | **Shares<br> offered<br> by Shares<br> offered<br> by selling<br> stockholder (1)** | **Potential<br> Bonus<br> Shares (1)** | **Shares<br> owned<br> after the Offering (1)** | **Stockholder's Pro Rata<br> Portion (8)** |
| Aaron Broder (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| AC Ventures, LLC (3) | 1167947 | 10389 | 2078 | 1155480 | 2.82% |
| Adam Gootnick (3) | 25000 | 222 | 44 | 24734 | 0.06% |
| Alan & Sophie Alpert Trust Established August 19, 1991 (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| Ali Jafri | 27354 | 243 | 49 | 27062 | 0.07% |
| Andrew Frye (3) | 6978 | 62 | 12 | 6904 | 0.02% |
| Anil Agarwal (5) | 3894 | 35 | 7 | 3852 | 0.01% |
| Antoine Tardif (5) | 9999 | 89 | 18 | 9892 | 0.02% |
| Aren Fakhourian (2) | 13582 | 121 | 24 | 13437 | 0.03% |
| Ariel Gootnick (3) | 25000 | 222 | 44 | 24734 | 0.06% |
| B&B Family Trust (3)(4) | 334471 | 2975 | 595 | 330901 | 0.81% |
| BAM Venture Partners (A), L.P. (3) | 59010 | 525 | 105 | 58380 | 0.14% |
| BAM Venture Partners, L.P. (3) | 86983 | 774 | 155 | 86054 | 0.21% |
| Bristol Investment Fund, Ltd. | 1150917 | 10237 | 2047 | 1138633 | 2.78% |
| Christian Scranton (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| Close Family Trust (Eric Close) (3) | 6978 | 62 | 12 | 6904 | 0.02% |
| Daniel Gootnick (3) | 25000 | 222 | 44 | 24734 | 0.06% |
| Daniel Gutenberg (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| David Zhang | 89789 | 799 | 160 | 88830 | 0.22% |
| Doryn Fine (2) | 39352 | 350 | 70 | 38932 | 0.10% |
| Epstein-McGowan 2010 Trust Agreement dated January 14, 20110 (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| Eric Bunting (3) | 25694 | 229 | 46 | 25419 | 0.06% |
| Ernie L. Brooks Generation Skipping Trust (3) | 583973 | 5194 | 1039 | 577740 | 1.41% |
| Glenn & Eve Jaffe Living Trust, dated 05/21/1998 (3) | 583973 | 5194 | 1039 | 577740 | 1.41% |
| Howard E. Marks Living Trust U/A Dtd 12/21/2001 (2)(3)(6) | 10016174 | 83015 | 16606 | 9916553 | 22.56% |
| Identity Intelligence Group, LLC (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| Jeremy Roll (3) | 200129 | 1780 | 356 | 197993 | 0.48% |
| Johanna Cronin (2) | 1220770 | 10858 | 2172 | 1207740 | 2.95% |
| Jon Reyes (2) | 99844 | 888 | 178 | 98778 | 0.24% |
| Jonathan Schiff (3) | 583973 | 5194 | 1039 | 577740 | 1.41% |
| Josh Amster (2) | 470591 | 4186 | 837 | 465568 | 1.14% |
| Ken Gootnick (3) | 508973 | 4527 | 905 | 503541 | 1.23% |
| Kenrick Ong (2) | 12125 | 108 | 22 | 11995 | 0.03% |
| Klein Family Trust (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| Marine Family Trust (3) | 583973 | 5194 | 1039 | 577740 | 1.41% |
| Mark Buettner (5) | 10699 | 95 | 19 | 10585 | 0.03% |
| Marks Irrevocable Trust | 1004434 | 8934 | 1787 | 993713 | 2.43% |
| Mary Frances Knight | 129597 | 1153 | 231 | 128213 | 0.31% |
| Matthew Quan (2) | 15041 | 134 | 27 | 14880 | 0.04% |
| Max Crawford | 5808 | 52 | 10 | 5746 | 0.01% |
| MHT Investments LLC (3) | 583973 | 5194 | 1039 | 577740 | 1.41% |
| Midland IRA, Inc. FBO Eric Bunting (3) | 120298 | 1070 | 214 | 119014 | 0.29% |
| QED Associates LLC (3) | 145992 | 1299 | 260 | 144433 | 0.35% |
| Rachel Walker (2) | 17562 | 156 | 31 | 17375 | 0.04% |
| Rajewski Living Trust dated May 30, 2013 (3)(4) | 404949 | 3602 | 720 | 400627 | 0.98% |
| Reazur Rasul (3) | 6978 | 62 | 12 | 6904 | 0.02% |
| Ryan Kim | 20477 | 182 | 36 | 20259 | 0.05% |
| Sara Hanks (2) | 218990 | 1948 | 390 | 216652 | 0.53% |
| Schuler Family Trust 2009 (Zack Schuler) (3) | 300000 | 2650 | 530 | 296820 | 0.72% |
| SE Agoura Investment LLC (4) | 9346567 | 83135 | 16627 | 9246805 | 22.59% |
| Stonegate Diversified Digital Asset Master Fund, Ltd. (5) | 291987 | 2597 | 519 | 288871 | 0.71% |
| Suzanne Riopel (2) | 4968 | 44 | 9 | 4915 | 0.01% |
| Teddy Rounds (2) | 150992 | 1343 | 269 | 149380 | 0.37% |
| Teshy Inc. (5) | 6471 | 57 | 11 | 6403 | 0.02% |
| The Jonathan & Nancy Glaser Family Trust (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| The Lee Miller Trust UA 09/05/2020 (2)(3) | 4291123 | 37279 | 7456 | 4246388 | 10.13% |
| The Ronald David Miller Trust UA 08/04/2020 (2)(3)(7) | 4291123 | 37279 | 7456 | 4246388 | 10.13% |
| Varun Sethi (3) | 300000 | 2668 | 534 | 296798 | 0.73% |
| Victor Coleman (3) | 291987 | 2597 | 519 | 288871 | 0.71% |
| TOTAL (9) |  |  |  |  | 100.00% |

---

(1) Assumes maximum number of shares are sold in this offering and maximum number of Bonus Shares are issued. The maximum number of Bonus Shares available is 20%. Reflects shares outstanding as of February 14, 2022.

(2) Incudes shares of Common Stock issuable upon exercise of vested options as of February 14, 2022, including payment for such shares of Common Stock prior to any closing, if applicable.

(3) Includes shares of Common Stock issuable upon conversion of Series Seed Preferred Shares on a 1-for-1 basis.

(4) Includes shares of Common Stock issuable upon conversion of Series A Preferred Shares on a 1-for-1 basis.

(5) Includes shares of Common Stock issuable upon conversion of Series T Preferred Shares on a 1-for-1 basis.

(6) Shares beneficially owned by Howard Marks.

(7) Shares beneficially owned by Ronald Miller.

(8) "Pro Rata Portion" represents that portion that a stockholder may sell in the offering expressed as a percentage where the numerator is the amount offered by the stockholder divided by the total number of shares offered by all selling stockholders.

(9) The total number of shares owned by the selling stockholders prior to this offering represents 75% of the company's capital stock, on a fully diluted basis, assuming all options are exercised, shares of Preferred Stock are converted to Common Stock.

**USE OF PROCEEDS TO ISSUER**

The company estimates that if it sells the maximum amount of $46 million from the sale of Common Stock, which represents the value of shares available to be offered as of the date of this offering circular out of the rolling 12-month maximum offering amount of $75 million, the net proceeds to the issuer in this offering will be approximately $30,309,000, after deducting the estimated offering expenses of approximately $6,491,000 (including payment to the escrow agent the broker-dealer, marketing, legal and accounting professional fees and other expenses) and sales by selling stockholders. As of February 9, 2023, the company issued 381,639 shares of Common Stock including 76,335 sold on behalf of selling stockholders, for aggregate gross proceeds of $8,615,975.

The table below shows the net proceeds the company would receive from this offering assuming an offering size of $5 million, $20 million and $37.4 million (the remaining amount to be sold in this offering), and the intended use of those proceeds. There is no guarantee that we will be successful in selling any of the shares we are offering.

---

| | | | |
|:---|:---|:---|:---|
| **Amount raised** | $**5000000** | $**20000000** | $**37348025** |
| **Offering expense** | $595000 | $2380000 | $5233763 |
| **Sales by selling stockholders** | $1000000 | $4000000 | $7476805 |
| **Net proceeds to issuer** | $3435000 | $13740000 | $24673457 |
| **Marketing** | $1274000 | $8096000 | $14666396 |
| **Operations** | $1387000 | $2548000 | $4615857 |
| **Product Development** | $580500 | $2322000 | $4206444 |
| **Cash Reserves** | $163500 | $654000 | $1184760 |

---

Marketing is our largest expected expenditure. Our marketing will use a lead-generation program designed to reach companies who are likely to want to raise capital and to offer them the ability to register on StartEngine to build crowdfunding offerings. Our marketing costs consist mainly of internal salaries for brand managers, lead generation associates, inside sales people and third party companies specialized in incoming lead conversion through telephone and emails. Also included are advertising costs on several types of media, including television, radio, podcasts and internet services such as Facebook and Google. These costs include engaging vendors such as advertising agencies and consultants.

Product development is our second largest expected expenditure. This mostly includes salaries for the internal technology development team. We expect to hire additional software engineers, user experience specialists, user interface specialists and quality assurance engineers. These engineers will assist with improving our existing services as well as developing our planned new services.

Compliance operations expenditures are expected to grow significantly in the next twelve months. This mostly includes salaries for the internal compliance team. We expect to hire additional corporate counsel and compliance associates. These compliance personnel will assist with improving our existing compliance procedures as well as assist in the developing compliance procedures for our planned new services.

**The company reserves the right to change the above use of proceeds if management believes it is in the best interest of the company.**

The allocation of the net proceeds of the offering set forth above represents the company's estimates based upon its current plans, assumptions it has made regarding the industry and general economic conditions and its future revenues (if any) and expenditures.

Investors are cautioned that expenditures may vary substantially from the estimates above. Investors will be relying on the judgment of the company's management, who will have broad discretion regarding the application of the proceeds from this offering. The amounts and timing of the company's actual expenditures will depend upon numerous factors, including market conditions, cash generated by the company's operations (if any), business developments and the rate of the company's growth. The company may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.

In the event that the company does not raise the entire amount it is seeking, then the company may attempt to raise additional funds through private offerings of its securities or by borrowing funds. The company does not have any committed sources of financing.

**THE COMPANY'S BUSINESS**

StartEngine Crowdsourcing Inc. was incorporated in the State of Delaware on March 19, 2014. On May 8, 2014, the company changed its name to StartEngine Crowdfunding, Inc.

StartEngine aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. In 2015, StartEngine Crowdfunding began operating under Title IV of the JOBS Act, allowing private companies to advertise the sale of their stock to both accredited and non-accredited investors under Regulation A, and under Title II of the JOBS Act, which permits offerings to accredited investors to be advertised under Rule 506(c) of Regulation D. StartEngine continues to expand the breadth of its offerings in order to better serve its mission. Operations expanded in 2016, as Regulation Crowdfunding, adopted in response to Title III of the JOBS Act, went into effect and we offered services to companies raising money under Regulation Crowdfunding. Beginning in December 2017, StartEngine began offering transfer agent services through one of its subsidiaries. In June 2019, StartEngine Primary LLC was approved for membership as a broker-dealer with FINRA. StartEngine Primary now offers broker-dealer services to companies selling securities in Regulation A and Regulation D offerings and operates our alternative trading system.

StartEngine's most recent addition to its family of services are securitization services that it provides through its subsidiary StartEngine Assets.

StartEngine Crowdfunding has four wholly owned direct operating subsidiaries:

· StartEngine
 Capital LLC ("StartEngine Capital"), a funding portal registered with the SEC and a member of the Financial Industry
 Regulatory Authority ("FINRA"), operates under Title III of the JOBS Act, which introduced Regulation Crowdfunding.

· StartEngine
 Secure LLC ("StartEngine Secure"), a transfer agent registered with the SEC that was formed on December 12, 2017.

· StartEngine
 Primary LLC ("StartEngine Primary"), a company formed on October 12, 2017, a registered broker-dealer, which was
 approved to act as alternative trading system on April 16, 2020.

· StartEngine Assets LLC
 ("StartEngine Assets"), a company formed on May 18, 2020, for the purpose of securitizing assets. StartEngine
 Assets currently has three active subsidiaries for which StartEngine Assets is the administrative manager and/or managing member.

On October 24, 2022, StartEngine Crowdfunding, Inc. ("StartEngine") entered into a definitive agreement to acquire substantially all of the assets of the SeedInvest business as conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, a Delaware limited liability company ("Pluto Holdings") and through SI Securities, LLC, a New York limited liability company ("SI Securities"), and SeedInvest Technology, LLC, a New York limited liability company, each a wholly-owned subsidiary of Pluto Holdings ("SeedInvest Technology," collectively, with the assets acquired from Pluto Holdings and SI Securities, "SeedInvest"). The completion of the acquisition of SeedInvest is subject to customary closing conditions and to regulatory approval by FINRA. The total consideration for the purchase is 960,000 shares of StartEngine's common stock, which based on StartEngine's current Regulation A offering price of $25 per share would be valued at $24 million.

The assets of the SeedInvest business include SeedInvest Technology, LLC and substantially all the assets related to owning and operating the crowdfunding platform at <u>www.seedinvest.com</u>.

The sellers will retain among other items: their broker-dealer regulatory approvals and licenses; equity interests, convertible notes, SAFEs and all other investment contracts received, and in certain cases to be received, in SeedInvest portfolio companies; and receivables related to current and certain contemplated offerings.

The parties anticipate this sale will close by the end of the first quarter of 2023. StartEngine notes that there can be no assurance that the transaction will close. Further, though StartEngine believes that acquiring these assets from SeedInvest will create opportunities for StartEngine to expand its current and future offerings to a broader base of investors, there is no guarantee that the acquisition have the impact anticipated. While StartEngine is excited by this opportunity, it does not believe that this acquisition would result in a fundamental change to the nature of its business or plan of operations. For details, see Exhibit 6.4 filed as an exhibit to the offering statement of which this offering circular forms a part.

**Principal Products and Services**

<u>Offerings</u>: Depending on the type of offering being made, we currently operate as a technology platform connecting issuers and investors, as a broker-dealer and as a Regulation Crowdfunding funding portal. We facilitate the following types of offerings that are exempt from registration under the Securities Act:

· Regulation
 A Offerings: Through StartEngine Primary we host Regulation A offerings on our platform. These companies are seeking to raise anywhere
 from $100,000 to $75 million and we provide an array of services, including acting as a broker-dealer, assisting with due diligence,
 custodial accounts and coordinating vendors.

· Regulation
 Crowdfunding Offerings: Through StartEngine Capital, our funding portal registered with the SEC and FINRA, we host Regulation Crowdfunding
 offerings. These companies are seeking to raise anywhere from $10,000 to $5 million, and we also provide an array of services permitted
 by Regulation Crowdfunding, including campaign page design services, marketing consulting services, assisting with due diligence,
 custodial accounts, and coordinating vendors.

· Rule 506(c) Offerings:
 Through StartEngine Crowdfunding, we host offerings under Rule 506(c) of Regulation D. Accredited investors are allowed
 to invest in these offerings and we host these offerings either on a stand-alone basis or concurrently with a Regulation Crowdfunding
 offering. Under Rule 506(c), companies can use general solicitation to attract investors and there is no limit to the amount
 of money that can be raised. Therefore, companies engaged in a concurrent Regulation Crowdfunding offering can also raise additional
 funds from accredited investors providing they comply with the requirements of each exemption.

StartEngine OWNers Bonus: The general public can become members of the StartEngine OWNers bonus program on StartEngine's website for $275 per year. The OWNers Bonus entitles members to 10% bonus shares on all investments they make in offerings on StartEngine where the issuer chooses to participate in the program. Issuers using our broker-dealer and funding portal services can choose to participate in our OWNers bonus program with respect to the offerings they are making under Regulation A or Regulation CF. Those issuers will grant bonus shares in their offerings to members of the StartEngine OWNers bonus program. The bonus shares are included in the offering statements filed with the SEC, and therefore offered and sold in reliance on Regulation A or Regulation CF, respectively.

<u>StartEngine Secure</u>: Through our wholly owned subsidiary, StartEngine Secure, we offer transfer agent services. These services include tracking each investor's account information and the amount of securities purchased and date purchased. We began offering transfer agent services in May 2017 to all of our clients and became a registered transfer agent in November 2017. Revenues from this service were first recognized in January 2018. Our goal is to provide a seamless service to our client companies. Our intent is for our transfer agent to have agreements with our various entities to allow it to collect information on investors and their investments through an API (application programming interface). Therefore, when a company raises money on StartEngine, our transfer agent will be notified and sent the investor information and the investment details. The transfer agent will then capture this information into its redundant and secure database hosted in the cloud and encrypt for security purposes.

<u>StartEngine Premium</u>: For our Regulation Crowdfunding campaigns, we offer marketing services branded under the name "StartEngine Premium". For an additional fee, our team will support companies with the design of their campaign pages, provide a designated account consultant to guide a company throughout the campaign creation process, and assist a company in developing a marketing strategy based on best practices and analytics from previous successful campaigns. This service first generated revenues in May 2017.

StartEngine Promote: Our funding portal offered digital advertising services branded under the name "StartEngine Promote". These services were aimed at improving the success of Regulation Crowdfunding campaigns through paid advertising. For a percentage of the net investments attributable to advertisements placed by StartEngine, our team supported companies with the creative design, purchase, and optimization of advertising across, but not limited to, Facebook, Instagram, Linkedin, Twitter, and Google Adwords. We offered this services from 2018 until January 1, 2022 .

<u>StartEngine Primary</u>: By adding broker-dealer services to the mix of our offerings, we are able to take a more active role in the promotion and sale of securities in Regulation A, Regulation Crowdfunding and Regulation D offerings hosted on our platforms. Further, we are able to facilitate the secondary trades on StartEngine Secondary, see (—"StartEngine Secondary" below). StartEngine Primary received approval for a range of business lines to allow us to act as the broker-dealer for the private placements of securities (which includes securities sold under Regulation D), to effect transfers and sales on StartEngine Secondary, and to be able to receive referral fees and commissions for sales of securities. Further, to expend our services that we can offer our clients, we filed a continuing membership application with FINRA ("CMA") to be a clearing or "carrying" broker-dealer so in addition to handling a client's orders to buy and sell securities we can also maintain custody of a client's securities and other assets (e.g. cash in their account). Our broker-dealer registration became effective in June 2019, and our CMA for become a carrying broker-dealer was accepted at the end of September 2021.

<u>StartEngine Secondary</u>: The goal of the StartEngine Secondary platform is to increase liquidity for shares sold in Regulation A, Regulation Crowdfunding and Regulation D offerings. We facilitate the transfer and sale of these shares by creating an alternative trading system ("ATS") to allow for secondary trades. Sales of shares sold under Regulation A on the StartEngine platform are permitted immediately, while holders of shares sold under Regulation Crowdfunding and Regulation D will need to wait one year in order to comply with the applicable transfer restrictions to participate on the platform. After receiving the requisite FINRA approval to operate as an ATS, StartEngine Primary launched its ATS, branded as "StartEngine Secondary" on May 18, 2020.

To date, StartEngine Secondary has a limited operating history, and only five companies have been quoted on this platform, including the company itself. Over 400 issuers have signed to be quoted on this platform. Currently, for StartEngine Secondary, we generate revenues by charging trade commissions to the sellers of the shares and we intend to generate revenues by charging initial and annual quotation fees.

<u>StartEngine Assets</u>: The goal of StartEngine Assets is to provide retails investors the opportunity to invest in various asset classes – including real estate, wine, fine art, trading cards, watches, comics and NFTs. We are currently selling securities underStartEngine Collectibles Fund I LLC (the Collectibles Fund"). The Collectibles Fund is geared at securitizing collectible assets and selling shares in them to the public. Our Collectible Fund has a qualified offering statement under Regulation A and is currently selling shares in series for wine, fine art, trading cards, watches and comics. StartEngine Assets LLC has been purchasing assets to sell to these funds. To date, this is still an early venture and we have yet to determine if there is a market for investments of this type. Further, to the extent there is a market, we may broaden what types of collectibles we may offer (for example, we may include cars and memorabilia) and we may decide to limit selling other types of assets (for example, at this point the company does not intend to purchase any additional NFTs or other crypto assets.). It is not clear at this time whether the assets business will ever amount to a material portion of our overall business.

<u>StartEngine iOS</u>: To improve our user experience and facilitate using our services, StartEngine our services can be accessed through our iOS application.

**Support Services**

Our company is focused on our core competencies and therefore we surround ourselves with third party companies who help us accomplish our non-core tasks.

We rely on the following companies for outsourced services:

· Fund America:
 Transaction management

· Bryn Mawr Trust
 Company: Escrow Services

· Amazon AWS:
 Cloud hosting

· Google Business:
 Cloud email and applications

**Market**

***Regulation A***

Amended Regulation A became effective June 19, 2015. According to the SEC, the size of the Regulation A market increased to approximately $1.8 billion from July 1, 2021 to June 30, 2022 from approximately $1.7 billion for the period from July 1, 2020 to June 30, 2021.

As of February 9, 2023, we have hosted 60 Regulation A offerings, which have raised a total of approximately $263 million on our platforms, not including five offerings for StartEngine itself and 33 offerings of series of companies managed by StartEngine Assets, LLC. We believe the market for Regulation A will continue to grow as more companies become aware of the ability to raise capital through crowdfunding platforms. Because it permits a maximum raise of $75 million each 12 months, we believe this rule is well suited for small and midsize businesses. We have seen the demand increase significantly between 2019 and 2022. Excluding offerings for StartEngine itself and its affiliates, we have hosted eight offerings in 2019, 13 offerings in 2020, 17 offerings in 2021 and 22 offerings in 2022. The number of offerings hosted is based on the year launched and do not include offerings for StartEngine itself and the offerings of series for StartEngine Collectibles Fund I LLC. We believe the recent administrative change to increase the maximum offering amount from $50 million to $75 million and the change to permit SEC-reporting companies to make offerings in reliance on Regulation A has been and will continue to increase the size of the market and make Regulation A a more appealing form of capital formation for some companies. We expect to continue to increase the number of companies who list their offerings on our platform, although we are likely to encounter competition from other platforms and from companies who seek to raise funds online without using a platform. Further, our broker-dealer capabilities will enable us to increase the scope of services offered to our clients.

***Regulation Crowdfunding***

Since its launch on May 16, 2016, we estimate that as of February 9, 2023, 1,007 offerings have raised over $405 million on StartEngine through Regulation Crowdfunding. According to the SEC, the size of the Regulation Crowdfunding market was approximately $368 million for the period from July 1, 2021 to June 30, 2022, more than double the approximately $174 million for the period from July 1, 2020 to June 30, 2021.

We believe Regulation Crowdfunding will continue to grow year over year as more startup companies become aware of this funding method and view Regulation Crowdfunding as a viable fundraising option. We have seen the demand increase significantly between 2019 and 2020. And, with the 2021 increase on the annual cap to $5 million, we have seen an increase in interest in this form of funding from prospective issuers throughout 2021 and 2022. Regulation Crowdfunding makes it relatively inexpensive to make an offering of securities: legal, compliance and accounting costs can be less than $10,000, and offering costs can be even cheaper for companies who prepare the documentation internally. With a current maximum raise of $5 million per year, we believe that this funding method is perfect for early-stage companies.

We are working to increase awareness of the benefits of Regulation Crowdfunding through a lead generation program that includes advertising on social media, email marketing and other marketing support. We mainly focus on start-ups; however, our outreach will also include some companies further along in their development. We have and plan to continue to educate the market through the content we write and publish on our blog as well as being guest authors on other popular blogs.

***Rule 506(c)***

Offerings under Regulation D include those under Rule 506(b), Rule 506(c), and Rule 504. According to the SEC, the size of the Rule 506(b) market was approximately $2.3 trillion, the Rule 506(c) market was approximately $148 billion and the Rule 504 market was approximately $624 million for the period from July 1, 2021 to June 30, 2022. The vast majority of Regulation D sales were through Rule 506(b), which does not allow for general solicitation and allows for some non-accredited investors as well as less stringent requirements for verifying accredited status. Based on this information, we believe there is large potential market for online sales under Rule 506(c).

Rule 506(c) offerings are an inexpensive way to raise capital from accredited investors with a low cost of entry. Further, recent expansion of the definition of an "accredited investor" may widen the pool of potential investors. We estimate it can cost under $10,000 to prepare an offering under Rule 506(c). There is no limitation on the amount raised, which makes this rule attractive to companies who just completed a Regulation Crowdfunding offering or are planning a Regulation A campaign in the near future. This exemption can be used together with Regulation A and Regulation Crowdfunding. For Regulation Crowdfunding offerings, this exemption provides companies an opportunity to extend an offering beyond Regulation Crowdfunding once the maximum $5 million has been reached. For Regulation A offerings, this exemption can be used as a fundraising option prior to the launch of the offering, because of the time it takes to get a Regulation A offering qualified. Currently, this represents only a small part of our overall business.

***Transfer Agent***

The exemptions provided by Regulation A and Regulation Crowdfunding include conditional exemptions from the registration requirements of the Securities Exchange Act of 1934. One of the conditions is that should the number of a company's securityholders and/or the value of a company's assets exceed a certain threshold, a company needs to use a registered transfer agent to avoid the requirement that the company become a fully-registered company with the SEC — an expensive proposition for many of these small companies. Therefore, the market for our transfer agent services includes all companies that have previously raised funds through Regulation A and Regulation Crowdfunding offerings. Currently, we mainly market our services to our current clients.

***StartEngine Secondary***

We believe that a portion of the owners of securities purchased under Regulation A, Regulation D and Regulation Crowdfunding will be interested in selling their securities to prospective buyers. There is no viable marketplace today for these securityholders to sell their securities unless the company seeks a quotation on an over-the-counter marketplace. Companies who use Tier 1 of Regulation A or Regulation Crowdfunding do not qualify for quotation on the leading over-the-counter marketplace. Further even if a company qualifies for that market, which would include issuers using Tier 2 of Regulation A, the quotation requirements are expensive. We believe StartEngine Secondary has the potential for success because there are limited trading forums for these securities.

***StartEngine Assets***

We believe that there are many companies and individuals who have value to bring to the market including specialized knowledge about unique types of assets and are interested in capital formation but lack the internal infrastructure in order to accept and manage investments from a large pool of investors. StartEngine Assets intends to remove this friction point by providing the administrative, technical and technological assistance needed. Further, we believe investors would be excited to invest in diverse asset pools that traditionally were only available to high net worth individuals. At this time, the full extent of investor interest is not clear, and we do not know whether this line of business will ever be a material part of our operations.

Currently, our Collectible Fund has a qualified offering statement under Regulation A and is currently selling shares in series for wine, fine art, trading cards, watches and comics. StartEngine Assets LLC has been purchasing assets to sell to these funds. To date, this is still an early venture and we have yet to determine if there is a market for this service; to the extent there is a market, we may broaden what types of collectibles we may offer (for example, we may include cars and memorabilia) and we may decide to limit selling other types of assets (for example, at this point the company does not intend to purchase any additional NFTs or other crypto assets.).

***Registered User Base***

As of February 9, 2022, we have approximately 1,064,000 registered users. Of these, approximately 305,571 have made investments on our platform. We determine registered users by tracking unique email addresses from investor profiles that have not deactivated their profiles. As an individual could have multiple email addresses across multiple profiles, or may no longer be active, even if they have not deactivated their profile, registered users is an approximate gauge and could overstate the actual number of unique registered users. There is no fee associated with becoming a registered user. Of the users who have made investments the average number of investments is approximately 2.3 and the amount per investment is approximately $951. We are seeing week-over-week growth in registered users and expect to register more users as we add more companies to our platform.

**Competition**

With respect to offerings made under Regulation Crowdfunding, we compete with other intermediaries, including brokers and funding portals such as WeFunder, Republic and MicroVentures. We have also seen more market entrants due to the 2021 increase in the cap size from $1.07 million to $5 million.

With respect to offerings under Regulation A, we compete with other platforms, hosting services and broker-dealers. Some of our competitors include Dalmore, Dealmaker, Republic and Wefunder.

With respect to offerings under Rule 506(c), or online offerings made under Regulation D (which includes non-solicited offerings), we compete with platforms such as AngelList, EquityNet, FundersClub and Fundable.

With respect to our transfer agent, we compete with transfer agents such as Computershare and VStock Transfer.

With respect to our offerings under StartEngine Assets, we compete with other companies selling shares in collectibles, including on the Rally Rd., Collectables and Otis platforms.

**Strategy**

Our Mission: Help entrepreneurs and investors achieve their dreams.

Our Strategy: We provide technology to allow the general public to invest in entrepreneurs.

**Our Advantages**

We believe that StartEngine is one of the leaders in the global crowdfunding nation. We aim to facilitate financial ignition of innovative companies led by determined, intelligent entrepreneurs who have the energy and talent to start and grow successful companies.

We harness the power and wisdom of "The Crowd" through the internet to release entrepreneurial creativity, thereby creating jobs, economic efficiency and ultimately economic growth. We believe we not only help entrepreneurs raise capital to start and grow their businesses, but we also help them build armies of committed, long-term brand ambassadors who, as investors, promote their companies to their friends, families and colleagues.

As one of the first movers in the equity crowdfunding industry, we are active in crowdfunding legal and regulatory affairs. Our position allows us to collaborate to establish industry-wide best practices and to improve the quality of listings. We believe our backend operating systems are highly efficient. Each function operates through documented procedures to ensure consistent, quality results. Knowing what it takes to successfully grow a company, we try to keep operating expenses to a minimum.

We believe that StartEngine's key asset is its team members. We are a group of talented people who have come together to democratize finance and investment in startup and growth companies. The hallmark of the company is talented, respectful, enthusiastic and entrepreneurial people who understand and operate on the principles of dignity and respect.

Our mission is to help entrepreneurs and investors achieve their dreams. Our objective is that by 2029, we will facilitate funding of $10 billion for companies.

**Research and Development**

StartEngine invested approximately $3,132,996 in 2021 and $1,309,444 in 2020 in research and development, product development, and maintenance. In 2022,the Company invested approximately $5,057,000.

**Employees**

As of February 9, 2023, we had 82 employees. We also work with a large number of contractors for user-experience design, security controls, and testing, services and marketing.

