BNAI 10-K & 10-Q changes, risk factors and insider trading
Brand Engagement Network Inc. (also BNAIW) · Nasdaq · Services-Computer Integrated Systems Design · CIK 1838163 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “Our ability to complete the Acquisition is dependent on our ability to meet the conditions to close, including the ability to obtain financing on favorable terms, or at all and our ability to pay down payments in accordance with the Purchase Agreement.”
Removed heading “We do not intend to pay dividends for the foreseeable future.”
Removed heading “Nasdaq may delist our securities from trading on its exchange, which could limit investors' ability to make transactions in our securities and subject us to additional trading restrictions.”
Removed heading “Our management does not have prior experience in operating a public company.”
Removed heading “The issuances of additional shares of Common Stock under the SEPA may result in dilution of holders of Common Stock and have a negative impact on the market price of the Common Stock.”
Largest changes
“Nasdaq may delist our securities from trading on its exchange, which could limit investors' ability to make transactions in our securities and subject us to additional trading restrictions.”see in full comparison
“If the Company is not in compliance with the Bid Price Requirement by the Compliance Date, the Company may qualify for a second 180 calendar day period to regain compliance with the Bid Price Requirement. …”see in full comparison
“Our ability to complete the Acquisition is dependent on our ability to meet the conditions to close, including the ability to obtain financing on favorable terms, or at all and our ability to pay down payments in accordance with the Purchase Agreement.”see in full comparison
“The issuances of additional shares of Common Stock under the SEPA may result in dilution of holders of Common Stock and have a negative impact on the market price of the Common Stock.”see in full comparison
see in full comparisonTheIf the Companyintendsfallstooutmonitorof compliance with theclosingBidbidPricepriceRequirementofinitsthe future, the Common Stockandmayisbeevaluating available options, including seekingsubject toeffectdelisting.a reverse stock split, to resolve the noncompliance matters described herein and intends to take appropriate steps to maintain its listing on Nasdaq. However, thereThere can be no assurance that the Company willbe ablecontinue toregainbecompliancecompliant with the Bid Price Requirement.
The South Korean economy is closely tied to, and is affected by developments in, the global economy. In recent years, adverse conditions and volatility in the worldwide financialsee in full comparisonmarkets,markets and fluctuations in oil and commodityprices, and the COVID-19 pandemic,prices have contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the South Korean economy.Due to liquidity and credit concerns and volatility in the global financial markets, the value of the Korean won relative to the U.S. dollar and other foreign currencies and the stock prices of South Korean companies have fluctuated significantly in recent years.Any future deterioration of the South Korean economy or the global economy could adversely affect our business, financial condition, and results of operations.
Full comparison: every changed paragraph (42)
In
connection with the preparation of BEN'sBEN’s 2022 and 20232025 consolidated financial statements, we and our independent auditors identified
material weaknesses and significant deficiencies in our internal control over financial reporting. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
The Company does not have a properly documented internal control system in accordance with the requirements of the Committee on Sponsoring Organizations (“COSO”) or some similarly appropriate internal control methodology or formal documentation of the Company’s systems of internal control.
However,
we cannot assure you that these measures will significantly improve or remediate the material weaknesses and significant deficiencies
described above. As of MarchApril 27,15, 2025,2026, the material weaknesses and significant deficiencies have not been remediated.
Our
results of operations may fluctuate, in part, because of the intensive nature of our sales efforts and the length and unpredictability
of our sales cycle. Our results of operations depend on sales to enterprise customers, which make product purchasing decisions based
in part or entirely on factors, or perceived factors, not directly related to the features of the software, including, among others,
such customer'scustomer’s projections of business growth, uncertainty about economic conditions (including as a result of public health crises such as the COVID-19 pandemic and international affairs such as the conflict between Russia and Ukraine and in the Middle East), capital
budgets, anticipated cost savings from the implementation of our software, potential preference for such customer'scustomer’s internally
developed software solutions, perceptions about our business and software, more favorable terms offered by potential competitors, and
previous technology investments. In addition, certain decision makers and other stakeholders within our potential customers tend to have
vested interests in the continued use of internally developed or existing software, which may make it more difficult for us to sell our
software and services. As a result of these and other factors, our sales efforts typically require an extensive effort throughout a customer's customer’s
organization, a significant investment of human resources, expense and time, including by our senior management, and there can be no
assurances that we will be successful in making a sale to a potential customer. If our sales efforts to a potential customer do not result
in sufficient revenue to justify our investments, our business, financial condition, and results of operations could be adversely affected.
We face intense and growing competition for our products and services, including advancements in artificial intelligence (“AI”) and we may lack sufficient financial or other resources to maintain or improve our competitive positions.
The market for our products is intensely competitive and characterized by rapid changes in technology, including advancements in AI, customer requirements, industry standards, and frequent new platform and application introductions and improvements. We anticipate continued competitive challenges from current competitors who address different aspects of our offerings, and in many cases, many of these competitors are more established and enjoy greater resources than we do. We also expect competitive challenges from new entrants into the industry or existing large companies seeking to grow their current offerings. If we are unable to anticipate or effectively react to these competitive challenges, our competitive position could weaken, and we could experience a decline in our growth rate and revenue that could adversely affect our business and results of operations.
Our ability to complete the Acquisition is dependent on our ability to meet the conditions to close, including the ability to obtain financing on favorable terms, or at all and our ability to pay down payments in accordance with the Purchase Agreement.
Pursuant to the Purchase Agreement, the Sellers have agreed to sell all of the outstanding equity interests of Cataneo to the Company for an aggregate purchase price of $19,500,000, including at a minimum, $9,000,000 in cash, and an additional amount of up to $3,000,000 subject to the Sellers’ right to convert a portion of the Equity Consideration to cash at a price per share of $2.50 (the “Cash Election”). In addition, the Addendum provides that the Company pay to Sellers $350,000 as a partial down payment on the Cash Consideration by February 13, 2025 which amount was paid in full on February 12, 2025. In addition, the Addendum provides for additional temporary suspensions of Sellers' right to withdraw for two successive one-month periods through April 30, 2025, dependent upon the Company's payment each month of a down payment of $100,000 Additional Down Payments, with each Additional Down Payment to be credited toward the Cash Consideration to be owed by the Company. On March 14, 2025, the Company paid an Additional Down