**Regulation**

Having platforms that host Regulation A, Regulation Crowdfunding and Regulation D offerings, we are required to comply with a variety of state and federal securities laws as well as the requirements of FINRA, a national securities association of which our funding portal subsidiary and our broker-dealer are members. Further, as a registered transfer agent, we are required to comply with a variety of state and federal securities laws and laws that govern transfer agents, as well as laws aimed at preventing fraud, tax evasion and money laundering

***Regulation Crowdfunding***

In order to act as an intermediary under Regulation Crowdfunding, our subsidiary is registered as a funding portal with the SEC and became a member of FINRA. In the future, we may be subject to additional rules issued by other regulators, such as the money-laundering rules proposed by FinCEN.

*SEC Requirements*

As a funding portal, our subsidiary is prohibited from engaging in certain activities in order not to be regulated as a full-service broker-dealer. These activities are set out in Section 4(a)(6) of the Securities Act and in Regulation Crowdfunding. We have accordingly established internal processes to ensure that our subsidiary as well as its agents and affiliates do not engage in activities that funding portals are not permitted to undertake, including:

· Providing investment
 advice or recommendations to investors for securities displayed on our platform;

· Soliciting
 purchases, sales or offers to buy securities displayed on our platform;

· Compensating
 employees, agents or other persons for solicitation or for the sale of securities displayed or listed on our platform; or

· Holding, managing,
 processing or otherwise handling investors' funds or securities.

In addition, our funding portal has certain affirmative requirements that it is required to comply with to maintain its status. These affirmative obligations include:

· Providing a
 communications channel to allow issuers to communicate with investors;

· Having due
 diligence and compliance protocols and requirements in place so that the company has a "reasonable basis" to believe
 that

· its issuers
 are in compliance with securities laws, have established means to keep accurate records of the securities offered and sold, and that
 none of their covered persons (e.g., officers, directors and certain beneficial owners) are "bad actors" and therefore
 disqualified from participating in the offering;

· its issuers
 and offerings do not present the potential for fraud or otherwise raise concerns about investor protection; and

· its investors
 do not invest more than they are allowed to invest under the limitations set out in Regulation Crowdfunding; and

· Creating procedures
 for its investors to notify them of risks regarding investing in securities hosted on its platform and providing them with required
 investor education and disclosure materials.

We are also required to set up protocols regarding payment procedures and recordkeeping.

*FINRA Rules*

As a member of FINRA, our funding portal is subject to their supervisory authority and is required to comply with FINRA's portal requirements. Some of those rules are also applicable to the company as an entity associated with the portal. These requirements include rules regarding conduct, compliance and codes of procedure. For instance, FINRA's compliance rules require timely reporting of specified events, such as complaints and certain litigation against the portal or its associated persons as well as the provision of the portal's annual financials prepared on a U.S. GAAP basis. In addition, under the conduct rules, the portal is required to conduct its business in accordance with high standards of commercial honor and just and equitable principles of trade, is limited to certain types of communications with investors and issuers, and is prohibited from using manipulative, deceptive and other fraudulent devices.

StartEngine Capital LLC was informed on December 21, 2021 that FINRA had preliminarily determined to pursue formal charges with respect to events in the period November 2016 to January 2018. After further discussions with FINRA, our funding portal submitted a Letter of Acceptance, Waiver, and Consent ("AWC") on March 11, 2022, and FINRA accepted the AWC on May 4, 2022. The AWC provides for a censure, a $350,000 fine, and a certification to be made by our funding portal that it has established and implemented policies, procedures, and internal controls sufficient to address the issues identified in the AWC. The issues identified in the AWC concern certain content on our website that FINRA found our funding portal knew or had reason to know was false or misleading and our funding portal's supervision of such content.

*Liability*

Under Section 4A(c) of the Securities Act, an issuer, including its officers and directors, may be liable to the purchaser of its securities in a transaction made under Section 4(a)(6) if the issuer makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in light of the circumstances under which there were made, not misleading; provided, however, that the purchaser does not know of the untruth or omission, and the issuer is unable to prove that it did not know, and in the exercise of reasonable care could not have known, of the untruth or omission.

Though not explicitly stated in the statute, this section may extend liability to funding portals, and the SEC has stated that, depending on the facts and circumstances, portals may be liable for misleading statements made by issuers. However, funding portals would likely have a "reasonable care" due diligence defense. "Reasonable care" would include establishing policies and procedures that are reasonably designed to achieve compliance with the requirements of Regulation Crowdfunding, including conducting a review of the issuer's offering documents before posting them to the platform to evaluate whether they contain materially false or misleading information. We have designed our internal processes and procedures with a view to establishing this defense, should the need arise.

We may also face liability from existing anti-fraud rules and statutes under the securities laws. For instance, under Section 9(a)(4) of the Exchange Act anyone who "willfully participates" in an offering could be liable for false or misleading statements made to induce a securities transaction. Further, the Supreme Court *Lorenzo* opinion in 2019 established liability for the "dissemination" of misleading statements under Rule 10b-5 under the Exchange Act.

In addition, FINRA imposes liability for certain conduct, including violations of commercial honor and just and equitable principles of trade and acts using manipulative, deceptive and other fraudulent devices.

***Regulation A and Regulation D***

*Broker-Dealer Regulations*

Our subsidiary, StartEngine Primary, is registered as a broker-dealer with the SEC and a member of FINRA. The registration process not only includes registering with the SEC, but also requires membership in a self-regulatory organization (in our case, we are a member of FINRA) and in the Securities Investor Protection Corporation ("SIPC"), compliance with state requirements and making sure that our associate persons satisfy all applicable qualification requirements.

*SEC Requirements*

Since StartEngine Primary became a broker-dealer, it has been required to comply with extensive SEC regulations with respect to its conduct and the processing of transactions. These include requirements related to conduct, financial responsibility, and other requirements such as those that relate to communications, anti-money laundering (AML) and ongoing internal controls and governance. In addition, StartEngine Primary has been approved to operate an alternative trading system for secondary trading of securities. StartEngine also need to comply with extensive SEC regulations with respect to its conduct and its execution and clearance of transactions.

*FINRA Requirements*

Since StartEngine Primary became a of FINRA as a broker-dealer, it has been subject to FINRA's supervisory authority and is required to comply with FINRA's rules and regulations. These rules and regulations include many similar requirements to those of the SEC, and in many cases are broader in scope and provide more specificity. FINRA also has rules regarding conduct, compliance and codes of procedure. For instance, FINRA members must comply with NASD's Rules of Fair Practice, which broadly speaking requires broker-dealers to observe high standards of commercial honor and just and equitable principles of trade in conducting their business. There are also rules that relate to use of manipulative, deceptive or other fraudulent devices, suitability, payments to unregistered persons, know your customer, supervision of our employees and responsibilities related to associated persons, financial soundness, recordkeeping, maintaining procedures, arbitration for customer disputes, AML and submitting to ongoing supervision. We are also required to undertake due diligence investigations with respect to Regulation A and Regulation D offerings.

*Conduct Requirements*

In general, many of the rules that govern broker-dealers stem from antifraud provisions; these requirements are broad in scope and prohibit misstatements or misleading omissions of material facts, and fraudulent or manipulative acts and practices, in connection with the purchase or sale of securities. Specifically, the following rules apply:

· Section 9(a) prohibits
 particular manipulative practices regarding securities registered on a national securities exchange.

· Section 10(b) prohibits
 the use of "any manipulative or deceptive device or contrivance" in connection with the purchase or sale of any security.

· Section 15(c)(1) prohibits
 broker-dealers from effecting transactions in, or inducing the purchase or sale of, any security by means of "any manipulative,
 deceptive or other fraudulent device" in over-the-counter markets

· Section 15(c)(2) prohibits
 a broker-dealer from making fictitious quotes in over-the-counter markets

Antifraud specific requirements include those related to:

· Duty of fair
 dealing (e.g., charging reasonable fees, promptness of executive orders, and disclosing specified material information as well as
 any conflict of interest);

· Regulation
 Best Interest (e.g., a duty to act in the "best interests" of retail customer (defined as natural persons and their legal
 representatives), which includes certain disclosure and care obligation and compliance obligations as well as maintaining policies
 and procedures to minimize the effects, if any, of conflicts of interest);

· Duty of best
 execution (e.g., a duty of execution requires that based on the circumstances requirement to find the most favorable terms for a
 customer;

· Customer confirmation
 (e.g., at or before the completion of transaction certain information must be provided to customers, including specifics on the sale,
 the payment that the broker-dealer receives, etc.);

· Disclosure of credit terms;

· Restrictions on short sales;

· Trading during an offering; and

· Restrictions on insider trading.

Finally, broker-dealers are governed by requirements regulating employees and individuals associated with the broker-dealer.

*Financial Responsibility Requirements*

Financial responsibility and operations requirements include: net capital requirements, margin requirements, customer protection requirements (e.g., reserve account and segregation of customer assets), risk assessment requirements, financial reporting (including an independent audit), and recordkeeping requirements. The minimum net capital requirement for StartEngine Primary is $250,000. As a self-clearing broker-dealer StartEngine Primary is specifically obligated under net capital requirements to maintain a sufficient level of net capital to cover any open trades that fail to settle.

*Anti-Money Laundering*

The Bank Secrecy Act, as amended by the USA PATRIOT ACT of 2001 (the "BSA/USA PATRIOT Act"), requires broker-dealers to develop anti-money laundering ("AML") programs to assist in the prevention and detection of money laundering and combating terrorism. Broker-dealers are also are subject to U.S. sanctions laws administered by the Office of Foreign Assets Control and are expected to have policies and procedures in place to comply with these laws.

*Other Requirements*

Broker-dealers are subject to a host of other rules and requirements including: mandatory arbitration, submitting for SEC and FINRA examinations, maintaining and reporting information on the broker-dealers affiliates (in our case, this includes the parent organization as well as the other subsidiaries), following electronic media and communication guidelines as well as maintaining an AML program.

*Liability*

Under our arrangements that do not use the services of our broker-dealer subsidiary, Section 12(a)(2) of the Securities Act, which applies to Regulation A, imposes liability for misleading statements not only on the issuers of securities but also on "sellers," which includes brokers involved in soliciting an offering. Rule 10b-5 under the Exchange Act generally imposes liability on persons who "make" or disseminate misleading statements. Currently, the information presented on our platform is driven by the issuers. Additional liability may arise from as-yet untested provisions such as Section 9(a)(4) of the Exchange Act, discussed above.

Broker-dealers are subject to heightened standards of liability. Not only do broker-dealers have potential liability under Section 12(a)(2) but we also are subject to liability under Rule 10b-5. Broker-dealers may also be subject to liability for failure to comply with SEC and FINRA requirements, including claims that we can be held liable for the behavior of our agents (control person liability), claims regarding unsuitable recommendations, violations of margin rules, breach of contract, common law claims of fraud and various claims under state laws.

***Regulation S***

Issuers that rely on Regulation S are still required to comply with the requirements of the jurisdiction in which their securities are sold.

***Operation of ATSs***

The ATS must be operated by a broker-dealer. Our broker-dealer, StartEngine Primary, is governed by the rules regulating broker-dealer trading systems. Regulation ATS includes provisions that govern the operations an ATS such as those that relate to fees charged, fair access to the trading system, system requirements (capacity, integrity and security), display of orders and capacity to execute those orders, recordkeeping and reporting, and establishing procedures including related to confidentiality of trading information, among other things.

Operating an ATS, means that we also need to ensure compliance with relevant state laws, referred to as blue sky requirements. While states are preempted from regulating many facets of initial offerings (e.g., in Regulation A and Regulation Crowdfunding), secondary offerings, the type that will occur on our ATS, are not pre-empted under state laws. Therefore, even though a security may be freely tradeable under federal laws, our ATS and issuers will need to comply with the blue sky requirements as well.

***Transfer Agent Regulations***

As a registered transfer agent, we are required to comply with all applicable SEC rules, which predominantly includes the rules under Section 17A(c) of the Exchange Act. The requirements for transfer agents include:

· minimum performance
 standards regarding tracking, recording and maintaining the official record of ownership of securities of a company and related recordkeeping
 and reporting rules;

· timely and
 accurate creation of records for security holders; and

· related safeguards
 and data security requirements for fraud prevention.

In addition, we must comply with various state corporate and securities laws as well as provisions of the Anti-Money Laundering (AML) regulations, Office of Foreign Assets Regulations (OFAC) and the Foreign Account Tax Compliance Act (FATCA).

**Intellectual Property**

We have a trademark for "StartEngine" in the United States. We do not own any patents; however, we have our own proprietary source code that we use in operating our platform. We also have a patent pending covering peer to peer trading.

**Litigation**

From time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. Other than discussed above in "The Company's Business – Regulation – Regulation Crowdfunding – FINRA Rules", we are currently not a party to any material legal proceeding.

**Available Information and Reports to Security Holders**

We are currently required to file annual, quarterly and current reports with the SEC, as well as proxy statements, information statements, and other information with the SEC. Our SEC filings will also be available to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov.

Our website address is http://www.startengine.com**.** Information contained on the website does not constitute part of this Registration Statement. We have included our website address in this Offering Statement solely as an inactive textual reference. We make available, through a link to the SEC's website, electronic copies of the materials we file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports.

**THE COMPANY'S PROPERTY**

We do not own any significant property. We are currently working remotely. We a have a service agreement for our office space at 4100 W Alameda Ave., Suite 300, Burbank, CA 91505. It is a month-to-month agreement.

Currently, our subsidiary, StartEngine Assets LLC, owns a building located at 327 South Madison Way, Glendale, California 91205. StartEngine Assets intends to sell the asset in 2023 on the open market.

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes for the period ending September 30, 2022, and our audited financial statements and related notes the fiscal years ending December 31, 2021 and 2020, included in this offering circular. . In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss certain factors that we believe could cause or contribute to these differences below and elsewhere in this offering circular.*

**Our Company**

StartEngine Crowdfunding, Inc. was incorporated on March 19, 2014 in the State of Delaware. The company was originally incorporated as StartEngine Crowdsourcing, Inc., but changed to the current name on May 8, 2014. The company's revenue-producing activities commenced in 2015 with the effectiveness of the amendments to Regulation A under the Securities Act adopted in response to Title IV of the JOBS Act. Operations expanded in 2016, as Regulation Crowdfunding, adopted in response to Title III of the JOBS Act, went into effect. On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA.

**Business and Trends**

For Regulation A offerings, our broker-dealer subsidiary is permitted to charge commissions to the companies that raise funds on our platform. Regulation A offerings are subject to a commission ranging between 4% and 7% and usually include warrants to purchase shares of the company or the securities that are the subject of the offering. The amount of commission is based on the risks and other factors associated with the offering. Since StartEngine Primary became a broker-dealer, we have also been permitted to charge commissions on Regulation D offerings hosted on our platform. We received a minimal amount of revenues from services related to Regulation D offerings in the periods under discussion. In Regulation Crowdfunding offerings, our funding portal subsidiary is permitted to charge commissions to the companies that raise funds on our platform. We typically charge 6% to 10% for Regulation Crowdfunding offerings on our platform. In addition, we charge additional fees to allow investors to use credit cards. We also generate revenue from services, which include a consulting package called StartEngine Premium priced at $10,000 to help companies who raise capital with Regulation Crowdfunding, digital advertising services branded under the name StartEngine Promote for an additional fee, as well as transfer agent services marketed as StartEngine Secure. The company discontinued the digital advertising service of StartEngine Promote as of January 1, 2022. We additionally charge a $1,000 fee for certain amendments we file on behalf of companies raising capital under Regulation Crowdfunding as well as fees to run the required bad actor checks for companies utilizing our services. The company also receives revenues from other programs such as the StartEngine OWNers bonus program and StartEngine Secondary. In October 2020, we started selling annual memberships of the StartEngine OWNers bonus program for $275 per year. We launched StartEngine Secondary on May 18, 2020 and generate revenues by charging trade commissions to the sellers of the shares. To date, StartEngine Secondary has a limited operating history. In the first half of 2021, the company itself was the only one quoted on this platform. Additional companies were quoted on the platform beginning in August 2021.

*Trend Information*

We are operating in a relatively new industry and there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. We continue to innovate and introducing new products to include in our current mix as well as continuing to improve our current services such as providing liquidity for our investors and issuers.

As we are a financial services company, our business, results of operations, and reputation are directly affected by elements beyond our control, such as economic and political conditions including unemployment rates, inflation and tax and interest rates, financial market volatility (such as we experienced during the COVID-19 pandemic), broad trends in business and finance, and changes in the markets in which such transactions occur (such as the bear markets that developed for equities in the second and third quarter of 2022), we might be disproportionately affected by declines in investor confidence caused by adverse economic conditions.

On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA. During 2021, we experienced increased costs for payroll and training that will increase relative to our revenue. We anticipate that this trend will continue into 2022. In addition, in April 2020 we received approval to operate an ATS. StartEngine Primary launched its ATS, branded as "StartEngine Secondary" on May 18, 2020. As of December 31, 2021, four additional issuers were quoted on the platform. Currently, for StartEngine Secondary, we generate revenues by charging trade commissions to the sellers of the shares and we intend to generate revenues by charging a 5% commission to the seller. We expect increased costs due to technology and operations related to the operation of our ATS. We anticipate operating the ATS will initially increase our overall expenses by $50,000 per month. Further, we anticipate receiving increased revenue related to offerings under Regulation A.

In June 2022, we became a reporting company, as a result of which we anticipate higher internal costs related to the increased administrative burden as well as higher professional fees.

We additionally anticipate having to engage and train additional compliance personnel, to better ensure continued compliance with FINRA and SEC and also in order to expand our broker-dealer operations.

*Change in Auditors*

 

On March 15, 2022, the board of directors (the "Board") of StartEngine Crowdfunding, Inc. approved and ratified the appointment of BF Borgers CPA PC ("Borgers") as the company's independent accounting firm for the fiscal year ending December 31, 2021. In connection with its selection of Borgers, the Board ratified the change in auditor from its former independent accounting firm, dbbmckennon ("dbbmckennon").

dbbmckennon's audit reports on the company's financial statements for the fiscal years ended December 31, 2020 and December 31, 2019 did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to any uncertainty, audit scope or accounting principle.

During the fiscal years ended December 31, 2020 and December 31, 2019 and through the subsequent date of dismissal, there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the company and dbbmckennon on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to dbbmckennon's satisfaction, would have caused dbbmckennon to make reference to the matter in their report. During the fiscal years ended December 31, 2020 and December 31, 2019 and through the subsequent date of dismissal there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).

The company provided dbbmckennon with a copy its Current Report on Form 1-U and requested that it provide the company with a letter addressed to the SEC indicating whether or not dbbmckennon agrees with the disclosures contained herein and, if not, the respects in which it is not in agreement. A copy of dbbmckennon's letter, dated March 16, 2022 was filed as Exhibit 9.1 to the Current Report on Form 1-U.

**Operating Results**

***Three Months Ended September 30, 2022 Compared with the Three Months Ended September 30, 2021***

The following table summarizes the results of our operations for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

---

| | | | |
|:---|:---|:---|:---|
|  | **Three-Months**<br>**Ended September 30,** | **Three-Months**<br>**Ended September 30,** | |
|  | **2022** | **2021** |<br>**$ Change** |
| Regulation Crowdfunding platform fees | $1984061 | $3037163 | $(1053102) |
| Regulation A commissions | 1369730 | 1878292 | (508562) |
| StartEngine Premium | 452500 | 465000 | (12500) |
| StartEngine Secure | 384468 | 391558 | (7090) |
| StartEngine Promote | 0 | 57379 | (57379) |
| OWNers Bonus revenue | 1018939 | 581217 | 437722 |
| Other service revenue | 19462 | 81181 | (61719) |
| Total revenues | $5229159 | $6491789 | $(1262630) |

---

*Revenues*

Our revenues during the three months ended September 30, 2022 were $5,229,159, which represented a decrease of $1,262,630 or 19%, from revenues in the same period in 2021. The following are the major components of our revenues during the three months ended September 30, 2022 and 2021:

The decrease in total revenues in three months ended September 30, 2022 as compared to the same period in 2021 is primarily due to the following:

● Decrease in Regulation
 Crowdfunding platform fees of $1,053,102 due primarily to lower amounts raised by issuers in Regulation Crowdfunding offerings. Specifically,
 in Q3 2022, the company raised approximately $25 million for issuers compared with Q3 2021 raising approximately $30 million for
 issuers.\*

● Decrease in Regulation
 A commissions of $508,562, due primarily to lower amounts raised in of Regulation A offerings as well as lower amount of offerings
 which provided stock or warrants to the company as compensation. Specifically, in Q3 2022, the company raised approximately $18 million
 for issuers compared with Q3 2021 raising approximately $24 million for issuers.\*

● Decrease in revenues of
 $7,090 from StartEngine Secure, primarily due to the previous year's quarter including revenue for services rendered earlier
 in the year that were not billed in Q3 2021. As at September 30, 2022, we had 534 companies compared with 387 companies as at
 September 30, 2021.

● Decrease in StartEngine
 Premium revenue of $12,500 primarily due to a decrease in campaign launches where premium was recognized compared to the previous
 period – which included 43 issuers in Q3 2022 where StartEngine Premium revenues were recognized during the period compared
 with 47 in Q3 2021.

● Decrease in revenues from
 StartEngine Promote, a marketing service that the company ceased offering as of January 2022.

● Increase in StartEngine
 OWNers Bonus revenue of $437,722 related to due to increased sales for that service at the end of Q4 2021 in which partial revenue
 was recognized in Q3 2022.

● Decrease in other service
 revenue of $61,719. Other service revenue includes revenue from StartEngine Secondary which did not have any trades in Q3 2022, as
 well as revenue from material amendments.

\**Offerings can span multiple periods and the amount raised during the period is based on the amounts closed on during that period.*

*Cost of Revenues*

Our cost of revenues during the three months ended September 30, 2022 was $1,753,004, which represented an increase of $596,184, or 52%, from the amounts during the same period in 2021 due to increased costs related to due diligence on new issuers. Our gross margin in the second quarter of 2022 decreased to 66% compared to 82% in 2021. This decrease is due to an increase in employee headcount for further diligence on our issuers and investors, as well as higher transaction costs including escrow fees which the company bears the cost on behalf of issuers.

*Operating Expenses*

Our total operating expenses during the three months ended September 30, 2022 amounted to $6,631,946, which represented an increase of $2,001,566, or 43%, from the expenses in the same period in 2021. The increase in operating expenses is primarily due to the following:

● Increase in general and
 administrative expenses of $794,658 primarily due to increased payroll expenses of approximately $123,889 as well as increased legal
 fees of $38,462 related to new initiatives and increased compliance and regulatory costs.

● Increase in sales and marketing
 expenses of $505,985 primarily due to higher market research expense of $142,406 as well as increased stock-based compensation of
 $1,038,252 offset by a decrease in gross payroll of $537,754 due to lower quarterly bonus.

● Increase in research and
 development expenses of $679,060 related to increased headcount as the company focused on enhancing its platform and technology which
 lead to an increase of payroll expenses related to research and development of $298,155.

*Other Expense (Income), net*

Our other income, net during the three months ended September 30, 2022 amounted to $85,086, which represented unrealized gain on shares received from customer stock issued during its IPO. During the same period in 2021 our other income, net was $243,462 which primarily represented write off of WeWork payables of $160,804.

*Net Loss (Income)*

Net loss attributable to stockholders totaled $3,075,439 for the three months ended September 30, 2022, a decrease of $3,979,116 compared to the net income attributable to shareholders of $903,677 recognized during the three months ended September 30, 2021.

***Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021***

The following table summarizes the results of our operations for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

---

| | | | |
|:---|:---|:---|:---|
|  | **Nine-Months**<br>**Ended September 30,** | **Nine-Months**<br>**Ended September 30,** | |
|  | **2022** | **2021** |<br>**$ Change** |
| Regulation Crowdfunding platform fees | $8108518 | $8365060 | $(256542) |
| Regulation A commissions | 4809052 | 6942032 | (2132980) |
| StartEngine Premium | 1634999 | 1207500 | 427499 |
| StartEngine Secure | 935348 | 704985 | 230363 |
| StartEngine Promote |  | 284424 | (284424) |
| OWNers Bonus revenue | 3592353 | 1879627 | 1712726 |
| Other service revenue | 497952 | 467075 | 30877 |
| Total revenues | $19578222 | $19850703 | $(272481) |

---

*Revenues*

Our revenues during the nine months ended September 30, 2022 were $19,578,222, which represented decrease of $272,481, or 1%, from revenues in the same period in 2021. The following are the major components of our revenues during the nine-months ended September 30, 2022 and 2021:

The decrease in total revenues in nine-months ended September 30, 2022 as compared to the same period in 2021 is primarily due to the following:

● Decrease in Regulation Crowdfunding platform fees of $256,542 due primarily to lower amounts raised by issuers in Regulation Crowdfunding offerings. Specifically, in the first nine months of 2022, the company raised approximately $82 million for issuers compared with the first nine-months of 2021 raising approximately $93 million for issuers.\*

● Decrease in Regulation A commissions of $2,132,980, due primarily to lower amounts raised in of Regulation A offerings for its issuers as well as lower amount of offerings which provided stock or warrants to the company as compensation. Specifically, in the first nine months of 2022, the company raised approximately $63 million for issuers compared with the first nine-months of 2021 raising approximately $91 million for issuers.\*

● Increase in revenues of $230,363 from StartEngine Secure, primarily due to a price increase for our services from $3 per investor to $10 per investor as well as an increase in customers using our services. As at September 30, 2022, we had 534 companies compared with 387 companies as at September 30, 2021.

● Increase in StartEngine Premium revenue of $427,499 due primarily to increased campaign launches compared to the previous period – which included 171 issuers in the first nine-months of 2022 where StartEngine Premium revenues were recognized during the period compared with 124 in the first nine-months of 2021.

● Decrease in revenues from StartEngine Promote, a marketing service that the company ceased offering as of January 2022.

● Increase in StartEngine OWNers Bonus revenue of $1,712,726 related to due to increased sales at the end of 2021 in which the revenue was partially deferred to 2022.

\**Offerings can span multiple periods and the amount raised during a period is based on the amounts closed on during that period.*

*Cost of Revenues*

Our cost of revenues during the nine months ended September 30, 2022 was $5,451,888, which represented an increase of $2,126,995, or 64%, from the amounts during the same period in 2021 due to the increase in the underlying revenue activity as well as increased costs related to due diligence on new issuers. Our gross margin in the nine months ended September 30, 2022 decreased to 72% compared to 83% in 2021. This decrease is due to an increase in employee headcount for further diligence on our issuers and investors, as well as higher transaction costs including escrow fees which the company bears the cost on behalf of issuers.

*Operating Expenses*

Our total operating expenses during the nine months ended September 30, 2022 amounted to $23,870,771, which represented an increase of $10,175,364 or 74%, from the expenses in the same period in 2021. The increase in operating expenses is primarily due to the following:

● Increase in general and administrative expenses of $4,101,523 due to increased payroll and bonus expenses of approximately $1,380,154 due to increased headcount and additional options granted in the first nine months of 2022. Additionally, we incurred a penalty of $350,000 for the period ended September 30, 2022 (see, "The Company's Business – Regulation") and legal fees increased $154,282 related to new initiatives and increased compliance and regulatory costs. Finally, stock-based compensation increased $1,283,912 due to the company having a higher valuation in 2022 vs 2021 which causes option grants in 2022 to have higher expenses than previous grants periods.

● Increase in sales and marketing expenses of $4,341,682 primarily due to higher market research expense of $138,400 as well as increased payroll and bonus expenses of approximately $861,087 due to increased headcount and the payment of bonuses related to the improved operating results during 2021. Additionally, stock-based compensation increased $2,926,792 due to the company having a higher valuation in 2022 vs 2021 which causes option grants in 2022 to have higher expenses than previous grants periods.

● Increase in research and development expenses of $2,153,914 due to increased headcount as the company focused on enhancing its platform and technology which lead to an increase of payroll and bonus expenses related to research and development of $1,628,910. Additionally, stock-based compensation increased $216,407 due to the company having a higher valuation in 2022 vs 2021 which causes option grants in 2022 to have higher expenses than previous grants periods.

*Other Expense (Income), net*

Our other income, net during the nine months ended September 30, 2022 amounted to $216,204, which represented cashback earned from our credit cards during the period. During the same period in 2021 our other income, net was $243,106 which primarily represented write of WeWork payables of 160,804.

*Net Loss (Income)*

Net loss attributable to shareholders totaled $9,581,454 for the nine months ended September 30, 2022, a decrease of $12,577,764 compared to a net income of $2,996,310 recognized during the nine months ended September 30, 2021.

***Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020***

The following table summarizes the results of our operations for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020.

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | |
|  | **2021<br> (restated)** | **2020** |<br>**$ Change** |
| Revenues | $29078030 | $12574218 | $16503812 |
| Cost of revenues | 5888893 | 3406397 | 2482496 |
| &nbsp;&nbsp;&nbsp;Gross profit | 23189137 | 9167821 | 14021316 |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 8960513 | 5170697 | 3789816 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 11832183 | 5177254 | 6654929 |
| &nbsp;&nbsp;&nbsp;Research and development | 3132996 | 1309444 | 1823552 |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrants received for fees | 129357 | 29010 | 100347 |
| &nbsp;&nbsp;&nbsp;Impairment in value of shares received for fees | 314261 | 51231 | 263030 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 24278450 | 11737636 | 12540814 |
| Operating loss | (1089313) | (2569815) | 1480502 |
| Other expense (income), net: |  |  |  |
| &nbsp;&nbsp;&nbsp;Other expense (income), net | (113748) | 35973 | (149721) |
| Total other expense (income), net | (113748) | 35973 | (149721) |
| Loss before provision for income taxes | (975565) | (2605788) | 1630223 |
| Provision for income taxes | 90863 | 18612 | 72251 |
| Net loss | (1066429) | (2624401) | 1557972 |
| &nbsp;&nbsp;&nbsp;Less: net loss attributable to noncontrolling interest | (35914) | (40041) | 4127 |
| Net loss attributable to stockholders | $(1030515) | $(2584360) | $1553845 |

---

*Revenues*

Our revenues during the year ended December 31, 2021 were $29,078,030, which represented an increase of $16,503,812, or 131%, from revenues in the same period in 2020. The following are the major components of our revenues during the years ended December 31, 2021 and 2020:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended<br> December 31,** | **Years Ended<br> December 31,** | |
|  | **2021** | **2020** |<br>**$ Change** |
| Regulation Crowdfunding platform fees | $14617318 | 6279099 | 8338219 |
| Regulation A commissions | 6054340 | 4315534 | 1738806 |
| StartEngine Premium | 2023000 | 741394 | 1281606 |
| StartEngine Secure | 868731 | 321037 | 547694 |
| StartEngine Promote | 278159 | 470374 | (192215) |
| Other service revenue | 5236483 | 446780 | 4789703 |
| Total revenues | $29078030 | $12574218 | $16503812 |

---

The increase in total revenues in the year ended December 31, 2021 as compared to the same period in 2020 is primarily due to the following:

● Increase in Regulation Crowdfunding platform fees of $8,338,219, due primarily to higher average amounts raised by issuers in Regulation Crowdfunding offerings both from the amounts raised in each offering and the greater number of issuers. Specifically, in 2021, we hosted 349 offerings raising approximately $126 million compared with 187 offerings in 2020 raising approximately $67 million.\* We believe the increase in the amounts was partially driven by the increase in Regulation Crowdfunding's cap to $5 million.

● Increase in Regulation A commissions of $1,738,806, due primarily to higher average amounts raised by issuers in Regulation A offerings both from the amounts raised in each offering and the greater number of issuers. Specifically, in 2021, we hosted 25 offerings raising approximately $101 million compared with 19 offerings in 2020 raising approximately $56 million.\*

● Increase in revenues of $547,694 from StartEngine Secure, primarily due to a higher volume of companies using our services. In 2021, we had 425 companies compared with 192 companies in 2020.

● Increase in StartEngine Premium revenue of $1,281,606 due primarily to increased campaign launches compared to the previous period -- which included 217 issuers in 2021 where StartEngine Premium revenues were recognized during the year compared with 75 in 2020.

● Increase in other service revenue of $4,789,703, primarily related to sales of annual membership in our StartEngine OWNers bonus program. In 2021 we sold 22,632 annual memberships compared with 1,935 annual memberships in 2020. Included in this 2021 revenue amount is also $11,824 in sourcing fee revenue from StartEngine's collectibles offerings, as well as $52,835 from StartEngine Secondary.

\**Offerings can span multiple years and the amount raised during the year is based on the amounts closed on during that year.*

*Cost of Revenues*

Our cost of revenues during the year ended December 31, 2021 was $5,888,893, which represented an increase of $2,482,496, or 72%, from the amounts during the same period in 2020 due to the increase in the underlying revenue activity. Our gross margin in 2021 improved to 79% compared to 72% in 2020. This margin improvement is due to an increase in revenue from services with high margins, including Regulation Crowdfunding platform fees, Regulation A fees, and StartEngine Premium, while at the same time we were able to negotiate lower rates for some of our variable cost of revenues.

*Operating Expenses*

Our total operating expenses during the year ended December 31, 2021 amounted to $24,278,450, which represented an increase of $12,540,814, or 107%, from the expenses in the same period in 2020. The increase in operating expenses is primarily due to an increase in general and administrative expenses of $3,698,956, an increase in sales and marketing expenses of $6,654,929 and an increase in research and development expenses of $1,823,552. General and administrative expenses increased primarily due to increased payroll and bonus expenses of approximately $3,551,664. Sales and marketing expenses increased primarily due to higher advertising costs for corporate branding of $4,341,941 as well as increased payroll and bonus expenses of approximately $1,425,385 due to increased headcount and the payment of bonuses related to the improved operating results during 2021. Research and development expenses increased due to increased headcount as the company focused on enhancing its platform and technology which lead to an increase of payroll and bonus expenses related to research and development of $1,823,552.

*Other Expenses, net*

Our other income, net during the year ended December 31, 2021 amounted to $113,748, which represented a forgiveness of rent payable which was accrued during 2020. During the same period in 2020 our other expenses, net was $35,973 which primarily represented losses on marketable securities during the period of $55,947.

**Critical Accounting Policies**

See Note 2 in the accompanying financial statements.

*Use of Estimates*

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of expenses during the reporting periods. Significant estimates include the value of marketable securities, the value of stock and warrants received as compensation and collectability of accounts receivable. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

A significant portion of the company's assets relate to investments in stock and warrants received as compensation from issuer companies undertaking Regulation Crowdfunding or Regulation A offerings. As described in Note 2, in the accompanying financial statements, stock and warrants require significant unobservable inputs, primarily related to the underlying stock price of the security received which may include marketability discounts. Warrants have further unobservable inputs related to the estimated life, In all cases, there were sales of the stock to the public through Regulation Crowdfunding or Regulation A funding mechanism, but such sales are often not to the level that an active market existed or exists. Once the funding round is concluded it is difficult to ascertain the fair value of the issuer shares or the status of the issuer's financial health, unless additional rounds of financing are undertaken in a public setting, or the issuer reports reliable and regular information publicly. Any change in the underlying shares would impact the valuation of the related investments. Shares held are generally illiquid. Valuations require significant management judgment related to these unobservable inputs.

As many of the companies that undertaking Regulation Crowdfunding and Regulation A are considered emerging growth companies, require significant capital to maintain or commence operations, and often contain warnings regarding substantial doubt about the company's ability to continue as a going concern, it is reasonable to conclude that through the passage of time, a significant portion of the stock and warrants held by the company will ultimately be deemed worthless, decline in value, or in the case of warrants, expire without exercise. Similar to traditional venture capital results, it is reasonable to conclude that only a small portion of each investment may ever increase in value.

*Collectibles and Real Estate*

The company records collectibles and real estate at cost in accordance with the company's policy. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, we believe that we purchase these assets in arms-length transactions at fair value and such transactions are evidence of fair market value in the near term. For collectibles, over time, and as trends change and economic factors effect various markets for which we hold assets, the estimation of certain assets that do not trade in a regular market may be difficult to assess for fair value. Certain assets may be subject to market manipulation or overproduction that could effect the underlying value of like or similar items. The quality of authentication bodies may effect future valuation. If there are limited data points to assess fair value, especially for one-of-a-kind collectibles, we may not identify impairments in a timely manor. Many of the collectibles have value that is in the eye of the beholder. Accordingly, there is significant uncertainty to what these assets would be valued at in subsequent arms-length transactions. For real estate assets, there tend to be more relevant data points, including comparable sales in close proximity to held real estate assets. The company can also assess trend information in the overall economy and local economy where such assets may be held. However, sharp changes in economic conditions may make it difficult to estimate fair value and therefore potential impairment.

**Liquidity and Capital Resources**

*Statement of Cash Flows*

The following table summarizes, for the periods indicated, selected items in our condensed Statements of Cash Flows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Nine-Months Ended** | **Nine-Months Ended** | |
|  | **September 30,** | **September 30,** | |
|  | **2022** | **2021** |<br>**$ Change** |
| Net cash (used in) provided by operating activities | $(6242974) | $2280167 | $(8523141) |
| Net cash (used in) provided by investing activities | $(1827503) | $(18498) | $(1809005) |
| Net cash provided by financing activities | $1657936 | $310879 | $1347057 |

---

Our net loss attributable to stockholders during the nine-month period ended September 30, 2022 was $9,582,027, as compared to a net income of $2,996,310 in during the nine-month period ended September 30, 2021.

Cash used by operating activities for the nine months ended September 30, 2022 was $6,242,974 as compared to cash provided by operating activities of $2,280,167 for the same period in 2021. The decrease in cash used by operating activities in 2022 was primarily due to the net loss in the period, offset by the company receiving a larger portion of revenue in the form of stock versus the prior year, recognition of deferred revenue from cash receipts in 2021, stock-based compensation increase of $6,171,725.

Cash used in investing activities for the nine months ended September 30, 2022 was $1,827,503, as compared to cash used in investing activities of $18,498 in the same period in 2021. The cash used in 2022 relates to the purchase or collectible assets that are sold in our StartEngine Assets offerings.

Cash provided by financing activities was $1,657,936 and $310,879 for the nine months ended September 30, 2022 and September 30, 2021, respectively.

*Balance Sheet*

The following table summarizes our assets and liabilities as of September 30, 2022 as compared as of December 31, 2021:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| Assets |  |  |
| Current assets: |  |  |
| Cash | $14587826 | $21000367 |
| Marketable securities | 76209 | 1856 |
| Accounts receivable, net of allowance | 1196413 | 1477887 |
| Other current assets | 1900219 | 3483129 |
| Total current assets | 17760667 | 25963239 |
| Property and equipment, net | 108992 | 57541 |
| Investments - warrants | 1497518 | 1130133 |
| Investments - stock | 5803288 | 3923788 |
| Investments - Collectibles | 3618274 | 1926394 |
| Investments - Real Estate | 2136628 | 2136628 |
| Intangible assets | 20000 | 20000 |
| Other assets | 69415 | 50000 |
| Total assets | $31014782 | $35207722 |
| Liabilities and Stockholders' Equity |  |  |
| Current liabilities: |  |  |
| Accounts payable | $562615 | $573840 |
| Accrued liabilities | 1706748 | 2607420 |
| Deferred revenue | 2391667 | 4111829 |
| Total current liabilities | 4661030 | 7293089 |
| Total liabilities | 4661030 | 7293089 |

---

The company's current assets decreased by $8,107,589 from December 31, 2021 to September 30, 2022. The decrease was primarily driven by a decrease in cash in the amount of $6,412,541 driven by its use in operating activities as well as conversion of cash into collectibles assets.

The company's long-term assets increased by $4,009,059 from December 31, 2021 to September 30, 2022. This was driven primarily by:

● A $1,691,880 increase in collectible assets related to the purchase of assets for our StartEngine Asset offerings which were started in 2021;

● A $2,246,885 increase in warrants and stock assets which we earn as part of compensation for raising funds for issuers.

Current liabilities decreased by $2,538,543 which is primarily due to a decrease in deferred revenue of $1,625,179 due to recognition of deferred OWNers Bonus revenue from 2021, as well as lower OWNers Bonus Sales than 2021 which would have increased deferred revenue. Additionally, accrued liabilities decreased $902,141 due to credit card balance paydown between December 31, 2021 and September 30, 2022.

*Liquidity and Capital Resources*

We do not currently have any significant loans or available credit facilities. As of September 30, 2022, the company's current assets were $17,855,650. To date, our activities have been funded from our revenues, investments from our founders, the previous sale of Series Seed Preferred Shares, Series A Preferred Shares, Series T Preferred Shares, and our Regulation A and Regulation CF offerings.

We have no off-balance sheet arrangements, including arrangements that would affect the liquidity, capital resources, market risk support, and credit risk support or other benefits.

The company currently has no material commitments for capital expenditures.

We believe we have the cash, marketable securities through this Regulation A offering, other current assets available, revenues, and access to funding that will be sufficient to fund operations until the company starts generating positive cash flows from normal operations.

**DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES**

As of February 9, 2023, our directors, executive officers and significant employees were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Name** | **Position** | **Age** | **Term of Office (if<br> indefinite, give date<br> appointed)** | **Approximate hours<br> per week (if<br> part-time)/full-time** |
| <u>Executive Officers:</u> |  |  |  |  |
| Howard Marks | CEO | 60 | January 1, 2014, Indefinitely | Full-time |
| Johanna Cronin | Chief Marketing Officer | 34 | March 2014, Indefinitely | Full-time |
| Jonathan Reyes | Chief Compliance Officer | 36 | March 2020, Indefinitely | Full-time |
| Allen Jebsen | SVP, Fundraising | 31 | March 2019, Indefinitely | Full-time |
| Joshua Amster | VP, Fundraising | 32 | July 2016, Indefinitely | Full-time |
| Hunter Strassman | VP, Finance | 31 | October 2021, Indefinitely | Full-time |
| Joseph Mathews | VP, Engineering | 50 | March 2019, Indefinitely | Full-time |
| <u>Directors:</u> |  |  |  |  |
| Howard Marks | Director | 60 | April 17, 2014, Indefinitely |  |
| Ronald Miller | Director and Chairman | 60 | April 17, 2014, Indefinitely |  |
| <u>Significant Employees:</u> |  |  |  |  |
| N/A |  |  |  |  |

---

**Howard Marks, Co-founder, CEO and Director**

Howard Marks is one of our co-founders and has served as our CEO since January 1, 2017. From our founding in March 2014 until December 2016, Howard served as our Executive Chairman. Howard founded StartEngine, an unrelated entity, in November 2011 as a startup accelerator with the mission to help make Los Angeles a top tech entrepreneurial city. In March 2014, Howard and Ron Miller founded the company as an equity crowdfunding platform. Howard was the founder and CEO of Acclaim Games, a publisher of online games now part of The Walt Disney company. Before Acclaim, Howard was the Chairman of Activision Studios from 1991 until 1997. As a former Board Member and Executive Vice-President of video-game giant Activision, he and a partner took control in 1991 and turned the ailing company into the $20 billion market cap video game industry leader. As a games industry expert, Howard built one of the largest and most successful games studios in the industry, selling millions of games. Howard is the 2015 "Treasure of Los Angeles" recipient, awarded for his work to transform Los Angeles into a leading technology city. Howard is a member of Mayor Eric Garcetti's technology council. Howard has a Bachelor of Science in Computer Engineering from the University of Michigan. He is bilingual and is a triple national of the United States, United Kingdom, and France.

**Ronald Miller, Co-founder and Executive Chairman**

Ron Miller is the executive chairman and cofounder of StartEngine. Ron served as our CEO and a director since our founding in March 2014 until December 2016. On January 1, 2017, Ron became our executive chairman. He is also currently the founder of the Disability Group Inc., and has served as its CEO since 2004. When Howard and Ron initially met in the fall of 2013, they recognized that the JOBS Act represented the greatest advancement for entrepreneurship in a generation. From direct experience as entrepreneurs, they recognized that the key to bringing new technologies and innovations to market required capital that is not readily available. As a serial start-up entrepreneur, Ron immediately went into action to advocate for SEC rulemaking to give life to the JOBS Act, raise the initial capital and built a leadership team to drive the sales and market plan to help StartEngine establish a leadership place in the market.

Prior to StartEngine, Ron founded built and sold five companies through management buyouts, private equity, private investors, and public markets. He was also nominated as a four-time Inc.500/5000 award recipient and was Ernst & Young entrepreneur of the year award finalist. As the executive chairman, Ron brings his deep experience as a leader and strategist to the company.

**Johanna Cronin, Chief Marketing Officer**

Johanna Cronin is the Chief Marketing Officer at StartEngine and is the sole manager of our subsidiary StartEngine Assets LLC. She was the first employee and began working for StartEngine in 2014. Prior to that she served as an SEM analyst, managing paid media budgets and purchasing media placements for small businesses, for Dex Media, Inc. from March 2012 until March 2014. Johanna received her Bachelor of Arts from Northwestern University, where she was a psychology major with a Spanish minor.

**Jonathan Reyes, Chief Compliance Officer**

Jonathan Reyes has served as the Chief Compliance Officer at StartEngine Crowdfunding Inc., StartEngine Capital, LLC, and StartEngine Primary LLC since December 2020. Before becoming Chief Compliance Officer, Jonathan was the first in-house attorney to work for StartEngine, serving in various roles on the compliance team dating back to May 2017. Prior to joining StartEngine, Jonathan served as co-founder of and Chief Operations Officer of Dryvrs, a mobile app ridesharing startup. Jonathan received his Juris Doctorate and Masters in Business Administration from Pepperdine University, and received a fellowship certificate from Pepperdine's Geoffrey H. Palmer Center for Entrepreneurship & the Law. Before that, Jonathan received his Bachelor of Science from Boston College where he was a triple major in Management and Leadership, Marketing, and Human Resource Management.

**Allen Jebsen, SVP, Fundraising**

Allen Jebsen is Senior Vice President of Fundraising at StartEngine as of March 2019. He joined StartEngine in March of 2016 as a VP of Fundraising. Before joining StartEngine, he worked in sales operations at AEG as an account executive. He graduated from University of Southern California with a BA Business Administration and Management. He holds his Series 7, 63, 79, and 24 certifications from FINRA.

**Joshua Amster, VP, Fundraising**

Josh Amster is Vice President of Fundraising at StartEngine. He joined StartEngine in February of 2016. Before joining StartEngine, he worked alongside Allen Jebsen in business development and sales operations at AEG. He graduated from Middlebury College with a Bachelor of Arts in History. He holds his Series 7, 63, 79, and 24 certifications from FINRA.

**Hunter Strassman, VP, Finance**

Hunter Strassman is VP of Finance and is responsible for the finance and operations of StartEngine. Prior to joining StartEngine in April 2021, Hunter worked as the Director of Finance at AlphaFlow, a real estate asset management platform (November 2018 to April 2021). From July 2017 to November 2018, Hunter was the Senior Controller at Karbone Inc., a leading renewable energy brokerage. From January 2017 to July 2017, Hunter was the assistant controller at ACT Commodities. Hunter began his career at the public accounting firm Grant Thornton in their New York office, where he focused on hedge funds, private equity and fund of funds.

Hunter received his Bachelors in Accounting from Bentley University, and a Masters in Taxation from Baruch College. Hunter is a licensed CPA in the State of New York, is a member of the AICPA, and holds the Series 7, 63, 24 and 27 certifications from FINRA. He has also passed the CISA and CRISC exams administered by ISACA.

**Joseph Mathews, VP, Engineering**

Joe Mathews is Vice President of Engineering at StartEngine, and has been leading Engineering and Product teams. Joe started his engineering career with NIIT Technologies, followed by Microsoft Inc, after which he worked for a number of startups, including co-founding one. In May 2017, Joe worked as Director of Platform Engineering at Science37, and since July of 2018, he's been enjoying his work at StartEngine.

**COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS**

*The following discussion and analysis of compensation arrangements should be read with the compensation tables and related disclosures set forth below. This discussion contains forward looking statements that are based on our current plans and expectations regarding future compensation programs. The actual compensation programs that we adopt may differ materially from the programs summarized in this discussion.*

This section describes the material elements of the compensation awarded to, earned by, or paid to our Chief Executive Officer, Howard Marks, and our three most highly compensated executive officers (other than our Chief Executive Officer), Johanna Cronin, Chief Marketing Officer, Joshua Amster, VP, Fundraising, and Allen Jebsen, SVP, Fundraising, for our fiscal year ended December 31, 2022.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name and <br> principal<br> position** | **Year** | **Salary<br> ($)** | **Bonus<br> ($)(1)** | **Stock<br> awards<br> ($)** | **Option<br> awards<br> ($)(2)** | **Nonequity<br> incentive plan<br> compensation<br> ($)** | **Total<br> ($)** |
| Howard Marks, Chief Executive Officer | 2022 | $645000 | $0 | $– $| 1895160 | $– $– $– $| 2540160 |
|  | 2021 | $518000 | $518000 | $– $|  | $– $– $– $| 1036000 |
| Allen Jebsen, VP of Sales | 2022 | $100000 | $358035 | $– $| 252688 | $– $– $– $| 710723 |
|  | 2021 | $100000 | $668345 | $– $|  | $– $– $– $| 768345 |
| Josh Amster, VP of Sales | 2022 | $100000 | $422180 | $– $| 252688 | $– $– $– $| 774868 |
|  | 2021 | $100000 | $477565 | $– $|  | $– $– $– $| 577565 |
| Johanna Cronin, Chief Marketing Officer | 2022 | $300000 | $- | $– $| 252688 | $– $– $– $| 552688 |
| 4 | 2021 | $250000 | $250000 | $– $|  | $– $– $– $| 500000 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Bonuses, if any, have not yet been granted for fiscal
 year 2022.

(2) Amounts reflect the aggregate
 grant date fair value of the RSUs granted in 2021, computed in accordance with Financial Accounting Standards Board ASC Topic 718
 (ASC 718). This amount does not reflect the actual economic value realized by the officer.

(3) Options are subject to vesting with 25% vesting one
 year after date of grant and then 1/48 per month thereafter.

***Principal Elements of Compensation***

The compensation of the company's executive officers comprises of the following major elements: (a) base salary; (b) an annual, discretionary cash bonus; and (c) long-term equity incentives, consisting of stock options, restricted stock awards, performance compensation awards and/or other applicable awards granted under the company's equity incentive plan (the "Equity Incentive Plan") and any other equity plan that may be approved by the Board from time to time. These principal elements of compensation are described below.

*Base Salaries*

Base salary is provided as a fixed source of compensation for our executive officers. Adjustments to base salaries will be reviewed annually and as warranted throughout the year to reflect promotions or other changes in the scope of breadth of an executive officer's role or responsibilities, as well as to maintain market competitiveness.

*Annual Bonuses*

Annual bonuses may be awarded based on qualitative and quantitative performance standards and will reward performance of our executive officers individually. The determination of an executive officer's performance may vary from year to year depending on economic conditions and conditions in the cannabis industry and may be based on measures such as stock price performance, the meeting of financial targets against budget, the meeting of acquisition objectives and balance sheet performance.

*Equity Incentive Plan*

The Equity Incentive Plan provides continual motivation for our officers, employees, consultants and directors to achieve our business and financial objectives and align their interests with the long-term interests of our stockholders. The purpose of our Equity Incentive Plan is to promote greater alignment of interests between employees and stockholders, and to support the achievement of our longer-term performance objectives, while providing a long term retention element.

***Employment Agreements with Key Executives***

We entered into an employment agreement Mr. Marks, our CEO, with an effective date of February 1, 2022. The agreement is for two years, and will automatically renew for an additional one year period, unless either party gives notice more than sixty days prior to the initial term date of the agreement or each renewal period. The agreement provides that Mr. Marks' base salary will be for 2022 will be $621,000, $745,000 for 2023, and will increase 20% each year thereafter. Mr. Marks is eligible to participate in all employee bonus plans of company, if any. Mr. Marks is also entitled receive bonuses (a) in an amount up to 60% of his base salary if the company achieves its revenue goals; and (b) in an amount up to 100% of his base salary if the company exceeds its revenue goals by 125%.

***Compensation Committee Interlocks and Insider Participation***

During 2021, the company did not have a compensation committee or any other committee performing equivalent functions of a compensation committee. Howard Marks, our Chief Executive Officer, in his capacity as a director, participated in deliberations of the Board concerning executive officer compensation and was employed by the company.

***2015 Equity Incentive Plan***

In May 2015, the company established the 2015 Equity Incentive Plan which was approved by the company's Board and by stockholders in June 2015. The 2015 Equity Incentive Plan authorized the issuance of 3,000,000 shares of common stock. In December 2015, the 2015 Plan was amended to increase the number of shares authorized for issuance under the Plan from 1,000,000 to 2,030,000, further amended in September 2020 to increase the number of shares from 2,030,000 to 2,530,000, and then further amended in July 2021 to increase the number of shares under the plan on a post- split basis to 7,590,000 shares. The company is in the process of amending the plan and as of March 18, 2023, there will be 11,590,000 shares available under the plan. The 2015 Equity Incentive Plan permits us to provide equity-based compensation in the form of stock options, restricted stock units, unrestricted stock and other stock bonus awards and performance compensation awards.

The 2015 Equity Incentive Plan is administered by our Board of Directors, or a committee appointed by the Board of Directors, which determines recipients and the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the 2015 Equity Incentive Plan cannot exceed ten years.

***Director Compensation***

There is currently no agreement or arrangement to pay any of our directors for their services as directors.

***Outstanding Equity Awards at Fiscal Year-End***

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Option awards** | **Option awards** | **Option awards** | **Option awards** | **Option awards** | **Option awards** | **Option awards** | **Stock awards** | **Stock awards** | **Stock awards** | **Stock awards** |
| **Name** | **Grant <br> date** | **Number of<br> securities<br> underlying<br> unexercised<br> options - (#)<br> exercisable** | **Number of<br> securities<br> underlying<br> unexercised<br> options - (#)<br> unexercisable** | **Equity incentive<br> plan awards:<br> number<br> of securities<br> underlying<br> unexercised<br> unearned<br> options<br> (#)** | **Option<br> exercise<br> price**<br> **($)** | **Option<br> expiration<br> date** | **Number<br> of shares<br> or units<br> of stock<br> that have<br> not vested<br> (#)** | **Market<br> value of<br> shares or<br> units of<br> stock<br> that have<br> not<br> vested**<br> **($)(2)** | **Equity<br> incentive<br> plan awards:<br> number of<br> unearned<br> shares, units or<br> other rights that<br> have not<br> vested<br> (#)** | **Equity incentive<br> plan awards:<br> market <br> or payout<br> value of<br> unearned<br> shares, units or<br> other rights that<br> have not vested<br> ($)(2)** |
| Howard Marks, Chief Executive Officer | 1/13/2018 | 300000 |  |  | 0.264 | 1/13/2028 |  |  |  |  |
|  | 12/16/2020 | 160208 | 139792 |  | 4.333 | 12/16/2030 |  |  |  |  |
|  | 1/1/2022 | 80833 | 219167 |  | 13.5 | 1/1/2032 |  |  |  |  |
| Allen Jebsen, SVP, Fundraising | 6/14/2016 | 30000 |  |  | 0.097 | 6/14/2026 |  |  |  |  |
|  | 2/7/2017 | 30000 |  |  | 0.097 | 2/7/2027 |  |  |  |  |
|  | 1/18/2018 | 75000 |  |  | 0.264 | 1/18/2028 |  |  |  |  |
|  | 8/31/2018 | 150000 |  |  | 1.667 | 8/31/2028 |  |  |  |  |
|  | 4/24/2019 | 142812 | 7188 |  | 2.500 | 4/24/2029 |  |  |  |  |
|  | 1/2/2020 | 116458 | 33542 |  | 2.500 | 1/2/2030 |  |  |  |  |
|  | 12/16/2020 | 40052 | 34948 |  | 4.333 | 12/16/2030 |  |  |  |  |
|  | 1/1/2022 | 10777 | 29223 |  | 13.5 | 1/1/2032 |  |  |  |  |
| Josh Amster, VP, Fundraising | 2/16/2016 | 11474 |  |  | 0.097 | 2/16/2026 |  |  |  |  |
|  | 1/1/2017 | 30000 |  |  | 0.097 | 1/1/2027 |  |  |  |  |
|  | 1/1/2018 | 75000 |  |  | 0.264 | 1/1/2028 |  |  |  |  |
|  | 7/6/2018 | 150000 |  |  | 1.667 | 7/6/2028 |  |  |  |  |
|  | 4/24/2019 | 142812 | 7188 |  | 2.500 | 4/24/2029 |  |  |  |  |
|  | 1/2/2020 | 116458 | 33542 |  | 2.500 | 1/2/2030 |  |  |  |  |
|  | 12/16/2020 | 40052 | 34948 |  | 4.333 | 12/16/2030 |  |  |  |  |
|  | 1/1/2022 | 10777 | 29223 |  | 13.5 | 1/1/2032 |  |  |  |  |
| Johanna Cronin, Chief Marketing Officer | 6/15/2015 | 695872 |  |  | 0.083 | 6/15/2025 |  |  |  |  |
|  | 2/7/2017 | 150000 |  |  | 0.097 | 2/7/2027 |  |  |  |  |
|  | 1/18/2018 | 30000 |  |  | 0.264 | 1/18/2028 |  |  |  |  |
|  | 1/13/2018 | 60000 |  |  | 0.264 | 1/13/2028 |  |  |  |  |
|  | 5/15/2019 | 142916 | 7084 |  | 2.500 | 5/15/2029 |  |  |  |  |
|  | 1/2/2020 | 70312 | 4688 |  | 2.500 | 1/2/2030 |  |  |  |  |
|  | 4/23/2019 | 116458 | 33542 |  | 2.500 | 4/23/2029 |  |  |  |  |
|  | 12/16/2020 | 40052 | 34948 |  | 4.333 | 12/16/2030 |  |  |  |  |
|  | 1/1/2023 | 10777 | 29223 |  | 13.5 | 1/1/2032 |  |  |  |  |

---

***Long-Term Incentive Plans***

There are no arrangements or plans in which we provide pension, retirement or similar benefits.

***Compensation Committee***

We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.

***Compensation of Directors***

For the years ended December 31, 2022 and 2021, no members of our board of directors received compensation in their capacity as directors.

**SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS**

The following table sets out certain information with respect to the beneficial ownership of the voting securities of the company, as of January 29, 2023, for:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Each person who we know beneficially owns more than
 five percent of any class of our voting securities.

· Each of our director and director nominees.

· Each of our executive officers.

· All of our directors, director nominees and executive
 officers as a group.

We have determined beneficial ownership in accordance with the rules of the Commission. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all securities that they beneficially own, subject to applicable community property laws.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Title of class** | **Name and address<br> of beneficial owner** | **Amount<br> and<br> nature of<br> beneficial<br> ownership** | **Amount<br> and<br> nature of<br> beneficial<br> ownership acquirable** |  | **Percent of<br> Class (2)** |
| Common Stock | Howard Marks (1)(4) | 9014646 | 600000 | (5) | 26.96% |
|  |  |  | 541041 | (6) | 30.18%(3) |
| Common Stock | The Ronald David Miller Trust U/A 08/04/2020 (Ron Miller) (1) | 3745577 | 300000 | (5) | 11.22% |
|  |  |  | 150000 | (6) | 12.40%(3) |
| Common Stock | SE Agoura Investment LLC (7) | 177287 | 9148309 | (5) | 0.53% |
|  |  |  |  |  | 21.92%(3) |
| Common Stock | The Lee Miller Trust UA 09/05/2020 (Lee Miller) | 3745577 | 300000 | (5) | 11.22% |
|  |  |  | 150000 | (6) | 12.40%(3) |
| Common Stock | All executive officers and directors as a group (8 members including Howard Marks and Ron Miller)(1) | 12777482 | 900000 | (5) | 38.26% |
|  |  |  | 6445522 | (6) | 49.39%(3) |
| Preferred Stock | Howard Marks (4) | 600000 |  |  | 3.00% |
| Preferred Stock | The Ronald David Miller Trust U/A 08/04/2020 (Ron Miller) (1) | 300000 |  |  | 1.50% |
| Preferred Stock | SE Agoura Investment LLC (7) | 9148309 |  |  | 45.75% |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Unless otherwise indicated,
 the address for each beneficial owner is c/o StartEngine Crowdfunding, Inc., 4100 W Alameda Ave., Suite 300, Burbank, California
 91505

(2) Based on 33,414,742 shares
 of Common Stock, and 19,994,684 shares of Preferred Stock outstanding.

(3) This calculation is the
 amount the person owns now, plus the amount that person is entitled to acquire. That amount is then shown as a percentage of the
 outstanding amount of securities in that class if no other person exercised their rights to acquire those securities. The result
 is a calculation of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the
 amounts in this column may not add up to 100% for each class.

(4) These shares are held by
 Howard E. Marks Living Trust U/A Dated 12/21/2001 (Howard Marks) and does not include the 1,002,180 shares held by the Marks Irrevocable
 Trust for the benefit of Mr. Marks' family.

(5) Shares acquirable through
 conversion of Preferred Stock.

(6) Shares acquirable through
 the exercise of stock options. The options were granted under the 2015 Equity Incentive Plan.

(7) SE Agoura Investment LLC
 is beneficially owned by Aubrey Chernick. The address for SE Agoura Investment LLC is 333 South Grand Avenue, Suite 1470, Los
 Angeles, CA 90071.

**INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS**

None.

**SECURITIES BEING OFFERED**

**General**

StartEngine is offering Common Stock to investors in this offering.

The following descriptions summarize important terms of our capital stock. This summary does not purport to be complete and is qualified in its entirety by the Sixth Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws, drafts of which have been filed as Exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of StartEngine's capital stock, you should refer to our Sixth Amended and Restated Certificate of Incorporation and our Bylaws, as amended and restated, and applicable provisions of the Delaware General Corporation Law.

StartEngine's authorized capital stock consists of 75,000,000 shares of Common Stock, $0.00001 par value per share, and 25,950,000 shares of Preferred Stock, $0.00001 par value per share, of which 10,650,000 shares are designated as Series Seed Preferred Stock, 10,350,000 shares are designated as Series A Preferred Stock, and 4,950,000 shares that will be designated Series T Preferred Stock.

As of February 9, 2023, the outstanding shares of StartEngine included: 33,414,742 shares of Common Stock, 10,240,536 shares of Series Seed Preferred Stock, 9,272,044 shares of Series A Preferred Stock, and 482,104 shares of Series T Preferred Stock.

**Common Stock**

***Dividend Rights***

Holders of Common Stock are entitled to receive dividends, as may be declared from time to time by the board of directors out of legally available funds, unless a dividend is paid with respect to all outstanding shares of Preferred Stock in an amount equal or greater than the amount those holders would receive on an as-converted basis to Common Stock. We have never declared or paid cash dividends on any of our capital stock and currently do not anticipate paying any cash dividends after this offering or in the foreseeable future.

***Voting Rights***

Each holder of Common Stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors, but excluding matters that relate solely to the terms of a series of Preferred Stock.

***Right to Receive Liquidation Distributions***

In the event of our liquidation, dissolution, or winding up, after the payment of all of our debts and other liabilities and the satisfaction of the liquidation preferences granted to the holders of Preferred Stock, the holders of Common Stock and the holders of Preferred Stock (calculated on an as-converted to Common Stock basis) will be entitled to share ratably in the net assets legally available for distribution to stockholders.

***Additional Rights and Preferences***

Holders of Common Stock have no preemptive, conversion, anti-dilution or other rights, and there are no redemptive or sinking fund provisions applicable to Common Stock.

***Forum Selection Provision***

Section 7 of our Common Stock subscription agreement (which appears as an exhibit to the offering statement of which this offering circular forms a part) provides that any court of competent jurisdiction in the State of California is the exclusive forum for all actions or proceedings relating to the subscription agreement. However, this exclusive forum provision does not apply to actions arising under the federal securities laws.

**Preferred Stock**

We have authorized the issuance of three series of Preferred Stock, designated Series T Preferred Stock, Series Seed Preferred Stock and Series A Preferred Stock. The Series T Preferred Stock, Series Seed Preferred Stock and Series A Preferred Stock enjoy substantially similar rights, preferences, and privileges.

***Dividend Rights***

Holders of Preferred Stock are entitled to receive dividends, as may be declared from time to time by the board of directors out of legally available funds. Such dividends are non-cumulative and no right shall accrue to holders of Preferred Stock for undeclared dividends. Unpaid and undeclared dividends shall not bear or accrue interest. Holders of Preferred Stock are entitled to at least their share proportionally (calculated on an as-converted to Common Stock basis) in any dividends paid to the holders of Common Stock. We have never declared or paid cash dividends on any of our capital stock and currently do not anticipate paying any cash dividends after this offering or in the foreseeable future.

***Voting Rights***

Each holder of Preferred Stock is entitled to one vote for each share of Common Stock issuable upon conversion of the Preferred Stock at the then-effective conversion rate. Fractional votes are not permitted and if the conversion results in a fractional share, it will be rounded to the closest whole number. Holders of Preferred Stock are entitled to vote on all matters submitted to a vote of the stockholders, including the election of directors, as a single class with the holders of Common Stock. Specific matters submitted to a vote of the stockholders require the approval of a majority of the holders of Preferred Stock voting as if their shares had been converted into Common Stock. These matters include any vote to:

· enter into
 a transaction or series of related transactions involving a merger or consolidation, or sale, conveyance or disposal of all or substantially
 of the assets, unless the majority of the voting power in the surviving entity is substantially similar to that before the transaction
 with substantially the same rights, preferences, privileges and restrictions;

· modify the
 rights preferences, privileges and restrictions so as to adversely affect the Preferred Stock;

· increase the
 total number of authorized shares of Preferred Stock;

· authorize or
 issue, or obligate to issue, any other equity security having a preferences over, or on a parity with the Preferred Stock with respect
 to dividends, liquidation, redemption or voting;

· redeem, purchase
 or otherwise acquire any shares of Common Stock or Preferred Stock except as indicated, including the repurchase of shares from employees,
 directors and officers, and existing contractual rights;

· declare or
 pay any dividend on the Common Stock, other than a dividend payable solely in Shares of Common Stock; and

· amend the Certificate
 of Incorporation or Bylaws.

***Right to Receive Liquidation Distributions***

In the event of our liquidation, dissolution, or winding up, holders of Series A Preferred Stock and Series T Preferred Stock are entitled to liquidation preference superior Series Seed Preferred Stock. Collectively, holders of Preferred Stock are entitled to a liquidation preference superior to holders of Common Stock. Liquidation distributions will be first paid to holders of Series A Preferred Stock and Series T Preferred Stock, who will be paid ratably with each other in proportion to their liquidation preference. Holders of Series T Preferred Stock will receive an amount for each share equal to $2.93333 per share of Series T Preferred Stock, adjusted for any stock splits (other than the stock split in 2020), reverse stock splits, stock dividends, and similar recapitalization events (each a "Recapitalization Event"), plus all declared and unpaid dividends and holders of Series A Preferred Stock will receive an amount for each share equal to $.57273 per share of Series A Preferred Stock, adjusted for any Recapitalization Event, plus all declared and unpaid dividends. The distributions will then go to holders of Series Seed Preferred Stock, who will receive an amount for each share equal to $0.16667 per share of Series Seed Preferred Stock, adjusted for any Recapitalization Event, plus all declared and unpaid dividends. Finally, distributions will be payable ratably to holders of Common Stock and Preferred Stock on an as-converted basis. If, upon such liquidation, dissolution or winding up, the assets and funds that are distributable to the holders of Series A Preferred Stock and Series Seed Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such assets and funds will be distributed ratably first among the holders of the Series A Preferred Stock in proportion to the full preferential amounts to which they would otherwise be entitled to receive, and then any remaining amounts to Series Seed Preferred Stock in proportion to the full preferential amounts which they would otherwise be entitled to receive.

***Conversion Rights***

Preferred Stock is convertible into Common Stock voluntarily and automatically. Each share of Preferred Stock is convertible at the option of the holder of the share at any time prior to the closing of a liquidation event. Each share of Preferred Stock is currently convertible into one share of Common Stock, but such conversion rate may be adjusted pursuant to the anti-dilution rights of the Preferred Stock set forth in Section 3(d) of the Sixth Amended and Restated Certificate of Incorporation.

Additionally, each share of the Preferred Stock will automatically convert into Common Stock (i) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933 where the per share offering price is at least the minimum share price (as adjusted for Recapitalization Events) and our aggregate proceeds are greater than or equal to $15,000,000 or (ii) by a vote by a majority of holders of Preferred Stocks. The "minimum share price" is $286333 for shares of Series Seed Preferred Stock and shares of Series A Preferred Stock and $2.93333 for shares of Series T Preferred Stock. Preferred Stock converts into the same number of shares of Common Stock regardless of whether converted automatically or voluntarily.

***Drag Along Rights***

Holders of Preferred Stock are subject to a drag-along provision, pursuant to which each holder of Preferred Stock agrees that, in the event that the company's Board, the holders of a majority of the company's voting stock vote, and the holders of a majority of Common Stock issued or issuable upon conversion of Preferred Shares vote in favor of a sale of the company, then such holder of Preferred Stock and Howard E. Marks Living Trust U/A Dated 12/21/2001 (Howard Marks), Marks Irrevocable Trust, and Miller Family Trust 1/2/96 (Ron Miller) and The Lee Miller Trust UA 09/05/2020 (Lee Miller) (each a "Key Holder") will vote in favor of the transaction if such vote is solicited, refrain from exercising dissenters' rights with respect to such sale of the company, and deliver any documentation or take other actions reasonably required. The drag-along provision is set forth in the Amended and Restated Investors' Rights Agreements for holders of Series A Preferred Stock and Series Seed Preferred Stock and in their respective subscription agreements for holders of Series T Preferred Stock.

***Right of First Refusal, Participation and Tag Along Rights***

Under the Amended and Restated Investors' Rights Agreement (for holders of Series A Preferred Stock and Series Seed Preferred Stock) and under the Subscription Agreement (for holders of Series T Preferred Stock), holders of at least 300,000 shares of Preferred Stock (as adjusted for recapitalization events) at the time of the event are entitled to a right of first refusal if we propose to issue new shares of capital stock (subject to certain exceptions). Holders of Common Stock and holders of fewer than 300,000 shares of Preferred Stock do not enjoy such rights. All holders of Series A Preferred Stock and Series Seed Preferred Stock are entitled to tag along rights if any Key Holder proposes to sell any of their respective holdings. All holders of Preferred Stock are entitled to participation rights in certain future offerings.

**ONGOING REPORTING AND SUPPLEMENTS TO THIS OFFERING CIRCULAR**

We are currently required to file and make available, through a link to the SEC's website, electronic copies of the materials we file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports. Our website address is http://www.startengine.com. Information contained on the website does not constitute part of our Offering Circular. We have included our website address in this Offering Circular solely as an inactive textual reference.

Our SEC filings will also be available to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov.

If this offering extends beyond 12 months from qualification, at least every 12 months, we will file a post-qualification amendment to the Offering Statement of which this Offering Circular forms a part, to include the company's recent financial statements.

We may supplement the information in this Offering Circular by filing a Supplement with the SEC.

You should read all the available information before investing.

**STARTENGINE CROWDFUNDING, INC.**

**UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021**

**STARTENGINE CROWDFUNDING, INC.**

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| **Financial Statements** |  |
| **[Consolidated Balance Sheets as at December 31, 2021(audited) and September 30, 2022 (unaudited)](#f_008)** | [F-2](#f_008) |
| **[Consolidated Statements of Operations as of Three and Nine Months Ended September 30, 2021 and 2022 (unaudited)](#f_009)** | [F-3](#f_009) |
| **[Consolidated Statements of Stockholders' Equity as of Three and Nine Months Ended September 30, 2021 and 2022 (unaudited)](#f_010)** | [F-4](#f_010) |
| **[Consolidated Statements of Cash Flows as of Nine Months Ended September 30, 2021 and 2022 (unaudited)](#f_011)** | [F-5](#f_011) |
| **[Notes to Consolidated Financial Statements](#f_012)** | [F-6](#f_012) |

---

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2022** | **December 31,**<br>**2021** |
| Assets |  |  |
| Current assets: |  |  |
| Cash | $14587826 | $21000367 |
| Marketable securities | 76209 | 1856 |
| Accounts receivable, net of allowance | 1196413 | 1477887 |
| Other current assets | 1900219 | 3483129 |
| Total current assets | 17760667 | 25963239 |
| Property and equipment, net | 108992 | 57541 |
| Investments - warrants | 1497518 | 1130133 |
| Investments - stock | 5803288 | 3923788 |
| Investments - Collectibles | 3618274 | 1926394 |
| Investments - Real Estate | 2136628 | 2136628 |
| Intangible assets | 20000 | 20000 |
| Other assets | 69415 | 50000 |
| Total assets | $31014782 | $35207722 |
| Liabilities and Stockholders' Equity |  |  |
| Current liabilities: |  |  |
| Accounts payable | $562615 | $573840 |
| Accrued liabilities | 1706748 | 2607420 |
| Deferred revenue | 2391667 | 4111829 |
| Total current liabilities | 4661030 | 7293089 |
| Total liabilities | 4661030 | 7293089 |
| Commitments and contingencies |  |  |
| Stockholders' equity: |  |  |
| Series A Preferred Stock, par value $0.00001, 10,350,000 shares authorized, 9,272,044 and 9,272,044 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectfully, liquidation preference of $5,310,409 and $5,310,409 at September 30, 2022 and December 31, 2021, respectively. | 5286667 | 5286667 |
| Series T Preferred Stock, par value $0.00001, 4,950,000 shares authorized, 482,104 and 482,211 shares issued and outstanding at September 30, 2022 and 2021, respectively, liquidation preference of $1,414,209 and $1,414,486 at September 30, 2022 and December 31, 2021, respectively. | 983634 | 983852 |
| Series Seed Preferred Stock, par value $0.00001, 10,650,000 shares authorized, 10,240,536 and 10,247,938 and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectfully, liquidation preference of $1,707,756 and $1,707,990 at September 30, 2022 and December 31, 2021, respectively. | 1706756 | 1707990 |
| Common stock, par value $0.00001, 75,000,000 shares authorized, 33,199,166 and 32,865,193 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. | 331 | 328 |
| Additional paid-in capital | 46900913 | 39246724 |
| Subscription Receivable | 0 | (367831) |
| Noncontrolling interest | (13251) | (4127) |
| Accumulated deficit | (28511300) | (18938967) |
| Total stockholders' equity | 26353751 | 27914633 |
| Total liabilities and stockholders' equity | $31014782 | $35207722 |

---

See accompanying notes to unaudited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Revenues | $5229159 | $6491789 | 19578222 | $19850703 |
| Cost of revenues | 1753004 | 1156820 | 5451888 | 3324893 |
| Gross profit | 3476155 | 5334969 | 14126334 | 16525810 |
| Operating expenses: |  |  |  |  |
| General and administrative | 2639351 | 1844693 | 9936537 | 5835014 |
| Sales and marketing | 2572402 | 2066417 | 9901596 | 5559914 |
| Research and development | 1398330 | 719270 | 4010775 | 1856861 |
| Change in fair value of warrants received for fees |  |  |  | 129357 |
| Impairment in value of shares received for fees | 21863 |  | 21863 | 314261 |
| Total operating expenses | 6631946 | 4630380 | 23870771 | 13695407 |
| Operating income (loss) | (3155791) | 704589 | (9744437) | 2830403 |
| Other expense (income), net: |  |  |  |  |
| Other expense (income), net | (85086) | (243462) | (216204) | (243106) |
| Total other expense (income), net | (85086) | (243462) | (216204) | (243106) |
| Income (loss) before provision for income taxes | (3070705) | 948051 | (9528233) | 3073509 |
| Provision for income taxes | 4160 | 44374 | 62344 | 77199 |
| Net income (loss) | (3074866) | 903677 | (9590578) | 2996310 |
| Less: net loss attributable to noncontrolling interest |  |  | (9124) |  |
| Net Income (loss) attributable to stockholders | (3074866) | $903677 | (9581454) | $2996310 |
| Weighted average loss per share - basic and diluted | $(0.09) | $0.02 | (0.29) | $0.10 |
| Weighted average shares outstanding - basic and diluted | 33086652 | 56902201 | 33086652 | 56902201 |

---

See accompanying notes to unaudited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

**(Unaudited)**

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Series A Preferred Stock** | **Series A Preferred Stock** | **Series T Preferred Stock** | **Series T Preferred Stock** | **Series Seed Preferred Stock** | **Series Seed Preferred Stock** | **Common Stock** | **Common Stock** | | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br>**Paid-in Capital** | **Subscription**<br>**Receivable** | **Noncontrolling**<br>**Interest** | **Accumulated**<br>**Deficit** |<br>**Total** |
| **Balance at December 31, 2020** | 9762783 | $5566473 | 497439 | $1014922 | 10650000 | $1775000 | 30508476 | $305 | 32526503 | $— | $(40041) | $(17872540) | 22970621 |
| Sale of common stock |  |  |  |  |  |  | 21580 |  | 154970 |  |  |  | 154970 |
| Offering costs |  |  |  |  |  |  |  |  | (61530) |  |  |  | (61530) |
| Stock compensation expense |  |  |  |  |  |  |  |  | 100017 |  |  |  | 100017 |
| Noncontrolling interest |  |  |  |  |  |  |  |  |  |  | 8979 | (8979) |  |
| Net loss |  |  |  |  |  |  |  |  |  |  |  | 1057417 | 1057417 |
| **Balance at March 31, 2021** | 9762783 | 5566473 | 497439 | 1014922 | 10650000 | 1775000 | 30530056 | 305 | 32719960 |  | (31063) | (16824102) | 24221495 |
| Sale of common stock |  |  |  |  |  |  | 71516 | 1 | 228058 |  |  |  | 228059 |
| Offering costs |  |  |  |  |  |  |  |  | (176893) |  |  |  | (176893) |
| Exercise of stock options |  |  |  |  |  |  | 30000 |  | 6715 |  |  |  | 6715 |
| Stock compensation expense |  |  |  |  |  |  |  |  | 100017 |  |  |  | 100017 |
| Noncontrolling interest |  |  |  |  |  |  |  |  |  |  | (41217) | 11500 | (29717) |
| Net loss |  |  |  |  |  |  |  |  |  |  |  | 1035216 | 1035216 |
| **Balance at June 30, 2021** | 9762783 | 5566473 | 497439 | 1014922 | 10650000 | 1775000 | 30631572 | 306 | 32877857 |  | (72279) | (15777386) | 25384893 |
| Sale of common stock |  |  |  |  |  |  | 164740 | 1 | 3284227 |  |  |  | 3284228 |
| Offering costs |  |  |  |  |  |  |  |  | (5657790) |  |  |  | (5657790) |
| Exercise of stock options |  |  |  |  |  |  |  |  | 123188 |  |  |  | 123188 |
| Stock compensation expense |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Noncontrolling interest |  |  |  |  |  |  |  |  |  |  | 2499 | (2499) |  |
| Net loss |  |  |  |  |  |  |  |  |  |  |  | 903677 | 903677 |
| **Balance at September 30, 2021** | 9762783 | 5566473 | 497439 | 1014922 | 10650000 | 1775000 | 30796312 | 307 | 30627482 |  | (69780) | (14876209) | 24038196 |

---

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Series A Preferred Stock** | **Series A Preferred Stock** | **Series T Preferred Stock** | **Series T Preferred Stock** | **Series Seed Preferred Stock** | **Series Seed Preferred Stock** | **Common Stock** | **Common Stock** | | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br>**Paid-in Capital** | **Subscription**<br>**Receivable** | **Noncontrolling**<br>**Interest** | **Accumulated**<br>**Deficit** |<br>**Total** |
| **Balance at December 31, 2021** | 9272044 | 5286667 | 482211 | 983852 | 10247938 | 1707990 | 32865193 | 328 | 39246724 | (367831) | (4127) | (18938969) | 27914633 |
| Exercise of stock options |  |  |  |  |  |  | 7927 |  | 18521 |  |  |  | 18521 |
| Stock compensation expense |  |  |  |  |  |  |  |  | 1979475 |  |  |  | 1979475 |
| Noncontrolling interest |  |  |  |  |  |  |  |  |  |  | (9124) | 9124 |  |
| Net loss |  |  |  |  |  |  |  |  |  |  |  | (2148468) | (2148468) |
| **Balance at March 31, 2022** | 9272044 | 5286667 | 482211 | 983852 | 10247938 | 1707990 | 32873120 | 328 | 41244720 | (367831) | (13251) | (21078313) | 27764161 |
| Sale of common stock |  |  |  |  |  |  | 206023 | 2 | 3709805 | (606700) |  |  | 3103107 |
| Offering costs |  |  |  |  |  |  |  |  | (3456142) |  |  |  | (3456142) |
| Conversion to Common Stock |  |  | (107) | (218) | (7402) | (1234) | 7509 |  | 1452 |  |  |  |  |
| Stock compensation expense |  |  |  |  |  |  |  |  | 2120552 |  |  |  | 2120552 |
| Net loss |  |  |  |  |  |  |  |  |  |  |  | (4358121) | (4358121) |
| **Balance at June 30, 2022** | 9272044 | 5286667 | 482104 | 983634 | 10240536 | 1706756 | 33086652 | 330 | 43620387 | (974531) | (13251) | (25436434) | 25173558 |
| Sale of common stock |  |  |  |  |  |  | 112514 | 1 | 1513575 | 974531 |  |  | 2488107 |
| Offering costs |  |  |  |  |  |  |  |  | (504781) |  |  |  | (504781) |
| Stock compensation expense |  |  |  |  |  |  |  |  | 2271732 |  |  |  | 2271732 |
| Net loss |  |  |  |  |  |  |  |  |  |  |  | (3074866) | (3074866) |
| **Balance at September 30, 2022** | 9272044 | 5286667 | 482104 | 983634 | 10240536 | 1706756 | 33199166 | 331 | 46900912 | 0 | (13251) | (28511300) | 26353751 |

---

See accompanying notes to unaudited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2022** | **2021** |
| Cash flows from operating activities: |  |  |
| Net Income (loss) | $(9590578) | $2996310 |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Depreciation | 9817 | 3193 |
| Bad debt expense | 98864 | 9384 |
| Fair value of warrants received for fees | (367385) |  |
| Fair value of investments - other received for fees | (1848516) | (2150582) |
| Change in fair value of warrant investments |  | 129357 |
| Impairment of investments - other received for fees | 21863 | 314261 |
| Unrealized gain on investments | (52845) |  |
| Stock-based compensation | 6371759 | 200034 |
| Changes in operating assets and liabilities: |  |  |
| Accounts receivable | 182610 | (700861) |
| Other current assets | 1563495 | (2954477) |
| Accounts payable | (11225) | 270007 |
| Accrued liabilities | (900672) | 1611316 |
| Deferred revenue | (1720162) | 2552225 |
| Net cash (used in) provided by operating activities | (6242974) | 2280167 |
| Cash flows from investing activities: |  |  |
| Investments - Marketable Securities | (74353) |  |
| Investments - Collectibles | (1691880) |  |
| Investments - Real Estate |  |  |
| Purchase of Intangible Assets |  |  |
| Purchase of property and equipment | (61269) | (18498) |
| Net cash (used in) provided by investing activities | (1827503) | (18498) |
| Cash flows from financing activities: |  |  |
| Proceeds from sale of common stock | 5223383 | 3667255 |
| Subscription Receivable | 367832 |  |
| Offering costs | (3960923) | (3454042) |
| Proceeds from exercise of employee stock options | 18521 | 129903 |
| Non-Controlling Interest | 9124 | (32237) |
| Net cash provided by financing activities | 1657936 | 310879 |
| (Decrease) increase in cash and restricted cash | (6412541) | 2572548 |
| Cash and restricted cash, beginning of period | 21000367 | 18539383 |
| Cash and restricted cash, end of period | $14587826 | $21111931 |
| Supplemental disclosures of cash flow information: |  |  |
| Cash paid for interest | $— | $— |
| Cash paid for income taxes | $62344 | $600 |

---

See accompanying notes to unaudited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**NOTE 1 – NATURE OF OPERATIONS**

StartEngine Crowdfunding, Inc. was formed on March 19, 2014 ("Inception") in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc. and changed to the current name on May 8, 2014. The consolidated financial statements of StartEngine Crowdfunding, Inc. (the "Company" are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company's headquarters are located in Burbank, California.

The Company aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. StartEngine Crowdfunding Inc. has wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Assets LLC and StartEngine Primary LLC. StartEngine Capital LLC is a funding portal registered with the US Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA), StartEngine Secure LLC is a transfer agent registered with the SEC. StartEngine Assets LLC was formed in 2020 to buy, hold and manage assets in various asset classes such as real estate, automobiles, luxury goods and royalty-producing intangible assets. StartEngine Primary LLC was formed in October 2017 and received approval to operate as a registered broker-dealer in July 2019. On April 16, 2020, StartEngine Primary LLC received approval to operate as an alternative trading system. The Company's mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years.

*Stock Split*

On July 7, 2021, StartEngine Crowdfunding Inc. split its designated "Common Stock" and "Preferred Stock" on a 3 for 1 basis. The total number of shares of Common Stock that the Company is authorized to issue was increased to 75,000,000 shares after the split. The total number of shares of Preferred Stock that the Company is authorized to issue was increased to 25,950,000 after the split. Accordingly, all share and per share amounts for all periods presented in the consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

*Management Plans*

The Company's revenue producing activities commenced in 2015 with the approved start of Title IV of the JOBS Act, which created new rules for Regulation A, and increased since then with the start of Regulation Crowdfunding under Title III of the JOBS Act. Because this is a relatively new industry, there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. Because there is a level of uncertainty and because we are still in the early stages of these new regulations, the Company is expected to incur losses until such time that the volume of Regulation A and Regulation Crowdfunding campaigns and the investments in those campaigns is sufficient for revenues derived from those campaigns to cover its costs. These factors could indicate substantial doubt about the Company's ability to continue as a going concern.

The Company has cash and cash equivalents of approximately $15 million, which its managements believes will cover losses for the foreseeable future. The Company's management believes that any substantial doubt about the Company's ability to continue as a going concern has been alleviated.

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

*Basis of Presentation*

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP. The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc., its subsidiaries where we have controlling financial interests, and any variable interest entities for which we are deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The accompanying consolidated financial statements reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year ending December 31, 2022.

*Principles of Consolidation*

The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.'s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, and StartEngine Primary LLC and StartEngine Assets LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

*Use of Estimates*

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of expenses during the reporting periods. Significant estimates include the value of marketable securities, the value of stock and warrants received as compensation and collectability of accounts receivable. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

*Fair Value of Financial Instruments*

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2- Include other inputs that are directly or indirectly observable in the marketplace.

Level 3- Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets.

<u>Level 1</u>

Investments: Marketable securities are made up of mutual funds and shares of common stock that are valued based on quoted prices in active markets.

<u>Level 2</u>

Investments - warrants (public portfolio): Fair value measurements of warrants of publicly traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable volatility assumptions based on comparable public company.

<u>Level 3</u>

Investments - warrants (private portfolio): Fair value measurements of warrants of private portfolio companies are priced based on a modified Black-Scholes option pricing model to estimate the asset value by using stated strike prices, warrant expiration dates modified to account for estimates to actual life relative to stated expiration, risk-free interest rates, and volatility assumptions based on comparable public companies. Option volatility assumptions used in the modified Black-Scholes model are based on public companies who operate in similar industries as companies in our private company portfolio. For these warrants, the fair value of the underlying stock is an unobservable input consistent with Investment - stocks noted above. Certain adjustments may be applied as determined appropriate by management for lack of liquidity.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of September 30, 2022:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Level 1 | Level 2 | Level 3 | Total |
| Cash and cash equivalents | $14587826 | $— | $— | $14587826 |
| Marketable securities |  | 76209 |  | 76209 |
| Investment - warrants |  |  | 1497518 | 1497518 |
|  | $14587826 | $76209 | $1497518 | $16161553 |

---

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Level 1 | Level 2 | Level 3 | Total |
| Cash and cash equivalents | $21000367 | $— | $— | $21000367 |
| Marketable securities |  | 1856 |  | 1856 |
| Investments - warrants |  |  | 1130132 | 1130132 |
|  | $21000367 | $1856 | $1130132 | $22132355 |

---

The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the nine-months ended September 30, 2022 and 2021 as it relates to Investments - warrants:

---

| | |
|:---|:---|
|  | Investments-<br>Warrants |
| Fair value at December 31, 2021 | 1130133 |
| Receipt of warrants | 367385 |
| Change in fair value of warrants |  |
| Fair value at September 30, 2022 | $1497518 |

---

---

| | |
|:---|:---|
|  | Investments-<br>Warrants |
| Fair value at December 31, 2020 | 431190 |
| Receipt of warrants |  |
| Change in fair value of warrants | (129357) |
| Fair value at September 30, 2021 | $301833 |

---

The following range of variables were used in valuing Level 3 warrant assets during the nine-months ended September 30, 2022 and 2021:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
| Expected life (years) | 1 - 2.5 | 1 - 2.5 |
| Risk-free interest rate | 0.1% - 0.9% | 0.1% - 0.9% |
| Expected volatility | 30% - 225% | 30% - 225% |
| Annual dividend yield | 0% | 0% |
| Underlying share values | $0.30 – 100.00 | $0.30 – 100.00 |
| Strike Prices | $0.30 – 100.00 | $0.30 – 100.00 |

---

For Investments – Warrants, the primary and most significant unobservable input relates to the underlying share value of the issuers for which we receive warrants. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.

For warrants, the Company also adjusts the expected life of certain warrants to account for potential liquidation events, as well as doubts regarding the ability for the issuer companies to continue as a going concern. We may apply marketability discounts to private company warrants to account for a general lack of liquidity of 20% due to the private nature of the associated underlying company. The quantitative measure used is based upon various models. Significant judgment is required by Management in selecting unobservable able inputs, and accordingly a change in the assumptions used for the valuation could cause the value to be significantly different. In general, increases in underlying share prices, expected life and volatility, increase the value of the warrants, whereas decreases would reduce the value.

*Accounts Receivable*

Accounts receivable are recorded at the invoiced amount and are non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance for doubtful accounts as of September 30, 2022 and December 31, 2021 was $207,522 and $209,026, respectively. Bad debt expense for the nine-months ended September 30, 2022 and 2021 was $98,864 and $9,384, respectively.

As of September 30, 2022 the company had accounts receivable over 90 days totaling $356,136.

*Investment Securities*

<u>Marketable Securities</u>

Our marketable securities consist of mutual funds and common stock equities that are tradable in an active market. Unrealized gains and losses on available-for-sale securities, net of applicable taxes, are reported as a component of other income, net in the accompanying consolidated statements of operations.

<u>Non-Marketable and Other Securities</u>

Non-marketable and other securities include investments in non-public equities. Our accounting for investments in non-marketable and other securities depends on several factors, including the level of ownership, power to control and the legal structure of the subsidiary making the investment. As further described below, we base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting.

*Investments – Warrant Assets*

In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks nor do we use other derivative instruments to hedge economic risks stemming from these warrants.

We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a "cashless" exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our consolidated balance sheet at the time they are obtained, and remeasured each reporting period.

The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt.

Any changes in fair value from the grant date fair value of warrants will be recognized as increases or decreases to investments on our consolidated balance sheets and as a component of operating expenses on our consolidated statements of operations.

In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities.

The fair value of the warrants portfolio is a critical accounting estimate and is reviewed each reporting period. We value our warrants using a modified Black-Scholes option pricing model, which incorporates the following significant inputs, in addition to certain adjustments for general lack of liquidity:

&nbsp;&nbsp;&nbsp;&nbsp;· An
 underlying asset value, which is estimated based on current information available in valuation
 reports, including any information regarding subsequent rounds of funding or performance
 of a company.

&nbsp;&nbsp;&nbsp;&nbsp;· Stated
 strike price, which can be adjusted for certain warrants upon the occurrence of subsequent
 funding rounds or other future events.

&nbsp;&nbsp;&nbsp;&nbsp;· Price
 volatility or risk associated with possible changes in the warrant price. The volatility
 assumption is based on historical price volatility of publicly traded companies within indices
 or companies similar in nature to the underlying client companies issuing the warrant.

&nbsp;&nbsp;&nbsp;&nbsp;· The
 expected remaining life of the warrants in each financial reporting period.

&nbsp;&nbsp;&nbsp;&nbsp;· The
 risk-free interest rate is derived from the Treasury yield curve and is calculated based
 on the risk-free interest rates that correspond closest to the expected remaining life of
 the warrant on the date of assessment.

*Investments - Stock*

In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, less adjustments for impairment in accordance with ASC 321-10-35-2. During the nine-months ended September 30, 2022 and 2021, the Company received stock with a cost of $1,891,748 and $2,150,582, respectively, as payment for fees. During the nine-months ended September 30, 2022 and 2021, impairment expense related to shares received amounted to $21,863 and $443,618, respectively.

*Investments – Collectibles*

The Company, through its subsidiary, purchases collectibles including art, wine, memorabilia, and other collectible assets, and are recorded at cost. The cost of the underlying asset includes the purchase price, including any deposits for the underlying asset and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, discovery, investigation, development and acquisition of the underlying assets.

The Company treats the underlying assets as long-lived assets, and the underlying assets will be subject to an annual test for impairment and will not be depreciated or amortized. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The underlying assets are purchased by our subsidiary, StartEngine Assets, LLC, (the "Administrative Manager") and sold to our Series LLC subsidiary collectible funds for cash or a promissory note. The Series uses the proceeds of the offering to pay off the note. Acquisition expenses are typically paid for in advance by the Administrative Manager and are reimbursed by the Series from the proceeds of the offering in accordance with the offering circular. All such transactions are eliminated in consolidation.

The below is a breakdown of the types of collectibles and their value held as of September 30, 2022:

---

| | | |
|:---|:---|:---|
|  | **Period Ended September 30,** | **Period Ended December 31,** |
|  | **2022** | **2021** |
| Wine | $560226 | $208123 |
| Trading Cards | 845857 | 939271 |
| Artwork | 1322718 | 779000 |
| Comic Books | 704477 |  |
| NFT | 47868 |  |
| Watches | 137128 |  |
| Total collectibles | $3618274 | $1926394 |

---

*Crypto Assets*

The Company holds crypto-denominated assets ("crypto assets"), which are included as other assets in the balance sheets. As of September 30, 2022 and December 31, 2021, cryptocurrencies were $19,415 and $0, which included one bitcoin and is recorded at cost less impairment.

*Investments – Real Estate*

Investments in real estate are stated at cost less accumulated depreciation and presented separately from Property and Equipment used for internal operating purposes. Real Estate purchased for investment includes the cost of the purchased property, including the building, related land. The Company allocates certain capitalized title fees and relevant acquisition expenses to the capitalized costs of the building. All capitalized property costs, except for the value attributable to the land, are depreciated using the straight-line method over the estimated useful life of 27.5-39 years depending on the use of the building. Additions and property improvements in excess of $5,000 are capitalized and depreciated using the straight-line method over the estimated useful lives of 5-7 years, while routine repairs and maintenance are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statement of operations.

StartEngine has invested $2,136,628 into one residential apartment building in California as of September 30, 2022.

*Noncontrolling Interest*

The Company presents third party minority interests in subsidiaries in accordance with ASC 810, Consolidation. Under that topic, such minority interests are presented on the Company's balance sheet within the equity section as noncontrolling interest.

*Equity Offering Costs*

The Company accounts for offering costs in accordance with ASC 340, Other Assets and Deferred Costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders' equity upon the completion of an offering or to expense if the offering is not completed. Offering costs of $504,781 and $3,960,923 and $5,657,790 and $5,896,213 were charged to stockholders' equity during the three and nine-months ended September 30, 2022 and 2021, respectively.

*Revenue Recognition*

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 contains a framework for analyzing potential revenue transactions by identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the Company satisfies a performance obligation.

The Company recognizes revenues from Regulation A and Regulation D platform fees at an agreed-upon rate. In 2021 the rate was a percentage of the capital raised. Platform fees are paid to the Company from customers' escrow accounts. For certain Regulation A offerings, the Company earns a portion of its platform fees in warrants or shares. The grant date fair values of shares and warrants received are recognized as revenue when earned. The Company's performance obligations are satisfied as services are rendered through the duration of the campaign.

Revenues from Regulation Crowdfunding platform fees are recognized at an agreed-upon rate based on the amount invested in an offering. Platform fees are due upon the disbursement of funds from escrow and are paid to the Company from customers' escrow accounts. The Company's performance obligations are satisfied as services are rendered through the duration of the campaign.

The Company provides marketing services branded under the name "StartEngine Premium.". The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due.

The Company provides transfer agent services branded under the name "StartEngine Secure" through its registered transfer agent subsidiary, StartEngine Secure, LLC. The company enters into an agreement with issuers for an annual term that commences from the date the issuers' Regulation Crowdfunding or Regulation A offering launches and renews annually unless cancelled prior to renewal. Initial payment of services is paid from funds of the offering and is non-refundable. Renewals are invoiced on the first day of each annual period and are not subject to cancellation. The initial payment is paid from funds of the offering and is non-refundable. The transfer agent services represent a single performance obligation and is deferred over 12 months which is the period over which the Company's performance obligations are to be satisfied. Fees for transfer agent services are charged based on a per investor basis, subject to certain maximums. The Company may also invoice customers for ancillary services such as but not limited to: recording of stock splits, change of address, or other services. These services are provided and earned at a point-in-time based on defined amounts in the agreement. Payment for StartEngine Secure services are generally paid via customers' escrow account, in full, during the initial year and billed to the client for cash payment for subsequent years if the customer does not have a follow-on offering or to the extent amounts in escrow are not sufficient. There are no significant judgments related to this revenue stream.

The Company previously offered campaign advertising services branded under the name "StartEngine Promote." Under these services, we assist issuer campaigns through creating, designing, purchasing and organizing media across digital marketing channels. Promote services represent a single performance obligation. The term of the services commences upon the agreement being signed and through the closing of the related campaign. The revenues are earned based on a percentage of additional investments attributable to the campaign advertising services, and invoiced monthly to the issuer throughout the campaign. The company may also earn a commission on placing television advertisements on behalf of the issuer. StartEngine Promote fees are charged to the issuers and are paid to the Company from customers' escrow accounts. The Company's performance obligations are satisfied as services are rendered. There are no significant judgments related to this revenue stream. The Company has ceased conducting these services in 2022.

The company provides services to investors branded the StartEngine OWNers bonus program. The general public can become members of the StartEngine OWNers bonus program on StartEngine's website for $275 per year. The OWNers Bonus entitles members to 10% bonus shares on all investments they make in offerings on StartEngine where the issuer chooses to participate in the program. Issuers using our broker-dealer and funding portal services can choose to participate in our OWNers bonus program with respect to the offerings they are making under Regulation A or Regulation CF. Those issuers will grant bonus shares in their offerings to members of the StartEngine OWNers bonus program. The bonus shares are included in the offering statements filed with the SEC, and therefore offered and sold in reliance on Regulation A or Regulation CF, respectively. The OWNers program provides member priority access to certain collectibles being offered through one of our subsidiary Series LLC offerings, notification of new bonus eligible launches and the ability to move to the front of the line on investment waitlists, and lower trading fees on StartEngine Secondary. The Company recognizes the revenue associated with memberships over 12 months, which is the term of the membership. There are no significant judgments related to this revenue stream. Such revenues are included in other service revenues noted below.

The Company hosts periodic events, such as summits, and recognizes revenues from ticket sales and sponsorships. Payments from event attendees and event sponsors received prior to each event are deferred and recognized in revenue once the event occurs.

The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered.

In all instances, as a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

The Company's contracts with customers generally have a term of one year or less. As of September 30, 2022 and 2021, the Company had deferred revenue of $2,391,667 and $4,111,829, respectively, related to performance obligations yet to be fulfilled. The Company had no other customer contract assets.

During the three and nine-months ended September 30, 2022 and 2021, revenue was made up of the following categories associated with the above described services:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three-Months**<br>**Ended September 30,** | **Nine-Months**<br>**Ended September 30,** | **Three-Months**<br>**Ended September 30,** | **Nine-Months**<br>**Ended September 30,** |
|  | **2022** | **2022** | **2021** | **2021** |
| Regulation Crowdfunding platform fees | $1984061 | $8108518 | $3037163 | $8365060 |
| Regulation A commissions | 1369730 | 4809052 | 1878292 | 6942032 |
| StartEngine Premium | 452500 | 1634999 | 465000 | 1207500 |
| StartEngine Secure | 384468 | 935348 | 391558 | 704985 |
| StartEngine Promote |  |  | 57379 | 284424 |
| OWNers Bonus revenue | 1018939 | 3592353 | 581217 | 1879627 |
| Other service revenue | 19462 | 497952 | 81181 | 467075 |
| Total revenues | $5229159 | $19578222 | $6491789 | $19850703 |

---

*Cost of Revenues*

Cost of revenues consists of internal employees, hosting fees, processing fees, and certain software subscription fees that are required to provide services to our issuers.

*Research and Development*

We incur research and development costs during the process of researching and developing our technologies and future offerings. Our research and development costs consist primarily of non-capitalizable engineering fees for both employees and consultants related to our website and future product offerings, email and other tools that are utilized for client related services and outreach. During the three and nine-months ended September 30, 2022 and 2021, research and development costs were $1,398,330 and $4,010,775 and $719,270 and $1,856,861, respectively.

*Stock-Based Compensation*

The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee's requisite vesting period and over the nonemployee's period of providing goods or services. The company recognized a significant increase in Stock-Based Compensation year over year as both the fair value grant and the employee count increased, further increasing the options granted.

*Earnings per Common and Common Equivalent Share*

The computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus common stock equivalents which would arise from the exercise of securities outstanding using the treasury stock method and the average market price per share during the period. Options and convertible preferred stock which are common stock equivalents are not included in the diluted earnings per share calculation for the nine-months ended September 30, 2022 as the effects would be anti-dilutive. See Note 6 for outstanding stock-options as of September 30, 2022. The weighted average shares outstanding – diluted is calculated as follows for the period ended September 30, 2021:

---

| | | |
|:---|:---|:---|
|  | September 30, | September 30, |
|  | 2021 | 2021 |
| Weighted average shares outstanding - basic |  | 30652394 |
| Preferred shares |  | 20910222 |
| Stock options | | 5,339,585 |
| Weighted average shares outstanding - diluted |  | 56902201 |

---

*Concentration of Credit Risk*

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.

At times, the Company may have certain vendors or customers that make up over 10% of the balance at any given time. However, the Company is not dependent on any single or group of vendors or customers, and accordingly, the loss of any such vendors or customers would not have a significant impact on the Company's operations.

*Recent Accounting Pronouncements*

The FASB issues ASUs to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

**NOTE 3 – MARKETABLE SECURITIES AND INVESTMENTS**

*Marketable Securities*

Marketable securities consisted of the following as of September 30, 2022 and December 31, 2021:

---

| | | |
|:---|:---|:---|
|  | September 30, 2022 | December 31, 2021 |
| Common stock | $76209 | $1856 |
|  | $76209 | $1856 |

---

Unrealized gain during the nine months ended September 30, 2022 and 2021 were $52,845 and $0, respectively.

*Investments – Warrant Assets*

Equity warrants, as described in Note 2, are equity warrants received for services provided. The warrants are valued on the date they are earned in accordance with revenue recognition criteria and again at each reporting date.

*Investments – Stock*

Investments - stock, as described in Note 2, consist of shares the Company holds in various companies that launched on its platform received in exchange for services provided. The shares are recorded at cost less any impairment.

**NOTE 4 – PROPERTY AND EQUIPMENT**

As of September 30, 2022 and December 31, 2021, property and equipment consisted of the following:

---

| | | |
|:---|:---|:---|
|  | September 30, 2022 | December 31, 2021 |
| Computer equipment | $133627 | $72358 |
| Software | 3753 | 3753 |
| Total property and equipment | 137380 | 76111 |
| &nbsp;&nbsp;Accumulated depreciation | (28388) | (18571) |
|  | $108992 | $57540 |

---

Depreciation expense for the nine-months ended September 30, 2022 and 2021 was $9,817 and $3,193, respectively.

**NOTE 5 – COMMITMENTS AND CONTINGENCIES**

The Company is currently not involved with and does not know of any pending or threatening litigation against the Company or any of its officers.

**NOTE 6 – STOCKHOLDERS' EQUITY**

*Preferred Stock*

As of September 30, 2022, the Company has authorized the issuance of 25,950,000 shares of our preferred stock with par value of $0.00001. Of these authorized shares, 10,350,000 are designated as Series A, 4,950,000 are designated as Series T, and 10,650,000 are designated as Series Seed.

*Series A Preferred Stock*

The Series A has liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series A shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series T in proportion to its respective liquidation preference. Holders of Series A will receive an amount equal to $0.5727 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series A votes on an as-converted basis. The Series A is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series A is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $2.86 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series A has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

*Series T Preferred Stock*

The Series T have liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series T shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series A in proportion to its respective liquidation preference. Holders of Series T will receive an amount equal to $2.93 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series T votes on an as-converted basis. The Series T is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series T is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $2.93 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series T has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

*Series Seed Preferred stock*

The Series Seed have liquidation priority over the common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series Seed shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, after any payment made to Series A and Series T, but before any payment is made to the Company's common stock, an amount equal to $0.1667 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of Series A and Series T first, then ratably in proportion to the full preferential amounts for which they are entitled to the Series Seed. The Series Seed votes on an as-converted basis. The Series Seed is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series Seed is automatically converted into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, converts the offer and sale of common stock at an offering price of not less than $2.86 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series Seed has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

*Common Stock*

As of September 30, 2022 we had authorized the issuance of 25,000,000 shares of our common stock with par value of $0.00001. As described in Note 1, concurrently with a stock split, we increased the authorized shares of common stock to 75,000,000.

During the nine-months period ended September 30, 2022, the Company sold 318,537 shares of common stock through its Regulation A offering for gross proceeds of $5,223,383 and incurred offering costs of $3,960,923.

During the nine-months period ended September 30, 2021, the Company sold 257,836 shares of common stock through its Regulation A offering for gross proceeds of $3,667,255 and incurred offering costs of $5,896,213.

*Stock Options*

In 2015, our Board of Directors adopted the StartEngine Crowdfunding, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). The 2015 Plan provides for the grant of equity awards to employees, and consultants, including stock options, stock purchase rights and restricted stock units to purchase shares of our common stock. Up to 7,590,000 shares of our common stock may be issued pursuant to awards granted under the 2015 Plan. The 2015 Plan is administered by our Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

The Company valued options granted under the 2015 Plan under ASC 718 using the Black-Scholes pricing model. The granted options in 2022 and 2021 have exercise prices ranging from $25.00 to $4.33, generally vest over four years and expire in ten years. The stock options granted during the nine months ended September 30, 2022 and 2021 were valued using the Black-Scholes pricing model using the range of inputs as indicated below:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Expected life (years) | 7 | 7 |
| Risk-free interest rate | 0.72% - 3.22 | 0.5% - 1.8 |
| Expected volatility | 57.8% | 57.8% |
| Annual dividend yield | 0% | 0% |

---

The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company's employee stock options.

The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.

The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company's common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company's common stock has enough market history to use historical volatility.

The dividend yield assumption for options granted is based on the Company's history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.

The Company currently recognizes option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates.

A summary of the Company's stock option activity and related information is as follows.

---

| | | | |
|:---|:---|:---|:---|
|  |<br><br><br>**Options** |<br>**Weighted-**<br>**Average**<br>**Exercise**<br>**Price** | **Weighted-**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Life**<br>**(Years)** |
| Outstanding at December 31, 2021 | 7709833 | $2.36 | 6.90 |
| Granted | 1212500 | $13.51 | 0 |
| Exercised | (7927) | 0 |  |
| Forfeited/cancelled | (436786) | 8.76 |  |
| Outstanding at September 30, 2022 | 8477620 | $4.03 | 6.57 |
| Vested and expected to vest at September 30, 2022 | 8477620 | $4.03 | 6.57 |
| Exercisable at September 30, 2022 | 4556881 | $1.64 | 6.21 |

---

The weighted average grant date fair values of options granted during the period ended September 30, 2022 and 2021 were $25.00 and $4.33 per option, respectively. The Company's fair market value is based on the offering price in its Regulation A offerings at the time of grant. During the period ended September 30, 2022 and 2021, employees exercised their vested options to purchase 7,927 and 0 shares of common stock, and the Company received aggregate exercise proceeds of $18,521 and $0, respectively. The intrinsic value of the options exercised was $107,015 and $0 during the nine-months ended September 30, 2022 and 2021, respectively.

Stock option expense for the periods ended September 30, 2022 and 2021 was $6,371,760 and $200,034, respectively, and are included within the consolidated statements of operations as follows:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
| Cost of revenues | $648358 | $20162 |
| General and administrative | 2232419 | 49038 |
| Sales and marketing | 2926792 | 113742 |
| Research and development | 564191 | 17092 |
| Total | $6371760 | $200034 |

---

At September 30, 2022, the total compensation cost related to nonvested awards not yet recognized was approximately $15,459,394 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 2.83 years.

**NOTE 7 – SUBSEQUENT EVENTS**

The Company has evaluated subsequent events that occurred after September 30, 2022 through November 14, 2022. On October 24, 2022, StartEngine Crowdfunding, Inc. ("StartEngine") entered into a definitive agreement to acquire substantially all of the assets of the SeedInvest business as conducted by Circle Internet Financial Limited through its subsidiary Pluto Holdings, LLC, a Delaware limited liability company ("Pluto Holdings") and through SI Securities, LLC, a New York limited liability company ("SI Securities"), and SeedInvest Technology, LLC, a New York limited liability company, each a wholly-owned subsidiary of Pluto Holdings ("SeedInvest Technology," collectively, with the assets acquired from Pluto Holdings and SI Securities, "SeedInvest"). The completion of the acquisition of SeedInvest is subject to customary closing conditions and to regulatory approval by FINRA. The total consideration for the purchase is 960,000 shares of StartEngine's common stock, which based on StartEngine's current Regulation A offering price of $25 per share would be valued at $24 million.

**STARTENGINE CROWDFUNDING, INC.**

**AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2022 AND DECEMBER 31, 2021**

**Report of Independent Registered Public Accounting Firm**

To the shareholders and the board of directors of StartEngine Crowdfunding, Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheet of StartEngine Crowdfunding, Inc. (the "Company") as of December 31, 2021, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

**Restatement of Financial Statements**

As discussed in Note 1 to the financial statements, based on comments received from the Securities and Exchange Commission, the Company discovered certain classification errors in previously reported financial statements for the year ended December 31, 2021. The Company's management conducted an investigation with independent third-party consultants and the Company's independent auditors. As a result of this investigation, the Company determined that several accounts required reclassification to be in accordance with US GAAP. In addition, certain footnotes to such financial statements were required as a result of such changes. Accordingly, the 2021 financial statements have been restated to correct the reclassifications and related disclosures.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s BF Borgers CPA PC

**BF Borgers CPA PC**

We have served as the Company's auditor since 2021

Lakewood, CO

August 3, 2022

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Stockholders of StartEngine Crowdfunding, Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheet of StartEngine Crowdfunding, Inc. and subsidiaries (collectively the "Company") as of December 31, 2020, and the related statements of operations, stockholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We did not audit the financial statements of StartEngine Primary, LLC, a wholly-owned subsidiary, which statements reflect total revenues consisting of 31.4 percent of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for StartEngine Primary, LLC, is based solely on the report of the other auditors.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.

---

| |
|:---|
| /s/ dbb*mckennon* |
| We have served as the Company's auditor from 2017 to 2022 |
| Newport Beach, California |
| June 24, 2021, except for the effects of the stock split discussed in Note 1 to the consolidated financial statements, as to which the date is July 12, 2021 |

---

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **December**<br>**31,**<br>**2021**<br>**(as restated)** |<br>**December**<br>**31,**<br>**2020** |
| Assets |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $21000367 | $18539383 |
| &nbsp;&nbsp;&nbsp;Marketable securities | 1856 | 4054542 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance | 1477887 | 751633 |
| &nbsp;&nbsp;&nbsp;Other current assets | 3483129 | 395463 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 25963239 | 23741021 |
| Property and equipment, net | 57541 | 7986 |
| Investments – warrant assets | 1130133 | 431190 |
| Investments – stock | 3923788 | 1047537 |
| Investments – Collectibles | 1926394 |  |
| Investments – Real Estate | 2136628 |  |
| Intangible assets | 20000 | 20000 |
| Other assets | 50000 | 43200 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $35207722 | $25290934 |
| Liabilities and Stockholders' Equity |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $573840 | $346145 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 2607420 | 1216417 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 4111829 | 757750 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 7293089 | 2320312 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 7293089 | 2320312 |
| Commitments and contingencies |  |  |
| Stockholders' equity: |  |  |
| Series A Preferred Stock, par value $0.00001, 10,350,000 shares authorized, 9,272,044 and 9,762,783 shares issued and outstanding at December 31, 2021 and 2020, respectfully, liquidation preference of $5,310,409 and $5,591,471 at December 31, 2021 and 2020, respectfully. | 5286667 | 5566473 |
| Series T Preferred Stock, par value $0.00001, 4,950,000 shares authorized, 482,211 and 497,439 shares issued and outstanding at December 31, 2021 and 2020, respectively, liquidation preference of $1,414,486 and $1,459,154 at December 31, 2021 and 2020, respectively. | 983852 | 1014922 |
| Series Seed Preferred Stock, par value $0.00001, 10,650,000 shares authorized, 10,247,938 and 10,650,000 and shares issued and outstanding at December 31, 2021 and 2020, respectfully, liquidation preference of $1,707,990 and $1,775,000 at December 31, 2021 and 2020, respectively. | 1707990 | 1775000 |
| Common stock, par value $0.00001, 75,000,000 shares authorized, 32,865,193 and 30,508,476 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively | 328 | 305 |
| Additional paid-in capital | 39246724 | 32526503 |
| Subscription Receivable | (367831) |  |
| Noncontrolling interest | (4127) | (40041) |
| Accumulated deficit | (18938967) | (17872540) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 27914633 | 22970622 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $35207722 | $25290934 |

---

See accompanying notes to audited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2021**<br> **(as <br> restated)** | **2020** |
| Revenues | $29078030 | $12574218 |
| Cost of revenues | 5888893 | 3406397 |
| &nbsp;&nbsp;&nbsp;Gross profit | 23189137 | 9167821 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 8869653 | 5170697 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 11832183 | 5177254 |
| &nbsp;&nbsp;&nbsp;Research and development | 3132996 | 1309444 |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrants received for fees | 129357 | 29010 |
| &nbsp;&nbsp;&nbsp;Impairment in value of shares received for fees | 314261 | 51231 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 24278450 | 11737636 |
| Operating loss | (1180173) | (2569815) |
| Other expense (income), net: |  |  |
| &nbsp;&nbsp;&nbsp;Other expense (income), net | (113748) | 35973 |
| Total other expense (income), net | (113748) | 35973 |
| Loss before provision for income taxes | (975565) | (2605788) |
| Provision for income taxes | 90863 | 18612 |
| Net loss | (1066429) | (2624401) |
| &nbsp;&nbsp;&nbsp;Less: net loss attributable to noncontrolling interest | (35914) | (40041) |
| Net loss attributable to stockholders | $(1030515) | $(2584360) |
| Weighted average loss per share – basic and diluted | $(0.03) | $(0.10) |
| Weighted average shares outstanding – basic and diluted | 32865193 | 27123576 |

---

See accompanying notes to audited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Series A** | **Series A** | **Series T** | **Series T** | **Series Seed** | **Series Seed** | | | | | | | | |
|  | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** |<br>**Additional**<br>**Paid-in**<br>**Capital** |<br>**Subscription**<br>**Receivable** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Loss** |<br>**Noncontrolling**<br>**Interest** |<br>**Accumulated**<br>**Deficit** |<br><br>**Total** |
| **Balance at December 31, 2019** | 9762783 | 5566473 | $429939 | 814922 | 10650000 | 1775000 | $24016413 | 240 | 9740266 | (59672) | $— |  | (15288180) | 2549049 |
| Sale of common stock |  |  |  |  |  |  | 6413775 | 64 | 22313539 | 59672 |  |  |  | 22373275 |
| Offering costs |  |  |  |  |  |  |  |  | (1691713) |  |  |  |  | (1691713) |
| Exercise of stock options |  |  |  |  |  |  | 47916 | 1 | 12638 |  |  |  |  | 12639 |
| Sale of preferred stock |  |  | 67500 | 200000 |  |  |  |  |  |  |  |  |  | 200000 |
| Stock compensation expense |  |  |  |  |  |  | 30372 |  | 2151773 |  |  |  |  | 2151773 |
| Noncontrolling interest |  |  |  |  |  |  |  |  |  |  |  | (40041) | 40041 |  |
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | (2624401) | (2624401) |
| **Balance at December 31, 2020** | 9762783 | 5566473 | 497439 | 1014922 | 10650000 | 1775000 | 30508476 | 305 | 32526503 |  |  | (40041) | (17872540) | 22970622 |
| Sale of common stock |  |  |  |  |  |  | 1234922 | 12 | 15180987 | (367831) |  |  |  | 14813168 |
| Offering costs |  |  |  |  |  |  |  |  | (11471836) |  |  |  |  | (11471836) |
| Exercise of stock options |  |  |  |  |  |  | 213766 | 2 | 128321 |  |  |  |  | 128324 |
| Sale of preferred stock |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Conversion to Common Stock | (490739) | (279806) | (15228) | (31070) | (402062) | (67010) | 908029 | 9 | 377877 |  |  |  |  |  |
| Stock compensation expense |  |  |  |  |  |  |  |  | 2504872 |  |  |  |  | 2504871 |
| Noncontrolling interest |  |  |  |  |  |  |  |  |  |  |  | 35914 | (35914) |  |
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | (1030515) | (1030515) |
| **Balance at December 31, 2021 (as restated)** | 9272044 | $5286667 | 482211 | $983852 | 10247938 | $1707990 | 32865193 | $328 | $39246724 | $(367831) | $- | $(4127) | $(18938969) | $27914633 |

---

See accompanying notes to audited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2021**<br> **(restated)** | **2020** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(1030515) | $(2624401) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 6084 | 3961 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense | 118335 | 72282 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of warrants received for fees | (828300) | (398273) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of investments – other received for fees | (3190512) | (1022971) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant investments | 129357 | 29010 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of investments – other received for fees | 314261 | 51231 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on marketable securities |  | 55947 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 2504872 | 2151773 |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (844589) | (38475) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets | (3094467) | 28036 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 227695 | 292335 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 1391002 | 368907 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 3354079 | 286362 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (942698) | (744276) |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Purchase of marketable securities |  | (5034635) |
| &nbsp;&nbsp;&nbsp;Sale of marketable securities | 4052686 | 1233831 |
| &nbsp;&nbsp;&nbsp;Investments – Collectibles | (1926394) |  |
| &nbsp;&nbsp;&nbsp;Investments – Real Estate | (2136628) |  |
| &nbsp;&nbsp;&nbsp;Purchase of property and equipment | (55639) | (10074) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by investing activities | (65975) | (3810878) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of common stock | 15180999 | 22310269 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of preferred stock |  | 200000 |
| &nbsp;&nbsp;&nbsp;Offering costs | (11471836) | (1691713) |
| &nbsp;&nbsp;&nbsp;Subscriptions receivable | (367831) | 59672 |
| &nbsp;&nbsp;&nbsp;Proceeds from exercise of employee stock options | 128324 | 15973 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 3469655 | 20894201 |
| Increase in cash and cash equivalents | 2460983 | 16339047 |
| Cash and restricted cash, beginning of period | 18539384 | 2200337 |
| Cash and restricted cash, end of period | $21000367 | $18539384 |
| Supplemental disclosures of cash flow information: |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $- | $- |
| &nbsp;&nbsp;&nbsp;Cash paid for income taxes | $90863 | $12612 |

---

See accompanying notes to audited consolidated financial statements

**STARTENGINE CROWDFUNDING, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1 – NATURE OF OPERATIONS**

StartEngine Crowdfunding, Inc. was formed on March 19, 2014 ("Inception") in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc. and changed to the current name on May 8, 2014. The consolidated financial statements of StartEngine Crowdfunding, Inc. (the "Company" are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company's headquarters are located in Burbank, California.

The Company aims to revolutionize the startup financing model by helping both accredited and non-accredited investors invest in private companies on a public platform. StartEngine Crowdfunding Inc. has wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, StartEngine Assets LLC and StartEngine Primary LLC. StartEngine Capital LLC is a funding portal registered with the US Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA), StartEngine Secure LLC is a transfer agent registered with the SEC. StartEngine Assets LLC was formed in 2020 to buy, hold and manage assets in various asset classes such as real estate, automobiles, luxury goods and royalty-producing intangible assets. StartEngine Primary LLC was formed in October 2017 and received approval to operate as a registered broker-dealer in July 2019. On April 16, 2020, StartEngine Primary LLC received approval to operate as an alternative trading system. The Company's mission is to empower thousands of companies to raise capital and create significant amounts of jobs over the coming years.

*Stock Split*

On July 7, 2021, StartEngine Crowdfunding Inc. split its designated "Common Stock" and "Preferred Stock" on a 3 for 1 basis. The total number of shares of Common Stock that the Company is authorized to issue was increased to 75,000,000 shares after the split. The total number of shares of Preferred Stock that the Company is authorized to issue was increased to 25,950,000 after the split. Accordingly, all share and per share amounts for all periods presented in the consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.

*Management Plans*

The Company's revenue producing activities commenced in 2015 with the approved start of Title IV of the JOBS Act, which created new rules for Regulation A, and increased since then with the start of Regulation Crowdfunding under Title III of the JOBS Act. Because this is a relatively new industry, there is a level of uncertainty about how fast the volume of activity will increase and how future regulatory requirements may change the landscape. Because there is a level of uncertainty and because we are still in the early stages of these new regulations, the Company is expected to incur losses until such time that the volume of Regulation A and Regulation Crowdfunding campaigns and the investments in those campaigns is sufficient for revenues derived from those campaigns to cover its costs. These factors could indicate substantial doubt about the Company's ability to continue as a going concern.

The Company has cash and cash equivalents of approximately $21 million, which its managements believes will cover losses for the foreseeable future. The Company's management believes that any substantial doubt about the Company's ability to continue as a going concern has been alleviated.

*Restatement*

During preparation for financial reporting related to the the quarter ended March 31, 2022, and based on comments received from the Securities and Exchange Commission, the Company discovered certain classification errors in previously reported financial statements for the year ended December 31, 2021. The Company's management conducted an investigation with independent third-party consultants and the Company's independent auditors. As a result of this investigation, the Company determined that several accounts required reclassification to be in accordance with US GAAP. In addition, certain footnotes to such financial statements were required as a result of such changes. Accordingly, the Company made certain corrections to previously reported financial statements for the year ended December 31, 2021, as more fully described below.

The restatement also includes corrections for other errors identified as immaterial, individually and in the aggregate, to our consolidated financial statements.

*Descriptions of Misstatements*

&nbsp;&nbsp;&nbsp;&nbsp;(a) Reclassification of Subscriptions Receivable: In reviewing the company's escrow account from a prior offering, it was determined
that cash received for stock issued was not yet disbursed as of December 31, 2021. Accordingly, the value was reclassified from additional
paid-in capital to subscription receivable. The reclassification also caused a change in presentation in the statement of cash flows and
statement of stockholders' equity.

&nbsp;&nbsp;&nbsp;&nbsp;(b) Reclassification of Allocated Noncontrolling Interest Loss: The Company determined that in calculating its net income for the year,
that a portion of the net loss was improperly allocated to the Company, instead of the non-controlling interest. The Company determined
that an adjustment was needed to correct the allocations and the amount of net loss applicable to non-controlling interest was reclassified
as such. The reclassification also caused a change in presentation in the balance sheet, statement of cash flows and statement of stockholders'
equity.

&nbsp;&nbsp;&nbsp;&nbsp;(c) Reclassification of Marketable Securities: The Company determined that a money market mutual funds previously disclosed as marketable
securities should have been considered a cash equivalent. Accordingly, the value of the mutual fund was adjusted to be included in cash
and cash equivalents in the balance sheet. The reclassification also caused a change in presentation in the statement of cash flows.

&nbsp;&nbsp;&nbsp;&nbsp;(d) Change in fair value of Warrants: The company had previously aggregated the change in fair value of Warrants and the impairment of
shares on the Statement of Cash Flows. The company determined that these should each be segregated out to be consistent with the statement
of operations descriptions.

*Description of Restatement Tables*

The following tables present the impact of the restatements on our previously reported consolidated balance sheet, statement of operations, and cash flows for the year ended December 31, 2021. The effects to the consolidated statement of stockholders' equity has not been presented as such changes are reflected in the totals included in the consolidated balance sheet.

*Balance Sheet:*

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
|  | **Previously <br> Reported** | **Adjustment** | **As Restated** |
| Assets |  |  |  |
| Current assets: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $13920634 | 7079733 | $21000367 &nbsp;&nbsp;&nbsp;&nbsp;(c) |
| &nbsp;&nbsp;&nbsp;Marketable securities | 7081588 | (7079733) | 1856 &nbsp;&nbsp;&nbsp;&nbsp;(c) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $35207722 | - | 35207722 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 2607417 | 3 | 2607420 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liablities | 7293089 | 3 | 7293089 |
| Additional paid-in capital | 38878893 | 367831 | 39246724 &nbsp;&nbsp;&nbsp;&nbsp;(a) |
| Subscription Receivable | - | (367831) | (367831) (a) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 27914636 | (3) | 27914633 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $35207722 | - | $35207722 |

---

*Statement of Operations:*

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
|  | **Previously**<br>**Reported** |<br>**Adjustment** |<br>**As Restated** |
| &nbsp;&nbsp;&nbsp;General and administrative | 8869651 | 2 | 8869653 |
| &nbsp;&nbsp;&nbsp;Change in fair value of warrants received for fees |  | 129357 | 129357 &nbsp;&nbsp;&nbsp;&nbsp;(d) |
| &nbsp;&nbsp;&nbsp;Impairment in value of shares received for fees | 443618 | (129357) | 314261 &nbsp;&nbsp;&nbsp;&nbsp;(d) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 24278448 |  | 24278450 |
| Operating loss | (1089311) | (2) | (1089313) |
| Provision for income taxes | 90862 | 1 | 90863 |
| Net loss | 1066427 | 1 | 1066428 |
| &nbsp;&nbsp;&nbsp;Less: net loss attributable to noncontrolling interest | - | 35914 | 35914 &nbsp;&nbsp;&nbsp;&nbsp;(b) |
| Net loss attributable to stockholders | $1066427 | $(35913) | $1030514 |

---

*Statement of Cash Flows:*

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
|  | **Previously<br> Reported** | **Adjustment** | **As Restated** |
| Cash flows from operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(1066426) | $35911 | (1030515) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 6084 |  | 6084 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense | 118335 |  | 118335 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of warrants received for fees | (698943) | (129357) | (828300) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of investments - other received for fees | (2876251) | (314261) | (3190512) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of warrant investments |  | 129357 | 129357 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of investments - other received for fees | 443618 | (129357) | 314261 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on marketable securities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 2504872 |  | 2504872 |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (726254) | (118335) | (844589) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets | (3131090) | 36623 | (3094467) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 227695 |  | 227695 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 1391000 | 2 | 1391002 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 3354079 |  | 3354079 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (453281) | (489417) | (942698) |
| Cash flows from investing activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Purchase of marketable securities | (3559167) | 3559167 |  |
| &nbsp;&nbsp;&nbsp;Sale of marketable securities |  | 4052686 | 4052686 |
| &nbsp;&nbsp;&nbsp;Investments - Collectibles | (1926394) |  | (1926394) |
| &nbsp;&nbsp;&nbsp;Investments - Real Estate | (2136628) |  | (2136628) |
| &nbsp;&nbsp;&nbsp;Purchase of property and equipment | (49555) | (6084) | (55639) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by investing activities | (7671744) | 7605769 | (65975) |
| Cash flows from financing activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of common stock | 14813156 | 367843 | 15180999 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of preferred stock |  |  |  |
| &nbsp;&nbsp;&nbsp;Offering costs | (11471836) |  | (11471836) |
| &nbsp;&nbsp;&nbsp;Subscriptions receivable |  | (367831) | (367831) |
| &nbsp;&nbsp;&nbsp;Proceeds from exercise of employee stock options | 164965 | (36641) | 128324 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 3506285 | (36629) | 3469656 |
| (Decrease) increase in cash and restricted cash | (4618740) | 7079723 | 2460983 |
| Cash and restricted cash, beginning of period | 18539384 |  | 18539384 |
| Cash and restricted cash, end of period | $13920644 | $7079723 | 21000367 |
| Supplemental disclosures of cash flow information: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $- | $— | - |
| &nbsp;&nbsp;&nbsp;Cash paid for income taxes | $90863 | $— | 90863 |

---

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

*Basis of Presentation*

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

*Principles of Consolidation*

The consolidated financial statements include the accounts of StartEngine Crowdfunding, Inc.'s wholly-owned subsidiaries, StartEngine Capital LLC, StartEngine Secure LLC, and StartEngine Primary LLC and StartEngine Assets LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

*Use of Estimates*

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of expenses during the reporting periods. Significant estimates include the value of marketable securities, the value of stock and warrants received as compensation and collectability of accounts receivable. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

*Fair Value of Financial Instruments*

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2- Include other inputs that are directly or indirectly observable in the marketplace.

Level 3- Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2021. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. The following are level 1, 2 and 3 assets.

<u>Level 1</u>

Investments: Marketable securities are made up of mutual funds and shares of common stock that are valued based on quoted prices in active markets

<u>Level 2</u>

Investments - warrants (public portfolio): Fair value measurements of warrants of publicly traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable volatility assumptions based on comparable public company.

<u>Level 3</u>

Investments - warrants (private portfolio): Fair value measurements of warrants of private portfolio companies are priced based on a modified Black-Scholes option pricing model to estimate the asset value by using stated strike prices, warrant expiration dates modified to account for estimates to actual life relative to stated expiration, risk-free interest rates, and volatility assumptions based on comparable public companies. Option volatility assumptions used in the modified Black-Scholes model are based on public companies who operate in similar industries as companies in our private company portfolio. For these warrants, the fair value of the underlying stock is an unobservable input consistent with Investment - stocks noted above. Certain adjustments may be applied as determined appropriate by management for lack of liquidity.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Level 1 | Level 2 | Level 3 | Total |
| Cash and cash equivalents | $21000367 | $- | $- | $21000367 |
| Marketable securities |  | 1856 |  | 1856 |
| Investments - warrants | - | - | 1130132 | 1130132 |
|  | $21000367 | $1856 | $5053920 | $26056143 |

---

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value as of December 31, 2020:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Level 1 | Level 2 | Level 3 | Total |
| Cash and cash equivalents | $18539384 | $- | $- | $18539384 |
| Marketable securities | 4054542 |  |  | 4054542 |
| Investments - warrants | - | - | 431190 | 431190 |
|  | $22593926 | $- | $1478727 | $24072653 |

---

The following table presents additional information about transfers in and out of Level 3 assets measured at fair value for the year ended December 31, 2021 and 2020:

---

| | |
|:---|:---|
|  | Investments-<br>Warrants |
| Fair value at December 31, 2019 | $61927 |
| Receipt of warrants | 398273 |
| Change in fair value of warrants | (29010) |
| Fair value at December 31, 2020 | 431190 |
| Receipt of warrants | 830300 |
| Change in fair value of warrants | (129357) |
| Fair value at December 31, 2021 | $1130133 |

---

The following range of variables were used in valuing Level 3 warrant assets during the year ended December 31, 2021 and 2020:

---

| | | |
|:---|:---|:---|
|  | 2021 | 2020 |
| Expected life (years) | 1 - 2.5 | 1 - 2.5 |
| Risk-free interest rate | 0.1% - 0.9% | 0.1% - 0.9% |
| Expected volatility | 30% - 225% | 30% - 225% |
| Annual dividend yield | 0% | 0% |
| Underlying share values | $0.30 – 100.00 | $0.30 – 100.00 |
| Strike Prices | $0.30 – 100.00 | $0.30 – 100.00 |

---

For Investments – Warrants, the primary and most significant unobservable input relates to the underlying share value of the issuers for which we receive warrants. In all cases, there were sales of the stock to the public through Regulation Crowdfunding, Regulation A, or a Regulation D funding mechanism, but such sales are often not to the level that an active market existed or exists. After the sales, such shares are often illiquid, and a change in valuation is often difficult to determine due to the lack of information available. Information regarding these unobservable inputs could correspondingly change the value of these assets.

The Company also adjusts the expected life of certain warrants to account for potential liquidation events, as well as doubts regarding the ability for the issuer companies to continue as a going concern. We may apply marketability discounts to private company warrants to account for a general lack of liquidity of 20% due to the private nature of the associated underlying company. The quantitative measure used is based upon various models. Significant judgment is required by Management in selecting unobservable able inputs, and accordingly a change in the assumptions used for the valuation could cause the value to be significantly different. In general, increases in underlying share prices, expected life and volatility, increase the value of the warrants, whereas decreases would reduce the value.

*Accounts Receivable*

Accounts receivable are recorded at the invoiced amount and are non-interest-bearing. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance for doubtful accounts as of December 31, 2021 and 2020 was $209,026 and $90,691, respectively. Bad debt expense for the year ended December 31, 2021 and 2020 was $118,335 and $72,282, respectively.

As of December 31, 2021, the Company had accounts receivable over 90 days totaling $75,198.

*Investments – Warrant Assets*

In connection with negotiated platform fee agreements, we may obtain warrants giving us the right to acquire stock in companies undergoing Regulation A offerings. We hold these assets for prospective investment gains. We do not use them to hedge any economic risks nor do we use other derivative instruments to hedge economic risks stemming from these warrants.

We account for warrants in certain private and public (or publicly traded under the provisions of Regulation A) client companies as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815, Derivatives and Hedging. In general, the warrants entitle us to buy a specific number of shares of stock at a specific price within a specific time period. Certain warrants contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events. Our warrant agreements typically contain net share settlement provisions, which permit us to receive at exercise a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a "cashless" exercise). These warrants are recorded at fair value and are classified as Investments - warrants on our consolidated balance sheet at the time they are obtained, and remeasured each reporting period.

The grant date fair values of warrants received in connection with services performed are deemed to be revenue and recognized upon receipt.

Any changes in fair value from the grant date fair value of warrants will be recognized as increases or decreases to investments on our consolidated balance sheets and as a component of operating expenses on our consolidated statements of operations.

In the event of an exercise for shares, the basis or value in the securities is reclassified from Investment - warrants to marketable securities or non-marketable securities, as described below, on the consolidated balance sheet on the latter of the exercise date or corporate action date. The shares in public companies, or companies that trade over-the-counter as allowed by Regulation A, are classified as marketable securities (provided they do not have a significant restriction from sale). The shares in private companies without an active trading market are classified as non-marketable securities.

The fair value of the warrants portfolio is a critical accounting estimate and is reviewed each reporting period. We value our warrants using a modified Black-Scholes option pricing model, which incorporates the following significant inputs, in addition to certain adjustments for general lack of liquidity:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· An underlying asset value,
 which is estimated based on current information available in valuation reports, including any information regarding subsequent rounds
 of funding or performance of a company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Stated strike price, which
 can be adjusted for certain warrants upon the occurrence of subsequent funding rounds or other future events.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Price volatility or risk
 associated with possible changes in the warrant price. The volatility assumption is based on historical price volatility of publicly
 traded companies within indices or companies similar in nature to the underlying client companies issuing the warrant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The expected remaining
 life of the warrants in each financial reporting period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The risk-free interest
 rate is derived from the Treasury yield curve and is calculated based on the risk-free interest rates that correspond closest to
 the expected remaining life of the warrant on the date of assessment.

*Investments - Stock*

In connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, less adjustments for impairment in accordance with ASC 321-10-35-2. During the years ended December 31, 2021 and 2020, the Company received stock with a cost of $2,876,251 and $1,022,971, respectively, as payment for fees. During the year ended December 31, 2021 and 2020, impairment expense related to shares received amounted to $314,261 and $51,231, respectively.

*Investments – Collectibles*

The Company, through its subsidiary, purchases collectibles including art, wine, memorabilia, and other collectible assets, and are recorded at cost. The cost of the underlying asset includes the purchase price, including any deposits for the underlying asset and acquisition expenses, which include all fees, costs and expenses incurred in connection with the evaluation, discovery, investigation, development and acquisition of the underlying assets.

The Company treats the underlying assets as long-lived assets, and the underlying assets will be subject to an annual test for impairment and will not be depreciated or amortized. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Because the assets held are limited in nature and generally unique, the Company reviews each collectible asset on an individual basis. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The underlying assets are purchased by our subsidiary, StartEngine Assets, LLC, (the "Administrative Manager") and sold to StartEngine Collectibles Funds I LLC, for cash or a promissory note. The Series uses the proceeds of the offering to pay off the note. Acquisition expenses are typically paid for in advance by the Administrative Manager and are reimbursed by the Series from the proceeds of the offering in accordance with the offering circular. All such transactions are eliminated in consolidation.

The below is a breakdown of the types of collectibles and their value held as of December 31, 2021:

---

| | |
|:---|:---|
|  | **Period Ended December 31,** |
|  | **2021** |
| Wine | $208123 |
| Trading Cards | 939271 |
| Artwork | 779000 |
| Total collectibles | $1926394 |

---

*Investments – Real Estate*

Investments in real estate are stated at cost less accumulated depreciation and presented separately from Property and Equipment used for internal operating purposes. Real Estate purchased for investment includes the cost of the purchased property, including the building, related land. The Company allocates certain capitalized title fees and relevant acquisition expenses to the capitalized costs of the building. All capitalized property costs, except for the value attributable to the land, are depreciated using the straight-line method over the estimated useful life of 27.5-39 years depending on the use of the building. Additions and property improvements in excess of $5,000 are capitalized and depreciated using the straight-line method over the estimated useful lives of 5-7 years, while routine repairs and maintenance are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statement of operations.

StartEngine has invested $2,136,628 into one residential apartment building in California as of December 31, 2021.

*Property and Equipment*

Property and equipment are stated at cost. The Company's fixed assets are depreciated using the straight-line method over the estimated useful life of three to five years. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations.

*Intangible Assets*

Intangible assets are amortized over their respective estimated lives, unless the lives are determined to be indefinite and reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. The impairment testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. Impairment charges, if any, are recorded in the period in which the impairment is determined.

*Impairment of Long-Lived Assets*

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

*Preferred Stock*

ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity.

Management is required to determine the presentation for the preferred stock as a result of the liquidation and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly, derivative liability accounting is not required by the Company.

Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock.

Dividends which are required to be paid upon redemption are accrued and recorded within preferred stock and accumulated deficit.

*Noncontrolling Interest*

The Company presents third party minority interests in subsidiaries in accordance with ASC 810, Consolidation. Under that topic, such minority interests are presented on the Company's balance sheet within the equity section as noncontrolling interest.

*Equity Offering Costs*

The Company accounts for offering costs in accordance with ASC 340, Other Assets and Deferred Costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders' equity upon the completion of an offering or to expense if the offering is not completed. Offering costs of $11,471,836 and $1,691,713 were charged to stockholders' equity during the year ended December 31, 2021 and 2020, respectively.

*Revenue Recognition*

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 contains a framework for analyzing potential revenue transactions by identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the Company satisfies a performance obligation.

The Company recognizes revenues from Regulation A and Regulation D platform fees at an agreed-upon rate. In 2021 the rate was a percentage of the capital raised. Platform fees are paid to the Company from customers' escrow accounts. For certain Regulation A offerings, the Company earns a portion of its platform fees in warrants or shares. The grant date fair values of shares and warrants received are recognized as revenue when earned. The Company's performance obligations are satisfied as services are rendered through the duration of the campaign.

Revenues from Regulation Crowdfunding platform fees are recognized at an agreed-upon rate based on the amount invested in an offering. Platform fees are due upon the disbursement of funds from escrow and are paid to the Company from customers' escrow accounts. The Company's performance obligations are satisfied as services are rendered through the duration of the campaign.

The Company provides marketing services branded under the name "StartEngine Premium.". The Company invoices for these services upon an issuer launching a campaign. If the campaign fails to launch, no amounts are due.

The Company provides transfer agent services branded under the name "StartEngine Secure" through its registered transfer agent subsidiary, StartEngine Secure, LLC. The company enters into an agreement with issuers for an annual term that commences from the date the issuers Regulation Crowdfunding or Regulation A offering launches. The transfer agent services represent a single performance obligation and is deferred over 12 months which is the period over which the Company's performance obligations are to be satisfied. Fees for transfer agent services are charged based on a per investor basis, subject to certain maximums. The Company, may also invoice customers for ancillary services such as but not limited to: recording of stock splits, change of address, or other services. These services are provided and earned at a point-in-time based on defined amounts in the agreement. Payment for StartEngine Secure services are generally paid via customers' escrow account, in full, during the initial year and billed to the client for cash payment for subsequent years if the customer does not have a follow-on offering or to the extent amounts in escrow are not sufficient. There are no significant judgments related to this revenue stream.

The Company offers campaign advertising services branded under the name "StartEngine Promote." Under these services, we assist issuer campaigns through creating, designing, purchasing and organizing media across digital marketing channels. Promote services represent a single performance obligation. The term of the services commences upon the agreement being signed and through the closing of the related campaign. The revenues are earned based on a percentage of additional investments attributable to the campaign advertising services, and invoiced monthly to the issuer throughout the campaign. The company may also earn a commission on placing television advertisements on behalf of the issuer. StartEngine Promote fees are charged to the issuers and are paid to the Company from customers' escrow accounts. The Company's performance obligations are satisfied as services are rendered. There are no significant judgments related to this revenue stream.

In 2020, the company introduced the StartEngine OWNers bonus program. The general public can become members of the StartEngine OWNers bonus program on StartEngine's website for $275 per year. The OWNers Bonus entitles members to 10% bonus shares on all investments they make in offerings on StartEngine where the issuer chooses to participate in the program. Issuers using our broker-dealer and funding portal services can choose to participate in our OWNers bonus program with respect to the offerings they are making under Regulation A or Regulation CF. Those issuers will grant bonus shares in their offerings to members of the StartEngine OWNers bonus program. The bonus shares are included in the offering statements filed with the SEC, and therefore offered and sold in reliance on Regulation A or Regulation CF, respectively. The OWNers program provides member priority access to certain collectibles being offered through one of our subsidiary Series LLC offerings, notification of new bonus eligible launches and the ability to move to the front of the line on investment waitlists, and lower trading fees on StartEngine Secondary. The Company recognizes the revenue associated with memberships over 12 months, which is the term of the membership. There are no significant judgments related to this revenue stream. Such revenues are included in Other service revenues noted below.

The Company hosts periodic events, such as summits, and recognizes revenues from ticket sales and sponsorships. Payments from event attendees and event sponsors received prior to each event are deferred and recognized in revenue once the event occurs.

The Company also provides other ancillary bundled professional services, which are recognized as such services are rendered.

In all instances, As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

The Company's contracts with customers generally have a term of one year or less. As of December 31, 2021 and 2020, the Company had deferred revenue of $4,111,829 and $757,750, respectively, related to performance obligations yet to be fulfilled. The Company had no other customer contract assets.

During the years ended December 31, 2021 and 2020, revenue was made up of the following categories associated with the above described services:

---

| | | |
|:---|:---|:---|
|  | **Years Ended December 31,** | **Years Ended December 31,** |
|  | **2021** | **2020** |
| Regulation Crowdfunding platform fees | $14617318 | 6279099 |
| Regulation A commissions | 6054340 | 4315534 |
| StartEngine Premium | 2023000 | 741394 |
| StartEngine Secure | 868731 | 321037 |
| StartEngine Promote | 278159 | 470374 |
| OWNers Bonus revenue | 4934022 | 40923 |
| Other service revenue | 302461 | 405857 |
| Total revenues | $29078030 | $12574218 |

---

As of December 31, 2021 and 2020, disaggregated deferred revenue was made up of the following:

---

| | | |
|:---|:---|:---|
|  | **Years Ended December 31,** | **Years Ended December 31,** |
|  | **2021** | **2020** |
| StartEngine Secure | $731687 | $305071 |
| OWNers Bonus | 3380143 | 452679 |
| Other service deferred revenue | - | - |
| Total deferred revenue | $4111829 | $757750 |

---

*Cost of Revenues*

Cost of revenues consists of internal employees, hosting fees, processing fees, and certain software subscription fees that are required to provide services to our issuers.

*Research and Development*

We incur research and development costs during the process of researching and developing our technologies and future offerings. Our research and development costs consist primarily of non-capitalizable engineering fees for both employees and consultants related to our website and future product offerings, email and other tools that are utilized for client related services and outreach. During the year ended December 31, 2021 and 2020, research and development costs were $2,918,951 and $1,309,444, respectively.

*Stock-Based Compensation*

The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee's requisite vesting period and over the nonemployee's period of providing goods or services.

*Income Taxes*

Income taxes are accounted for in accordance with the provisions of ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

*Earnings per Common and Common Equivalent Share*

The computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus common stock equivalents which would arise from the exercise of securities outstanding using the treasury stock method and the average market price per share during the year. Options and convertible preferred stock which are common stock equivalents are not included in the diluted earnings per share calculation for the year ended December 31, 2021 or 2020 since their effect is anti-dilutive. See Note 6 for outstanding stock-options as of December 31, 2021 and 2020.

*Concentration of Credit Risk*

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.

At times, the Company may have certain vendors or customers that make up over 10% of the balance at any given time. However, the Company is not dependent on any single or group of vendors or customers, and accordingly, the loss of any such vendors or customers would not have a significant impact on the Company's operations.

*Risks and Uncertainties*

The Company's operations are subject to new laws, regulation and compliance. Significant changes to regulations governing the way the Company derives revenues could impact the company negatively. Technological and advancements and updates as well as maintaining compliance standards are required to maintain the Company's operations.

*Recent Accounting Pronouncements*

The FASB issues ASUs to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

**NOTE 3 – MARKETABLE SECURITIES AND INVESTMENTS**

*Marketable Securities*

Marketable securities consisted of the following as of December 31, 2021 and 2020:

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2021 | 2020 |
| Mutual funds – short term bond index | $- | $4052686 |
| Common stock | 1856 | 1856 |
|  | $1856 | $4054542 |

---

The Company had $10,716 in losses and $76,991 in losses on mutual funds held for the year ended December 31, 2021 and 2020, respectively. Unrealized losses as of December 31, 2020 were negligible.

*Investments – Warrant Assets*

Equity warrants, as described in Note 2, are equity warrants received for services provided. The warrants are valued on the date they are earned in accordance with revenue recognition criteria and again at each reporting date.

*Investments – Stock*

Investments - stock, as described in Note 2, consist of shares the Company holds in various companies that launched on its platform received in exchange for services provided. The shares are recorded at cost less any impairment.

**NOTE 4 – PROPERTY AND EQUIPMENT**

As of December 31, 2021 and 2020, property and equipment consisted of the following:

---

| | | |
|:---|:---|:---|
|  | December 31, <br> 2021 | December 31, <br> 2020 |
| Computer equipment | $72358 | $16818 |
| Software | 3753 | 3654 |
| Total property and equipment | 76111 | 20472 |
| &nbsp;&nbsp;&nbsp;Accumulated depreciation | (18571) | (12486) |
|  | $57540 | $7986 |

---

Depreciation expense for the year ended December 31, 2021 and 2020 was $6,084 and $3,961, respectively.

**NOTE 5 – COMMITMENTS AND CONTINGENCIES**

The Company is currently not involved with and does not know of any pending or threatening litigation against the Company or any of its officers.

The Company maintains offices on a month-to-month lease. Total rent expense for the year ended December 31, 2021 and 2020 amounted to $59,268 and $299,840, respectively.

**NOTE 6 – STOCKHOLDERS' EQUITY**

*Preferred Stock*

As of December 31, 2021, the Company had authorized the issuance of 8,650,000 shares of preferred stock with par value of $0.00001. Of these authorized shares, 3,450,000 were designated as Series A Preferred Stock ("Series A"), 1,650,000 were designated as Series T Preferred Stock ("Series T"), and 3,550,000 were designated as Series Seed Preferred Stock ("Series Seed").

As described in Note 1, concurrently with a stock split on July 7, 2021, the Company has authorized the issuance of 25,950,000 shares of our preferred stock with par value of $0.00001. Of these authorized shares, 10,350,000 are designated as Series A, 4,950,000 are designated as Series T, and 10,650,000 are designated as Series Seed.

*Series A Preferred Stock*

The Series A has liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series A shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series T in proportion to its respective liquidation preference. Holders of Series A will receive an amount equal to $0.5727 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series A votes on an as-converted basis. The Series A is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series A is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $2.86 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series A has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

*Series T Preferred Stock*

The Series T have liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series T shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series A in proportion to its respective liquidation preference. Holders of Series T will receive an amount equal to $2.93 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series T votes on an as-converted basis. The Series T is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series T is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $2.93 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series T has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

During the year ended December 31, 2020, the Company sold 67,500 shares of Series T Preferred Stock for $200,000.

*Series Seed Preferred stock*

The Series Seed have liquidation priority over the common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series Seed shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, after any payment made to Series A and Series T, but before any payment is made to the Company's common stock, an amount equal to $0.1667 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of Series A and Series T first, then ratably in proportion to the full preferential amounts for which they are entitled to the Series Seed. The Series Seed votes on an as-converted basis. The Series Seed is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series Seed is automatically converted into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, converts the offer and sale of common stock at an offering price of not less than $2.86 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series Seed has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

*Common Stock*

As of December 31, 2021 we had authorized the issuance of 25,000,000 shares of our common stock with par value of $0.00001. As described in Note 1, concurrently with a stock split, we increased the authorized shares of common stock to 75,000,000.

During the year ended December 31, 2021, the Company sold 1,204,526 shares of common stock through its Regulation A offering and sold 1,128,085 shares of common stock on behalf of selling shareholders. The Company recognized gross proceeds of $14,813,136. In connection with the offering, the Company recognized offering costs of $11,471,836 during the year ended December 31, 2021.

During the year ended December 31, 2020, the Company sold 6,413,775 shares of common stock through its Regulation A offering. The Company recognized gross proceeds of $22,313,603 and received funds from a subscription receivable of $59,672 related to the sale of shares in 2019.

*Stock Options*

In 2015, our Board of Directors adopted the StartEngine Crowdfunding, Inc. 2015 Equity Incentive Plan (the "2015 Plan"). The 2015 Plan provides for the grant of equity awards to employees, and consultants, including stock options, stock purchase rights and restricted stock units to purchase shares of our common stock. Up to 7,590,000 shares of our common stock may be issued pursuant to awards granted under the 2015 Plan. The 2015 Plan is administered by our Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

The Company valued options granted under the 2015 Plan under ASC 718 using the Black-Scholes pricing model. The granted options in 2021 and 2020 have exercise prices ranging from $13.50 to $4.33, generally vest over four years and expire in ten years. The stock options granted during the year ended December 31, 2021 and 2020 were valued using the Black-Scholes pricing model using the range of inputs as indicated below:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Expected life (years) | 7 | 7 |
| Risk-free interest rate | 0.5% - 1.8% | 0.5% - 1.8% |
| Expected volatility | 57.8% | 57.8% |
| Annual dividend yield | 0% | 0% |

---

The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company's employee stock options.

The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.

The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company's common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company's common stock has enough market history to use historical volatility.

The dividend yield assumption for options granted is based on the Company's history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.

The Company currently recognizes option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates.

A summary of the Company's stock option activity and related information is as follows.

---

| | | | |
|:---|:---|:---|:---|
|  |<br><br>**Options** |<br>**Weighted-**<br>**Average**<br>**Exercise**<br>**Price** | **Weighted-<br> Average**<br>**Remaining**<br>**Contractual**<br>**Life**<br>**(Years)** |
| Outstanding at December 31, 2019 | 4035000 | $0.85 | 6.77 |
| Granted | 3022515 | 3.09 |  |
| Exercised | (47916) | 0.26 |  |
| Forfeited/cancelled | (195000) | 0.26 |  |
| Outstanding at December 31, 2020 | 6814599 | $1.86 | 7.57 |
| Granted | 587000 | 8.25 |  |
| Exercised | (213766) | 0.60 |  |
| Forfeited/cancelled | (108000) | 4.33 |  |
| Outstanding at December 31, 2021 | 7079833 | $2.36 | 6.90 |
| Vested and expected to vest at December 31, 2021 | 7079833 | $1.18 | 6.40 |
| Exercisable at December 31, 2021 | 3924831 | $1.18 | 6.40 |

---

The weighted average grant date fair values of options granted during the years ended December 31, 2021 and 2020 were $8.25 and $2.11 per option, respectively. The Company's fair market value is based on the offering price in its Regulation A offerings at the time of grant. During the years ended December 31, 2021 and 2020, employees exercised their vested options to purchase 213,766 and 47,916 shares of common stock, and the Company received aggregate exercise proceeds of $128,323 and $12,638, respectively. The intrinsic value of the options exercised was $925,607 and $129,567 during the years ended December 31, 2021 and 2020, respectively.

Stock option expense for the year ended December 31, 2021 and 2020 was $2,504,872 and $2,032,280, respectively, and are included within the consolidated statements of operations as follows:

---

| | | |
|:---|:---|:---|
|  | 2021 | 2020 |
| Cost of revenues | $252468 | $204835 |
| General and administrative | $614063 | 498208 |
| Sales and marketing | $1424296 | 1155575 |
| Research and development | $214045 | 173662 |
| Total | $2504872 | $2032280 |

---

At December 31, 2021, the total compensation cost related to nonvested awards not yet recognized was approximately $10,199,255 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 3.15 years.

**NOTE 7 – INCOME TAXES**

For the years ended December 31, 2021 and 2020, the Company only recorded state minimum taxes due to current and historical losses incurred by the Company. The Company's losses before income taxes consist solely of losses from domestic operations.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs.

The Company considered the provisions under the CARES Act and elected not to take advantage of the provisions of CARES Act as the effect of such provisions was not expected to have a material impact on the Company's results of operations, cash flows and financial statements.

The following table presents the current and deferred tax provision for federal and state income taxes for the years ended December 31, 2021 and 2020.

Reconciliations of the U.S. federal statutory rate to the actual tax rate are as follows for the year ended December 31, 2021 and 2020.

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Tax at Federal Statutory Rate | 21.0% | 21.0% |
| State, Net of Federal Benefit | 7.0% | 0.7% |
| Meals & Entertainment | -1.6% | -0.2% |
| Stock-based compensation | -65.8% | -12.2% |
| Other | -6.2% | -1.6% |
| Change in Valuation Allowance | 54.1% | -6.8% |
| Provision for Taxes | 8.5% | 0.9% |

---

The components of our deferred tax assets (liabilities for federal and state income taxes consisted of the following as of December 31, 2021 and 2020.

---

| | | |
|:---|:---|:---|
|  | 2021 | 2020 |
| Net Operating Loss Carryforwards | $3505436 | $3878130 |
| Reserves and Accruals | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;202704 | 83778 |
| Depreciation & Amortization | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;503 | 1664 |
| Gross Deferred Tax Assets | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3708643 | 3963572 |
| Valuation Allowance | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3708643) | (3963572) |
| Net Deferred Tax Assets | $- | $- |

---

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily of net operating loss carryforwards and tax credits. Management has considered the Company's history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its U.S. federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2021 and 2020, respectively. The Company reevaluates the positive and negative evidence at each reporting period. The Company's valuation allowance increased during 2021 by $353,300 primarily due to the generation of net operating loss carryforwards and stock based compensation.

Based on federal tax returns filed or to be filed through December 31, 2021, the Company had approximately $14.7 million in U.S. and $15.4 million in state tax net operating loss carryforwards, which begin to expire in 2034. The 2017 Tax Cuts and Jobs Act ("TCJA") will generally allow losses incurred after 2017 to be carried over indefinitely, but will generally limit the net operating loss deduction to the lesser of the net operating loss carryover or 80% of a corporation's taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation's net operating loss carryover or 100% of a corporation's taxable income and be available for twenty years from the period the loss was generated. Losses starting in 2018 do not expire. The CARES Act temporarily allows the Company to carryback net operating losses arising in 2018, 2019 and 2020 to the five prior tax years. In addition, net operating losses generated in these years could fully offset prior year taxable income without the 80% of the taxable income limitation under the TCJA which was enacted on December 22, 2017. The Company has been generating losses since its inception, as such the net operating loss carryback provision under the CARES Act is not applicable to the Company.

The Company files tax returns in the United States and California. The Company is subject to U.S. federal and state tax examinations by tax authorities for years 2017 through present. As of December 31, 2021 and 2020, the Company has recorded no liability for unrecognized tax benefits, interest, or penalties related to federal and state income tax matters and there currently no pending tax examinations. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense.

**NOTE 8 – SUBSEQUENT EVENTS**

The Company has evaluated subsequent events that occurred after December 31, 2021 through August 3, 2022. There have been no other events or transactions during this time which would have a material effect on these consolidated financial statements.

**ITEM 8. EXHIBITS**

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

---

| | |
|:---|:---|
| [2.1](http://www.sec.gov/Archives/edgar/data/1661779/000110465921091366/tm219675d5_ex2-1.htm) | [Sixth Amended and Restated Certificate of Incorporation (1)](http://www.sec.gov/Archives/edgar/data/1661779/000110465921091366/tm219675d5_ex2-1.htm) |
| [2.2](http://www.sec.gov/Archives/edgar/data/1661779/000114420418063436/tv508487_ex2-2.htm) | [Amended and Restated Bylaws (2)](http://www.sec.gov/Archives/edgar/data/1661779/000114420418063436/tv508487_ex2-2.htm) |
| [3.1](http://www.sec.gov/Archives/edgar/data/1661779/000110465920032597/tm2012060d1_ex3-1.htm) | [Second Amended and Restated Investors' Rights Agreement (3)](http://www.sec.gov/Archives/edgar/data/1661779/000110465920032597/tm2012060d1_ex3-1.htm) |
| [3.2](http://www.sec.gov/Archives/edgar/data/1661779/000110465922020902/tm226245d1_ex3-2.htm) | [Form of Irrevocable Power of Attorney (4)](http://www.sec.gov/Archives/edgar/data/1661779/000110465922020902/tm226245d1_ex3-2.htm) |
| [4.1](tm236154d1_ex4-1.htm) | [Form of Common Stock Subscription Agreement](tm236154d1_ex4-1.htm) |
| [6.1](tm236154d1_ex6-1.htm) | [Amended and Restated 2015 Equity Incentive Plan and Form of Stock Option Grant Notice](tm236154d1_ex6-1.htm) |
| [6.2](http://www.sec.gov/Archives/edgar/data/1661779/000110465922020902/tm226245d1_ex6-2.htm) | [Employment Agreement effective as of January 1, 2022 (Howard Marks) (4)](http://www.sec.gov/Archives/edgar/data/1661779/000110465922020902/tm226245d1_ex6-2.htm) |
| [6.3](http://www.sec.gov/Archives/edgar/data/1661779/000114420418036457/tv497502_ex6-6.htm) | [Observer Rights Agreement dated November 2, 2016 (Ronald Miller) (2)](http://www.sec.gov/Archives/edgar/data/1661779/000114420418036457/tv497502_ex6-6.htm) |
| [6.4](http://www.sec.gov/Archives/edgar/data/1661779/000110465922122400/tm2231329d1_ex99-2.htm) | [Asset Purchase Agreement (5)](http://www.sec.gov/Archives/edgar/data/1661779/000110465922122400/tm2231329d1_ex99-2.htm) |
| [8.1](http://www.sec.gov/Archives/edgar/data/1661779/000110465922032551/tm226245d2_ex8-1.htm) | [Escrow Agreement for Securities Offering (4)\*](http://www.sec.gov/Archives/edgar/data/1661779/000110465922032551/tm226245d2_ex8-1.htm) |
| [9.1](https://www.sec.gov/Archives/edgar/data/1661779/000110465922034399/tm226245d3_ex9-1.htm) | [Letter from dbbMcKennon (6)](https://www.sec.gov/Archives/edgar/data/1661779/000110465922034399/tm226245d3_ex9-1.htm) |
| [11.1](tm236154d1_ex11-1.htm) | [Consent of dbbMcKennon](tm236154d1_ex11-1.htm) |
| [11.2](tm236154d1_ex11-2.htm) | [Consent of BF Borgers CPA PC](tm236154d1_ex11-2.htm) |
| [12.1](https://www.sec.gov/Archives/edgar/data/1661779/000110465922032551/tm226245d2_ex12-1.htm) | [Attorney opinion on the legality of the offering (4)](https://www.sec.gov/Archives/edgar/data/1661779/000110465922032551/tm226245d2_ex12-1.htm) |
| [13.1](https://www.sec.gov/Archives/edgar/data/1661779/000110465922032551/tm226245d2_ex13-1.htm) | ["Test the waters" materials (4)](https://www.sec.gov/Archives/edgar/data/1661779/000110465922032551/tm226245d2_ex13-1.htm) |

---

\* Portions of this exhibit have been omitted.

&nbsp;&nbsp;&nbsp;&nbsp;(1) Filed as an exhibit to the StartEngine Crowdfunding, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11487)

&nbsp;&nbsp;&nbsp;&nbsp;(2) Filed as an exhibit to the StartEngine Crowdfunding, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10862)

&nbsp;&nbsp;&nbsp;&nbsp;(3) Filed as an exhibit to the StartEngine Crowdfunding, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11177)

(4) Previoulsy filed as an exhibit to this Offering Statement on Form 1-A (Commission File No. 024-11806)

(5) Filed as an exhibit to the StartEngine Crowdfunding, Inc. Current Report on Form 8-K/A (filed November 28, 2022, and incorporated herein by reference).

(6) Filed as an exhibit to the StartEngine Crowdfunding, Inc.'s
Current Report on Form 1-U (Commission File No. 24R-00138)

**SIGNATURE**

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Burbank, California on February 13, 2023.

---

| | |
|:---|:---|
|  | **StartEngine Crowdfunding, Inc.** |
| **By:** | /s/ *Howard Marks* |
|  | Howard Marks, Chief Executive Officer |
|  | Date: February 13, 2023 |

---

This Offering Statement has been signed below by the following persons in the capacities and on the dates indicated.

---

| | |
|:---|:---|
| **By:** | /s/ *Howard Marks* |
|  | Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Director |
|  | Date: February 13, 2023 |
| **By:** | /s/ *Ronald Miller* |
|  | Ronald Miller, Director and Chairman |
|  | Date: February 13, 2023 |

---

## Ex1A-4

**Exhibit 4.1**

FORM OF COMMON STOCK SUBSCRIPTION AGREEMENT

**THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.** THIS INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO BE ILLIQUID FOR AN INDEFINITE PERIOD OF TIME. NO PUBLIC MARKET EXISTS FOR THE SECURITIES, AND NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOLLOWING THIS OFFERING.

**THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE SKY LAWS.** ALTHOUGH AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO SUBSCRIBER IN CONNECTION WITH THIS OFFERING OVER OUR WEB-BASED PLATFORM (THE "PLATFORM"). ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

**INVESTORS WHO ARE NOT "ACCREDITED INVESTORS" (AS THAT TERM IS DEFINED IN SECTION 501 OF REGULATION D PROMULGATED UNDER THE ACT) ARE SUBJECT TO LIMITATIONS ON THE AMOUNT THEY MAY INVEST, AS SET OUT IN SECTION 4.** THE COMPANY IS RELYING ON THE REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH SUBSCRIBER IN THIS SUBSCRIPTION AGREEMENT AND THE OTHER INFORMATION PROVIDED BY SUBSCRIBER IN CONNECTION WITH THIS OFFERING TO DETERMINE THE APPLICABILITY TO THIS OFFERING OF EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT.

**THE SUBSCRIPTION AGREEMENT, THE OFFERING CIRCULAR OR ANY OF THE OTHER MATERIALS AVAILABLE ON THE PLATFORM (COLLECTIVELY, THE "OFFERING MATERIALS") MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY.** THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS "ESTIMATE," "PROJECT," "BELIEVE," "ANTICIPATE," "INTEND," "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

**THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE.** THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH THE SECURITIES ARE NOT BEING OFFERED.

**THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE DELIVERY NOR THE PURCHASE OF THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.**

TO: StartEngine Crowdfunding, Inc. <br> 4100 W Alameda Ave., Suite 300 <br> Burbank, California 91505

Ladies and Gentlemen:

<u>1. Subscription</u>.

(a) The undersigned ("Subscriber") hereby irrevocably subscribes for and agrees to purchase Common Stock (the "Securities"), of StartEngine Crowdfunding, Inc., a Delaware Corporation (the "Company"), at a purchase price of $25.00 per share of Common Stock (the "Per Security Price"), upon the terms and conditions set forth herein. The minimum subscription is $500. The rights of the Common Stock are as set forth in Sixth Amended and Restated Certificate of Incorporation and Bylaws included in the Exhibits to the Offering Statement of the Company filed with the SEC (the "Offering Statement").

(b) Subscriber understands that the Securities are being offered pursuant to an offering circular (the "Offering Circular") filed with the SEC as part of the Offering Statement (SEC File No. 024-11806), as may be amended from time to time. By executing this Subscription Agreement as provided herein, Subscriber acknowledges that Subscriber has received access to this Subscription Agreement, copies of the Offering Circular and Offering Statement including exhibits thereto and any other information required by the Subscriber to make an investment decision.

(c) The Subscriber's subscription may be accepted or rejected in whole or in part, at any time prior to a Closing Date (as hereinafter defined), by the Company at its sole discretion. In addition, the Company, at its sole discretion, may allocate to Subscriber only a portion of the number of Securities Subscriber has subscribed for. The Company will notify Subscriber whether this subscription is accepted (whether in whole or in part) or rejected. If Subscriber's subscription is rejected, Subscriber's payment (or portion thereof if partially rejected) will be returned to Subscriber without interest and all of Subscriber's obligations hereunder shall terminate.

(d) The aggregate number of Securities sold shall not exceed [_________] (the "Maximum Offering"), [________] of which are being sold by certain of the Company's existing stockholders (collectively, the "Selling Stockholders"). The Company may accept subscriptions until [_______________], unless otherwise extended by the Company in its sole discretion in accordance with applicable SEC regulations for such other period required to sell the Maximum Offering (the "Termination Date"). The Company may elect at any time to close all or any portion of this offering, on various dates at or prior to the Termination Date (each a "Closing Date").

(e) In the event of rejection of this subscription in its entirety, or in the event the sale of the Securities (or any portion thereof) is not consummated for any reason, this Subscription Agreement shall have no force or effect, except for Section 5 hereof, which shall remain in force and effect.

(f) The terms of this Subscription Agreement shall be binding upon Subscriber and its transferees, heirs, successors and assigns (collectively, "Transferees"); provided that for any such transfer to be deemed effective, the Transferee shall have executed and delivered to the Company in advance an instrument in a form acceptable to the Company in its sole discretion, pursuant to which the proposed Transferee shall be acknowledge, agree, and be bound by the representations and warranties of Subscriber, terms of this Subscription Agreement.

<u>2. Purchase Procedure</u>.

(a) <u>Payment.</u> The purchase price for the Securities shall be paid simultaneously with the execution and delivery to the Company of the signature page of this Subscription Agreement. Subscriber shall deliver a signed copy of this Subscription Agreement , along with payment for the aggregate purchase price of the Securities by cash, ACH electronic transfer or wire transfer to an account designated by the Company, or by any combination of such methods.

(b) <u>Escrow arrangements.</u> Payment for the Securities shall be received by Bryn Mawr Trust Company (the "Escrow Agent") from the undersigned by transfer of immediately available funds, check or other means approved by the Company at least two days prior to the applicable Closing Date, in the amount as set forth in Appendix A on the signature page hereto. Upon such Closing Date, the Escrow Agent shall release such funds to the Company and the Selling Shareholders. The undersigned shall receive notice and evidence of the digital entry of the number of the Securities owned by undersigned reflected on the books and records of the Company and verified by StartEngine Secure LLC (the "Transfer Agent"), which books and records shall bear a notation that the Securities were sold in reliance upon Regulation A.

<u>3. Representations and Warranties of the Company</u>.

The Company represents and warrants to Subscriber that the following representations and warranties are true and complete in all material respects as of the date of each Closing Date, except as otherwise indicated. For purposes of this Agreement, an individual shall be deemed to have "knowledge" of a particular fact or other matter if such individual is actually aware of such fact. The Company will be deemed to have "knowledge" of a particular fact or other matter if one of the Company's current officers has, or at any time had, actual knowledge of such fact or other matter.

(a) <u>Organization and Standing.</u> The Company is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Subscription Agreement, and any other agreements or instruments required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.

(b) <u>Issuance of the Securities</u>. The issuance, sale and delivery of the Securities in accordance with this Subscription Agreement has been duly authorized by all necessary corporate action on the part of the Company. The Securities, when so issued, sold and delivered against payment therefor in accordance with the provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable.

(c) <u>Authority for Agreement</u>. The execution and delivery by the Company of this Subscription Agreement and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities) are within the Company's powers and have been duly authorized by all necessary corporate action on the part of the Company. Upon full execution hereof as provided herein, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.

(d) <u>No filings.</u> Assuming the accuracy of the Subscriber's representations and warranties set forth in Section 4 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription Agreement except (i) for such filings as may be required under Regulation A or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Company to perform its obligations hereunder.

(e) <u>Capitalization</u>. The authorized and outstanding units securities of the Company immediately prior to the initial investment in the Securities is as set forth under "Securities being Offered" in the Offering Circular. Except as set forth in the Offering Circular, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or agreements of any kind (oral or written) for the purchase or acquisition from the Company of any of its securities.

(f) <u>Financial statements.</u> Complete copies of the Company's financial statements meeting the requirements of Form 1-A under the Securities Act (the "Financial Statements") have been made available to the Subscriber and appear in the Offering Circular. The Financial Statements are based on the books and records of the Company and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations and cash flows of the Company for the periods indicated. The auditing firm, or each firm, which has audited the Financial Statements, is an independent accounting firm within the rules and regulations adopted by the SEC.

(g) <u>Proceeds</u>. The Company shall use the proceeds from the issuance and sale of the Securities as set forth in "Use of Proceeds to issuer" in the Offering Circular.

(h) <u>Litigation</u>. Except as set forth in the Offering Circular, there is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body, or to the Company's knowledge, currently threatened in writing (a) against the Company or (b) against any consultant, officer, manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the Company or that could otherwise materially impact the Company.

(i) With respect to the Selling Stockholders and the Securities being sold by them to the Subscriber, to the Company's knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Title to the Securities. Each Selling Stockholder is the lawful owner of the Securities being offered for sale in the Offering by such Selling Stockholder, with good and marketable title thereto, and the Selling Stockholder has the absolute right to sell, assign, convey, transfer and deliver such Securities and any and all rights and benefits incident to the ownership thereof, all of which rights and benefits are transferable by the Selling Stockholder to the Subscriber, free and clear of all the following (collectively called "Claims") of any nature whatsoever: security interests, liens, pledges, claims (pending or threatened), charges, escrows, encumbrances, lock-up arrangements, options, rights of first offer or refusal, community property rights, mortgages, indentures, security agreements or other agreements, arrangements, contracts, commitments, understandings or obligations, whether written or oral and whether or not relating in any way to credit or the borrowing of money. Delivery to the Subscriber of such Securities, upon payment therefor, will (i) pass good and marketable title to such Securities to the relevant Investor(s), free and clear of all Claims, and (ii) convey, free and clear of all Claims, any and all rights and benefits incident to the ownership of such Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) No Filings. No order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to each Selling Stockholder in connection with the sale and delivery of the Securities of such Selling Stockholder being sold hereunder, except (a) for such filings as may be required under Regulation A of the Securities Act of 1933, as amended the "Securities Act"), or under any applicable state securities laws, (b) for such other filings and approvals as have been made or obtained, or (c) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Selling Stockholder to perform its obligations under the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) No Litigation. With respect to each Selling Stockholder, there is no action, suit, proceeding, judgment, claim or investigation pending, or to the knowledge of the Selling Stockholder, threatened against the Selling Stockholder which could reasonably be expected in any manner to challenge or seek to prevent, enjoin, alter or materially delay any of the transactions contemplated by this Subscription Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Non-Public Information. Each Selling Stockholder is not selling its Securities "on the basis of" (as defined in Rule 10b5-1 of the Exchange Act (as defined below)) any material, non-public information about the Securities or the Company.

<u>4. Representations and Warranties of Subscriber</u>. By executing this Subscription Agreement, Subscriber (and, if Subscriber is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom Subscriber is so purchasing) represents and warrants, which representations and warranties are true and complete in all material respects as of such Subscriber's respective Closing Date(s):

(a) <u>Requisite Power and Authority</u>. Such Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement and other agreements required hereunder and to carry out their provisions. All action on Subscriber's part required for the lawful execution and delivery of this Subscription Agreement and other agreements required hereunder have been or will be effectively taken prior to the Closing Date. Upon their execution and delivery, this Subscription Agreement and other agreements required hereunder will be valid and binding obligations of Subscriber, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.

(b) <u>Investment Representations</u>. Subscriber understands that the Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). Subscriber also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Subscriber's representations contained in this Subscription Agreement.

(c) <u>Illiquidity and Continued Economic Risk</u>. Subscriber acknowledges and agrees that there is no ready public market for the Securities and that there is no guarantee that a market for their resale will ever exist. Subscriber must bear the economic risk of this investment indefinitely and the Company has no obligation to list the Securities on any market or take any steps (including registration under the Securities Act or the Securities Exchange Act of 1934, as amended) with respect to facilitating trading or resale of the Securities. Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber's entire investment in the Securities. Subscriber also understands that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors relating to the purchase of Securities.

(d) <u>Accredited Investor Status or Investment Limits</u>. Subscriber represents that either:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Subscriber is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. Subscriber represents and warrants that it meets one or more of the criteria set forth in Appendix A attached hereto; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The purchase price of the Securities (including any fee to be paid by the Subscriber), together with any other amounts previously used to purchase Securities in this offering, does not exceed 10% of the greater of the Subscriber's annual income or net worth.

Subscriber represents that to the extent it has any questions with respect to its status as an accredited investor, or the application of the investment limits, it has sought professional advice.

(e) <u>Shareholder information.</u> Within five days after receipt of a request from the Company, the Subscriber hereby agrees to provide such information with respect to its status as a shareholder (or potential shareholder) and to execute and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which the Company is or may become subject. **Subscriber further agrees that in the event it transfers any Securities, it will require the transferee of such Securities to agree to provide such information to the Company as a condition of such transfer.**

(f) <u>Company Information</u>. Subscriber understands that the Company is subject to all the risks that apply to early-stage companies, whether or not those risks are explicitly set out in the Offering Circular. Subscriber has had such opportunity as it deems necessary (which opportunity may have presented through online chat or commentary functions) to discuss the Company's business, management and financial affairs with managers, officers and management of the Company and has had the opportunity to review the Company's operations and facilities. Subscriber has also had the opportunity to ask questions of and receive answers from the Company and its management regarding the terms and conditions of this investment. Subscriber acknowledges that except as set forth herein, no representations or warranties have been made to Subscriber, or to Subscriber's advisors or representative, by the Company or others with respect to the business or prospects of the Company or its financial condition.

(g) <u>Valuation.</u> The Subscriber acknowledges that the price of the Securities was set by the Company on the basis of the Company's internal valuation and no warranties are made as to value. The Subscriber further acknowledges that future offerings of Securities may be made at lower valuations, with the result that the Subscriber's investment will bear a lower valuation.

(h) <u>Domicile</u>. Subscriber maintains Subscriber's domicile (and is not a transient or temporary resident) at the address shown on the signature page.

(i) <u>No Brokerage Fees</u>. There are no claims for brokerage commission, finders' fees or similar compensation in connection with the transactions contemplated by this Subscription Agreement or related documents based on any arrangement or agreement binding upon Subscriber.

(j) <u>Foreign Investors</u>. If Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Subscriber's subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber's jurisdiction.

5. <u>Survival of Representations and Indemnity</u>. The representations, warranties and covenants made by the Subscriber herein shall survive the Termination Date of this Agreement. The Subscriber agrees to indemnify and hold harmless the Company, the Selling Shareholders and their respective officers, directors and affiliates, and each other person, if any, who controls the Company or any Selling Shareholder within the meaning of Section 15 of the Securities Act against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all reasonable attorneys' fees, including attorneys' fees on appeal) and expenses reasonably incurred in investigating, preparing or defending against any false representation or warranty or breach of failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any other document furnished by the Subscriber to any of the foregoing in connection with this transaction.

6. <u>Governing Law; Jurisdiction</u>. This Subscription Agreement shall be governed and construed in accordance with the laws of the State of New York.

EACH OF THE SUBSCRIBER AND THE COMPANY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE STATE OF CALIFORNIA AND NO OTHER PLACE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS SUBSCRIPTION AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF SUBSCRIBER AND THE COMPANY ACCEPTS FOR ITSELF AND HIMSELF AND IN CONNECTION WITH ITS AND HIS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS SUBSCRIPTION AGREEMENT. EACH OF SUBSCRIBER AND THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN THE MANNER AND IN THE ADDRESS SPECIFIED IN SECTION 7 AND THE SIGNATURE PAGE OF THIS SUBSCRIPTION AGREEMENT. HOWEVER, NOTHING IN THIS PARAGRAPH SHALL BE CONSTRUED TO BE APPLICABLE TO ANY ACTION ARISING UNDER THE FEDERAL SECURITIES LAWS.

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT OR THE ACTIONS OF EITHER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF, EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. EACH OF THE PARTIES HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SUBSCRIPTION AGREEMENT. IN THE EVENT OF LITIGATION, THIS SUBSCRIPTION AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. BY AGREEING TO THIS PROVISION, EACH SUBSCRIBER WILL NOT BE DEEMED TO HAVE WAIVED THE COMPANY'S COMPLIANCE WITH U.S. FEDERAL SECURITIES LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.

7. <u>Notices</u>. Notice, requests, demands and other communications relating to this Subscription Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail, postage prepaid, return receipt requested, in the third day after the posting thereof; or (c) emailed, telecopied or cabled, on the date of such delivery to the address of the respective parties as follows:

---

| | |
|:---|:---|
| If to the Company, to: | with a required copy to: |
| StartEngine Crowdfunding Inc. |  |
| 4100 W Alameda Ave., Suite 300 |  |
| Burbank, California 91505 |  |
| If to a Subscriber, to Subscriber's address as shown on the signature page hereto | If to a Subscriber, to Subscriber's address as shown on the signature page hereto |

---

or to such other address as may be specified by written notice from time to time by the party entitled to receive such notice. Any notices, requests, demands or other communications by telecopy or cable shall be confirmed by letter given in accordance with (a) or (b) above.

The Subscriber hereby agrees that the Company may deliver all notices, financial statements, valuations, reports, reviews, analyses or other materials, and any and all other documents, information and communications concerning the affairs of the Company and its investments, including, without limitation, information about the investment, required or permitted to be provided to the Subscriber under the Offering Circular or hereunder by means e-mail or by posting on an electronic message board or by other means of electronic communication. The Subscriber hereby consents to receive electronically all documents, communications, notices, contracts, and agreements arising from or relating in any way to your or our rights, obligations or services hereunder or pursuant to your ownership of the Securities.

8<u>. Miscellaneous</u>.

(a) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require.

(b) This Subscription Agreement is not transferable or assignable by Subscriber.

(c) The representations, warranties and agreements contained herein shall be deemed to be made by and be binding upon Subscriber and its heirs, executors, administrators and successors and shall inure to the benefit of the Company and its successors and assigns.

(d) None of the provisions of this Subscription Agreement may be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Subscriber.

(e) In the event any part of this Subscription Agreement is found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if the void or unenforceable part were never the subject of agreement.

(f) The invalidity, illegality or unenforceability of one or more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality or enforceability of this Subscription Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

(g) This Subscription Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

(h) The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.

(i) The headings used in this Subscription Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

(j) This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

(k) If any recapitalization or other transaction affecting the stock of the Company is effected, then any new, substituted or additional securities or other property which is distributed with respect to the Securities shall be immediately subject to this Subscription Agreement, to the same extent that the Securities, immediately prior thereto, shall have been covered by this Subscription Agreement.

(l) No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

[*SIGNATURE PAGE FOLLOWS*]

## Ex1A-6

**Exhibit 6.1**

**STARTENGINE CROWDFUNDING, INC.<br> AMENDED AND RESTATED 2015 EQUITY INCENTIVE PLAN**

**SECTION 1. PURPOSE**

The purpose of the StartEngine Crowdfunding, Inc. 2015 Equity Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company's stockholders.

**SECTION 2. DEFINITIONS**

Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.

**SECTION 3. ADMINISTRATION**

**3.1 Administration of the Plan**

The Plan shall be administered by the Board. All references in the Plan to the "***Plan Administrator***" shall be to the Board.

**3.2 Administration and Interpretation by Plan Administrator**

(a) Except for the terms and conditions explicitly set forth in the Plan, and to the extent permitted by applicable law, the Plan Administrator shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (viii) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (ix) delegate ministerial duties to such of the Company's employees as it so determines; and (x) make any other determination and take any other action that the Plan Administrator deems necessary or desirable for administration of the Plan.

(b) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant's reduction in hours of employment or service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Board, whose determination shall be final.

(c) Decisions of the Plan Administrator shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Plan Administrator may determine its actions.

**SECTION 4. SHARES SUBJECT TO THE PLAN**

**4.1 Authorized Number of Shares**

Subject to adjustment from time to time as provided in Section 14.1, a maximum of 11,590,000 shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.

**4.2 Share Usage**

(a) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award, or (ii) covered by an Award that is settled in cash or in a manner such that some or all of the shares covered by the Award are not issued, shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.

(b) The Plan Administrator shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.

(c) Notwithstanding any other provision of the Plan to the contrary, the Plan Administrator may grant Substitute Awards under the Plan. In the event that a written agreement between the Company and an Acquired Entity pursuant to which merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, and the persons holding such awards shall be deemed to be Participants.

<br> (d) Notwithstanding any other provisions in this Section 4.2 to the contrary, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 14.1.

**4.3 Section 16 of the Exchange Act**

Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by the entire Board, unless the Board has two or more "non-employee directors" (as defined in the regulations promulgated under Section 16 of the Exchange Act). In such case, awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more "non-employee directors" (as defined in the regulations promulgated under Section 16 of the Exchange Act).

**4.4. <u>Foreign Award Recipients</u>.**

Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company or a Related Company operates or has Employees or other individuals eligible for Awards, the Board, in its sole discretion, will have the power and authority to: (a) determine which Related Company(ies) will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company or a Related Company under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs, and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures to the extent the Board determines such actions to be necessary or advisable (and such subplans and/or modifications will be attached to this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Board determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals; provided, however, that no action taken under this Section 4.4 will increase the Common Stock limitations contained in Section 4.1 hereof. Notwithstanding the foregoing, the Board may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act, the Securities Act, any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.

**SECTION 5. ELIGIBILITY**

An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Plan Administrator from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company's securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company's securities.

**SECTION 6. AWARDS**

**6.1 Form, Grant and Settlement of Awards**

The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine.

**6.2 Evidence of Awards**

Awards granted under the Plan shall be evidenced by a written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Board (or in the case of Award agreements that are not used for Insiders, the Board's delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.

**6.3 Dividends and Distributions**

Participants may, if the Plan Administrator so determines, be credited with dividends or dividend equivalents paid with respect to shares of Common Stock underlying an Award in a manner determined by the Plan Administrator in its sole discretion. The Plan Administrator may apply any restrictions to the dividends or dividend equivalents that the Plan Administrator deems appropriate. The Plan Administrator, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. Notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on the number of shares underlying an Option or Stock Appreciation Right may not be contingent, directly or indirectly, on the exercise of the Option or Stock Appreciation Right, and must comply with or qualify for an exemption under Section 409A. Also notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on Restricted Stock must (a) be paid at the same time they are paid to other stockholders and (b) comply with or qualify for an exemption under Section 409A.

**SECTION 7. OPTIONS**

**7.1 Grant of Options**

The Plan Administrator may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.

**7.2 Option Exercise Price**

Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date (and not less than the minimum exercise price required by Section 422 of the Code with respect to Incentive Stock Options), except in the case of Substitute Awards.

**7.3 Term of Options**

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option (the "***Option Term***") shall be ten years from the Grant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.

**7.4 Exercise of Options**

The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:

---

| | |
|:---|:---|
| **Period of Participant's Continuous**<br> **Employment or Service With the**<br> **Company or Its Related Companies**<br> **From the Vesting Commencement Date** | <br>**Portion of Total Option That**<br> **Is Vested and Exercisable** |
| After 1 year | 1/4th |
| After each additional one-month period of continuous service completed thereafter | An additional 1/48th<br>|
| After 4 years | 100% |

---

To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Section 7.5. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator.

**7.5 Payment of Exercise Price**

The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for that purchase, which forms may include:

(a) cash;

(b) check or wire transfer;

(c) having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

(d) tendering (either actually or, if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

(e) if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any tax withholding obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or

(f) such other consideration as the Plan Administrator may permit.

In addition, to assist a Participant (including directors and executive officers) in acquiring shares of Common Stock pursuant to an Option granted under the Plan, the Plan Administrator, in its sole discretion and to the extent permitted by applicable law, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Option, (i) the payment by a Participant of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third party. Such notes or loans must be full recourse to the extent necessary to avoid adverse accounting charges to the Company's earnings for financial reporting purposes. Subject to the foregoing, the Plan Administrator shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate and terms of and security for repayment.

**7.6 Effect of Termination of Service**

The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:

(a) Any portion of an Option that is not vested and exercisable on the date of a Participant's Termination of Service shall expire on such date.

(b) Any portion of an Option that is vested and exercisable on the date of a Participant's Termination of Service shall expire on the earliest to occur of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) if the Participant's Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such Termination of Service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) if the Participant's Termination of Service occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Option Expiration Date.

Notwithstanding the foregoing, if a Participant dies after the Participant's Termination of Service but while an Option is otherwise exercisable, the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the Plan Administrator determines otherwise.

Notwithstanding the foregoing, to the extent required by applicable law, unless employment or services are terminated for Cause, the right to exercise an Option in the event of Termination of Service, to the extent that the Participant is otherwise entitled to exercise an Option on the date of Termination of Service, shall be

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. at least six months from the date of a Participant's Termination of Service if termination was caused by death or Disability; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. at least 30 days from the date of a Participant's Termination of Service if termination was caused by other than death or Disability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. but in no event later than the Option Expiration Date.

Also notwithstanding the foregoing, in case a Participant's Termination of Service occurs for Cause, all Options granted to the Participant shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant's employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant's rights under any Option shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a Participant's Termination of Service, any Option then held by the Participant may be immediately terminated by the Plan Administrator, in its sole discretion.

**SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS**

Notwithstanding any other provisions of the Plan to the contrary, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code or any successor provision, and any applicable regulations thereunder, including, to the extent required thereunder, the following:

**8.1 Dollar Limitation**

To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which a Participant's Incentive Stock Options become exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.

**8.2 Eligible Employees**

Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.

**8.3 Exercise Price**

Incentive Stock Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date and, in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a "***Ten Percent Stockholder***"), shall be granted with an exercise price per share not less than 110% of the Fair Market Value of the Common Stock on the Grant Date. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.

**8.4 Option Term**

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Incentive Stock Option shall not exceed ten years, and in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, shall not exceed five years.

**8.5 Exercisability**

An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the date of a Participant's termination of employment if termination was for reasons other than death or disability, (b) more than one year after the date of a Participant's termination of employment if termination was by reason of disability, or (c) more than six months following the first day of a Participant's leave of absence that exceeds three months, unless the Participant's reemployment rights are guaranteed by statute or contract.

**8.6 Taxation of Incentive Stock Options**

In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods.

**8.7 Code Definitions**

For the purposes of this Section 8, "disability," "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code.

**8.8 Promissory Notes**

The amount of any promissory note delivered pursuant to Section 7.5 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes.

**SECTION 9. STOCK APPRECIATION RIGHTS**

**9.1 Grant of Stock Appreciation Rights**

The Plan Administrator may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Plan Administrator shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone ("***freestanding***"). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Plan Administrator determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.

**9.2 Payment of SAR Amount**

Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Plan Administrator as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Plan Administrator in its sole discretion.

**9.3 Waiver of Restrictions**

The Plan Administrator, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

**SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS**

**10.1 Grant of Stock Awards, Restricted Stock and Stock Units**

The Plan Administrator may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Plan Administrator shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.

**10.2 Vesting of Restricted Stock and Stock Units**

Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant's release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Plan Administrator (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant subject to the terms and conditions of the Plan, the instrument evidencing the Award, and applicable securities laws, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.

**10.3 Waiver of Restrictions**

The Plan Administrator, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

**SECTION 11. OTHER STOCK OR CASH-BASED AWARDS**

Subject to the terms of the Plan and such other terms and conditions as the Plan Administrator deems appropriate, the Plan Administrator may grant other incentives payable in cash or in shares of Common Stock under the Plan.

**SECTION 12. WITHHOLDING**

The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award ("***tax withholding obligations***") and (b) any amounts due from the Participant to the Company or to any Related Company ("***other obligations***"). Notwithstanding any other provision of the Plan to the contrary, the Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.

The Plan Administrator may permit or require a Participant to satisfy all or part of the Participant's tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. The value of the shares so withheld or tendered may not exceed the employer's minimum required tax withholding rate.

**SECTION 13. ASSIGNABILITY**

No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant's death. During a Participant's lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit a Participant to assign or transfer an Award, subject to such terms and conditions as the Plan Administrator shall specify.

**SECTION 14. ADJUSTMENTS**

**14.1 Adjustment of Shares**

In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or any other company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2(d); and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.

Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Change of Control shall not be governed by this Section 14.1 but shall be governed by Sections 14.2 and 14.3, respectively.

**14.2 Dissolution or Liquidation**

To the extent not previously exercised or settled, and unless otherwise determined by the Plan Administrator in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Plan Administrator, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.

**14.3 Change of Control**

(a) Notwithstanding any other provision of the Plan to the contrary, unless the Plan Administrator determines otherwise with respect to a particular Award in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Change of Control, if and to the extent an outstanding Award is not converted, assumed, substituted for or replaced by the Successor Company, then effective immediately prior to the Change of Control such Award shall become fully vested and exercisable or payable, and all applicable restrictions or forfeiture provisions shall lapse, and then terminate upon effectiveness of the Change of Control. If and to the extent the Successor Company converts, assumes, substitutes for or replaces an outstanding Award, the vesting and/or exercisability restrictions and/or forfeiture and/or repurchase provisions applicable to such Award shall not be accelerated or lapse, and all such vesting and/or exercisability restrictions and/or forfeiture and/or repurchase provisions shall continue with respect to any shares of the Successor Company or other consideration that may be received with respect to such Award.

(b) For the purposes of Section 14.3(a), an Award shall be considered converted, assumed, substituted for or replaced by the Successor Company if following the Change of Control the Award confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the Successor Company, the Plan Administrator may, with the consent of the Successor Company, provide for the consideration to be received pursuant to the Award, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator, and its determination shall be conclusive and binding.

(c) Notwithstanding the foregoing, the Plan Administrator, in its sole discretion, may instead provide in the event of a Change of Control that a Participant's outstanding Awards shall terminate upon or immediately prior to such Change of Control and that each such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (i) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Awards (either to the extent then vested and exercisable, or subject to restrictions and/or forfeiture provisions, or whether or not then vested and exercisable, or subject to restrictions and/or forfeiture provisions, as determined by the Plan Administrator in its sole discretion) exceeds (ii) if applicable, the respective aggregate exercise, grant or purchase price payable with respect to shares of Common Stock subject to such Awards.

(d) For the avoidance of doubt, nothing in this Section 14.3 requires all Awards to be treated similarly.

**14.4 Further Adjustment of Awards**

Subject to Sections 14.2 and 14.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change of control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change of control that is the reason for such action.

**14.5 No Limitations**

The grant of Awards shall in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

**14.6 Fractional Shares**

In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.

**14.7 Section 409A**

Subject to Section 18.5, but notwithstanding any other provision of the Plan to the contrary, (a) any adjustments made pursuant to this Section 14 to Awards that are considered "deferred compensation" within the meaning of Section 409A shall be made in compliance with the requirements of Section 409A and (b) any adjustments made pursuant to this Section 14 to Awards that are not considered "deferred compensation" subject to Section 409A shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A or (ii) comply with the requirements of Section 409A.

**SECTION 15. FIRST REFUSAL; VOTING RESTRICTIONS**

**15.1 First Refusal Rights**

Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Company shall have the right of first refusal with respect to any proposed sale or other disposition by a Participant of any shares of Common Stock issued pursuant to an Award. Such right of first refusal shall be exercisable in accordance with the terms and conditions established by the Plan Administrator and set forth in the agreement evidencing the Participant's receipt of the shares or, if applicable, in a shareholders agreement or other similar agreement.

**15.2 Other Rights and Voting Restrictions**

Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Plan Administrator may require a Participant, as a condition to receiving shares under the Plan, to become a party to a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which Participant grants to the Company and/or its other shareholders certain rights, including but not limited to co-sale rights, and agrees to certain voting restrictions with respect to the Shares acquired by Participant under the Plan.

**15.3 General**

The Company's rights under this Section 15 are assignable by the Company at any time.

**SECTION 16. MARKET STANDOFF**

In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, no person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed (a) 180 days after the effective date of the registration statement for such public offering or (b) such longer period requested by the underwriters as is necessary to comply with regulatory restrictions on the publication of research reports (including, but not limited to, NYSE Rule 472 or NASD Conduct Rule 2711, or any successor rules). The limitations of this Section 16 shall in all events terminate two years after the effective date of the Company's initial public offering.

In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding Common Stock effected as a class without the Company's receipt of consideration, any new, substituted or additional securities distributed with respect to the shares issued under the Plan shall be immediately subject to the provisions of this Section 16, to the same extent the shares issued under the Plan are at such time covered by such provisions.

In order to enforce the limitations of this Section 16, the Company may impose stop-transfer instructions with respect to the shares until the end of the applicable standoff period.

**SECTION 17. AMENDMENT AND TERMINATION**

**17.1 Amendment, Suspension or Termination**

The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan. Subject to Section 17.3, the Board may amend the terms of any outstanding Award, prospectively or retroactively.

**17.2 Term of the Plan**

The Plan shall have no fixed expiration date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the later of (a) the adoption of the Plan by the Board and (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code. Also notwithstanding the foregoing, no Award may be granted to a resident of California more than ten years after the earlier of the date of adoption of the Plan and the date the Plan is approved by the stockholders.

**17.3 Consent of Participant**

The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant's consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 14 shall not be subject to these restrictions.

Subject to Section 18.5, but notwithstanding any other provision of the Plan to the contrary, the Board shall have broad authority to amend the Plan or any outstanding Award without the consent of the Participant to the extent the Board deems necessary or advisable to comply with, or take into account, changes in applicable tax laws, securities laws, accounting rules or other applicable law, rule or regulation.

**<br> SECTION 18. GENERAL**

**18.1 No Individual Rights**

No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.

Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant's employment or other relationship at any time, with or without cause.

**18.2 Issuance of Shares**

Notwithstanding any other provision of the Plan to the contrary, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company's counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.

As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant's own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Plan Administrator may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.

To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

**18.3 Indemnification**

Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person, unless such loss, cost, liability or expense is a result of such person's own willful misconduct or except as expressly provided by statute; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf.

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.

**18.4 No Rights as a Stockholder**

Unless otherwise provided by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.

**18.5 Compliance with Laws and Regulations**

In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code.

The Plan and Awards granted under the Plan are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the exclusion applicable to stock options, stock appreciation rights and certain other equity-based compensation under Treasury Regulation Section 1.409A-1(b)(5), or otherwise. To the extent Section 409A is applicable to the Plan or any Award granted under the Plan, it is intended that the Plan and any Awards granted under the Plan comply with the deferral, payout, plan termination and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with such intentions; provided, however, that the Plan Administrator makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to Awards granted under the Plan. Without limiting the generality of the foregoing, and notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, with respect to any payments and benefits under the Plan or any Award granted under the Plan to which Section 409A applies, all references in the Plan or any Award granted under the Plan to the termination of the Participant's employment or service are intended to mean the Participant's "separation from service," within the meaning of Section 409A(a)(2)(A)(i) to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A. In addition, if the Participant is a "specified employee," within the meaning of Section 409A, then to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under the Plan or any Award granted under the Plan during the six-month period immediately following the Participant's "separation from service," within the meaning of Section 409A(a)(2)(A)(i), shall not be paid to the Participant during such period, but shall instead be accumulated and paid to the Participant (or, in the event of the Participant's death, the Participant's estate) in a lump sum on the first business day after the earlier of the date that is six months following the Participant's separation from service or the Participant's death. Notwithstanding any other provision of the Plan to the contrary, the Plan Administrator, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A.

**18.6 Participants in Other Countries or Jurisdictions**

Without amending the Plan, the Plan Administrator may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Plan Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.

**18.7 No Trust or Fund**

The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.

**18.8 Successors**

All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

**18.9 Severability**

If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

**18.10 Choice of Law and Venue**

The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of California without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of California.

**18.11 Financial Reports**

To the extent required by applicable law, the Company shall provide annual financial statements of the Company to each Participant. Such financial statements need not be audited and need not be issued to key persons whose duties within the Company assure them access to equivalent information.

**18.12.** **Securities Law and other Regulatory Compliance** 

An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control and other laws, rules, and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Common Stock may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Common Stock under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and/or (b) completion of any registration or other qualification of such Common Stock under any state, federal, or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.

**18.13. Certificates** 

All Common Stock or other securities, whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends, and other restrictions as the Board may deem necessary or advisable, including restrictions under any applicable U.S. federal, state, or foreign securities law, or any rules, regulations, and other requirements of the United States Securities and Exchange Commission or any stock exchange or automated quotation system upon which the Common Stock may be listed or quoted, and any non-U.S. exchange controls or securities law restrictions to which the Common Stock is subject.

**18.14 Insider Trading Policy**

Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Company's securities by Employees, officers, and/or directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.

**18.15 All Awards Subject to Company Clawback or Recoupment Policy**

All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant's employment or other service with the Company that is applicable to officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards..

**SECTION 19. EFFECTIVE DATE**

The effective date (the "***Effective Date***") is the date on which the Plan is adopted by the Board. If the stockholders of the Company do not approve the Plan within 12 months after the Board's adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options. To the extent required under applicable law, any Award exercised before the stockholders of the Company approve the Plan shall be rescinded if the stockholders of the Company do not approve the Plan by the later of (a) within 12 months before or after the date on which the Board adopts the Plan and (b) prior to or within 12 months of the date on which any Award under the Plan is granted in California.

**APPENDIX A**

**DEFINITIONS**

As used in the Plan:

"***Acquired Entity***" means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.

"***Acquisition Price***" means the fair market value of the securities, cash or other property, or any combination thereof, receivable or deemed receivable upon a Change of Control in respect of a share of Common Stock, as determined by the Plan Administrator in its sole discretion.

"***Award***" means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit or cash-based award or other incentive payable in cash or in shares of Common Stock, as may be designated by the Plan Administrator from time to time.

"***Board***" means the Board of Directors of the Company.

"***Cause***," unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, whose determination shall be conclusive and binding.

"***Change of Control***," unless the Plan Administrator determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:

(a) a merger or consolidation of the Company with or into any other company or other entity;

(b) a sale, in one transaction or a series of transactions undertaken with a common purpose, of all of the Company's outstanding voting securities; or

(c) a sale, lease, exchange or other transfer, in one transaction or a series of related transactions, undertaken with a common purpose of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change of Control shall not include (i) a merger or consolidation of the Company in which the holders of the outstanding voting securities of the Company immediately prior to the merger or consolidation hold at least a majority of the outstanding voting securities of the Successor Company immediately after the merger or consolidation; (ii) a sale, lease, exchange or other transfer of all or substantially all of the Company's assets to a majority-owned subsidiary company; (iii) a transaction undertaken for the principal purpose of restructuring the capital of the Company, including, but not limited to, reincorporating the Company in a different jurisdiction, converting the Company to a limited liability company or creating a holding company; or (iv) any transaction that the Board determines is not a Change of Control for purposes of the Plan.

Where a series of transactions undertaken with a common purpose is deemed to be a Change of Control, the date of such Change of Control shall be the date on which the last of such transactions is consummated.

"***Code***" means the Internal Revenue Code of 1986, as amended from time to time.

"***Common Stock***" means the common stock, par value $0.0001 per share, of the Company.

"***Company***" means StartEngine Crowdfunding, Inc., a Delaware corporation.

"***Disability***," unless otherwise defined by the Plan Administrator for purposes of the Plan or in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.

"***Effective Date***" has the meaning set forth in Section 19.

"***Eligible Person***" means any person eligible to receive an Award as set forth in Section 5.

"***Exchange Act***" means the Securities Exchange Act of 1934, as amended from time to time.

"***Fair Market*** Value" means, as of any date, the value of a share of Common Stock, determined as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board deems reliable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board deems reliable; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) by the Board in good faith.

"***Grant Date***" means the later of (a) the date on which the Plan Administrator completes the corporate action authorizing the grant of an Award or such later date specified by the Plan Administrator and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

"***Incentive Stock Option***" means an Option granted with the intention that it qualify as an "incentive stock option" as that term is defined for purposes of Section 422 of the Code or any successor provision.

"***Insider***" means an officer or director of the Company or any other person or entity whose transactions in the Company's Common Stock are subject to Section 16 of the Exchange Act.

"***Nonqualified Stock Option***" means an Option other than an Incentive Stock Option.

"***Option***" means a right to purchase Common Stock granted under Section 7.

"***Option Expiration Date***" means the last day of the maximum term of an Option.

"***Option Term***" means the maximum term of an Option as set forth in Section 7.3.

"***Participant***" means any Eligible Person to whom an Award is granted.

"***Plan***" means the StartEngine Crowdfunding, Inc. 2015 Equity Incentive Plan.

"***Plan Administrator***" has the meaning set forth in Section 3.1.

"***Related Company***" means any entity that, directly or indirectly, is in control of, is controlled by or is under common control with the Company.

"***Restricted Stock***" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Plan Administrator.

"***Retirement***," unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means "Retirement" as defined for purposes of the Plan by the Plan Administrator or the Company's chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches "normal retirement age," as that term is defined in Section 411(a)(8) of the Code.

"***Section 409A***" means Section 409A of the Code.

"***Securities Act***" means the Securities Act of 1933, as amended from time to time.

"***Stock Appreciation Right***" or "***SAR***" means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.

"***Stock Award***" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Plan Administrator.

"***Stock Unit***" means an Award denominated in units of Common Stock granted under Section 10.

"***Substitute Awards***" means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.

"***Successor Company***" means the surviving company, the successor company, the acquiring company or its parent, as applicable, in connection with a Change of Control.

"***Termination of Service***" means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Board, whose determination shall be conclusive and binding. Transfer of a Participant's employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Board determines otherwise, a Termination of Service shall be deemed to occur if the Participant's employment or service relationship is with an entity that has ceased to be a Related Company. A Participant's change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company, or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.

"***Vesting Commencement Date***" means the Grant Date or such other date selected by the Plan Administrator as the date from which an Award begins to vest.

Form of Stock Option Grant Notice

**STARTENGINE CROWDFUNDING, INC.<br> 2015 EQUITY INCENTIVE PLAN<br> STOCK OPTION GRANT NOTICE**

StartEngine Crowdfunding, Inc. (the "***Company***") hereby grants to you an Option (the "***Option***") to purchase shares of the Company's Common Stock under the Company's 2015 Equity Incentive Plan (the "***Plan***"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "***Grant Notice***"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.

---

| | |
|:---|:---|
| **Participant**: |  |
| **Grant Date**: |  |
| **Vesting Commencement Date**: |  |
| **Number of Shares Subject to Option**: |  |
| **Exercise Price (per Share)**: | &nbsp;&nbsp; **$**<br>|
| **Option Expiration Date**: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(subject to earlier termination in accordance with the terms of the Plan and the Stock Option Agreement |
| **Type of Option**: | ⌧ Incentive Stock Option<sup>1</sup>\* ◻ Nonqualified Stock Option |
| **Vesting and Exercisability Schedule**: | &nbsp;&nbsp; 1/4<sup>th</sup> of the shares subject to the Option will vest and become exercisable on the one-year anniversary of the Vesting Commencement Date.<br>1/48<sup>th</sup> of the shares subject to the Option will vest and become exercisable monthly thereafter over the next three years.<br>|

---

**Additional Terms/Acknowledgement**: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between you and the Company regarding the Option and supersede all prior oral and written agreements on the subject.

STARTENGINE CROWDFUNDING, INC. Signature: Title: CEO<br>Name: Date: PARTICIPANT<br>Address: <br> Taxpayer ID:

<sup>1</sup>\* See Sections 3 and 4 of the Stock Option Agreement.

**Attachments**: Stock Option Agreement

**STARTENGINE CROWDFUNDING, INC.**

**2015 EQUITY INCENTIVE PLAN**

**STOCK OPTION AGREEMENT**

Pursuant to your Stock Option Grant Notice (the "***Grant Notice***") and this Stock Option Agreement (this "***Agreement***"), StartEngine Crowdfunding, Inc. (the "***Company***") has granted you an Option under its 2015 Equity Incentive Plan (the "***Plan***") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "***Shares***") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan.

The details of the Option are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. **Vesting and Exercisability**. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. **Securities Law Compliance**. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. **Incentive Stock Option Qualification**. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.

If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. **Notice of Disqualifying Disposition**. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. **By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. **Alternative Minimum Tax**. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. **Independent Tax Advice**. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. **Method of Exercise**. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. **First Refusal Rights; Voting and Other Restrictions**. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. **Market Standoff**. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. **Treatment Upon Termination of Employment or Service Relationship**. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) *General Rule*. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) *Retirement or Disability*. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) *Death*. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) *Cause*. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.

The Option must be exercised within three months after termination of employment for reasons other than death or disability and one year after termination of employment due to disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 422 of the Code.

**It is your responsibility to be aware of the date the Option terminates.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. **Limited Transferability**. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. **Withholding Taxes**. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. **Option Not an Employment or Service Contract**. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. **No Right to Damages**. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. **Binding Effect**. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. **Section 409A Compliance**. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. **Insider Trading Restrictions/Market Abuse Laws.** Optionee acknowledges that Optionee may be subject to insider trading restrictions and/or market abuse laws, which may affect Optionee's ability to acquire or sell the Common Stock or rights to Common Stock under the Plan during such times as Optionee is considered to have "inside information" regarding the Company. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Optionee acknowledges that it is Optionee's responsibility to comply with any applicable restrictions and understands that Optionee should consult his or her personal legal advisor on such matters. In addition, Optionee acknowledges that he or she has read the Company's Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Optionee acquires or disposes of the Company's securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. **Award Subject to Company Clawback or Recoupment**. To the extent permitted by applicable law, the Option will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Optionee's employment or other service that is applicable to Optionee. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Optionee's Option (whether vested or unvested) and the recoupment of any gains realized with respect to Optionee's Option.

## Ex1A-11

**Exhibit 11.1**

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use, in this Offering Statement on Form 1-A of our report dated June 24, 2021, except for the effects of the stock split discussed in Note 1 to the consolidated financial statements, as to which the date is July 12, 2021, related to the consolidated financial statements of StartEngine Crowdfunding, Inc., as of December 31, 2020, and for the year then ended.

Very truly yours,

/s/ dbb*mckennon*

Newport Beach, California

February 13, 2023

## Ex1A-11

**Exhibit 11.2**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation in this Registration Statement on Form 1-A of our report dated August 3, 2022, relating to the financial statements of StartEngine Crowdfunding, Inc. for the years ended December 31, 2021 and 2020 and to all references to our firm included in this Registration Statement.

Certified Public Accountants

Lakewood, CO

February 13, 2023

### UNITED STATES SECURITIES AND EXCHANGE COMMISSION
**Washington, D.C. 20549**

## FORM 1-A

### REGULATION A OFFERING STATEMENT
### UNDER THE SECURITIES ACT OF 1933

### Item 1. Issuer Information

**Exact name of issuer:** STARTENGINE CROWDFUNDING, INC.

**Jurisdiction of Incorporation/Organization:** DE

**Year of Incorporation:** 2014

**CIK:** 0001661779

**I.R.S. Employer Identification Number:** 46-5371570

**Primary Standard Industrial Classification Code:** 6199

**Total number of full-time employees:** 82

**Total number of part-time employees:** 0

**Address of Principal Executive Offices:** 4100 W ALAMEDA AVE., SUITE 300, BURBANK, CA 91505

**Company Phone:** 800-317-2200

**Person to contact:** Jamie Ostrow

### Financial Statements

**Balance Sheet Information**

| Metric                                   | Amount       |
|:---|:---|
| Cash and Cash Equivalents                | $14587826.00 |
| Investment Securities                    | $7300806.00  |
| Accounts and Notes Receivable            | $1196413.00  |
| Property, Plant and Equipment (PP&E)     | $108992.00   |
| Total Assets                             | $31014782.00 |
| Accounts Payable and Accrued Liabilities | $2269363.00  |
| Long-Term Debt                           | $0.00        |
| Total Liabilities                        | $4661030.00  |
| Total Stockholders' Equity               | $26353751.00 |
| Total Liabilities and Equity             | $31014782.00 |

**Statement of Comprehensive Income Information**

| Metric                                    | Amount       |
|:---|:---|
| Total Revenues                            | $19578222.00 |
| Costs and Expenses Applicable to Revenues | $5451888.00  |
| Depreciation and Amortization             | $9817.00     |
| Net Income                                | $-9581454.00 |
| Earnings Per Share - Basic                | -0.29        |
| Earnings Per Share - Diluted              | -0.29        |

**Auditor Information**

| Metric          | Amount            |
|:---|:---|
| Name of Auditor | BF Borgers CPA PC |

### Outstanding Securities

| Class                       |   Outstanding | CUSIP     | Publicly Traded   |
|:---|---:|:---|:---|
| Common Stock                |      33414742 | 85572Y104 | N/A               |
| Series Seed Preferred Stock |      10240536 | 000000N/A | N/A               |
| N/A                         |             0 | 000000N/A | N/A               |

### Item 2. Issuer Eligibility
- [x] The issuer certifies that all of the statements in this part are true.

### Item 3. Application of Rule 262
- [x] The issuer certifies that it is not disqualified and has not been involved in any disqualifying event.

### Item 4. Summary Information Regarding the Offering

**Tier:** Tier2

**Financial Statement Status:** Audited

**Type of Securities Offered:** Equity (common or preferred stock)

**Is this a delayed or continuous offering?** No

**Was or is the offering to take place within one year after qualification?** Yes

**Was or is the offering to commence within two days after qualification?** No

**Is this a best efforts offering?** Yes

**Was there any solicitation of interest?** Yes

**Are there any resale securities by affiliates of the issuer?** Yes

**Offering Amounts**

| Description                                                     | Amount       |
|:---|:---|
| Number of securities offered                                    | 2208000      |
| Number of securities outstanding                                | 32834797     |
| Price per security                                              | $25.00       |
| Issuer's aggregate offering price                               | $29907220.00 |
| Aggregate offering price of securities held by security holders | $7476805.00  |
| Aggregate price of securities offered concurrently              | $8615975.00  |
| Total aggregate offering price                                  | $46000000.00 |

**Anticipated Fees**

| Service Provider   | Name                  | Fees      |
|:---|:---|:---|
| Auditor            | dbbMcKennon / Borgers | $20000.00 |
| Legal              | CrowdCheck Law LLP    | $35000.00 |
| Promoters          |  |  |

**Estimated Net Proceeds to the Issuer:** $30309000.00

### Item 5. Jurisdictions in Which Securities are to be Offered

- All States and Territories

### Item 6. Unregistered Securities Issued or Sold Within One Year

**Name of Such Issuer:** StartEngine Crowdfunding Inc.

**Title of Securities Issued:** Common Stock

**Total Amount of Securities Issued:** 334153

**Amount of such securities sold by principal security holders:** 47486

**Aggregate consideration:** $8,615,975 at 25.00 per share; however, certain investors were entitled to a discount.

**Basis for aggregate consideration:** Same as (c)(1)

**Securities Act Exemption:** Regulation A and Rule 701.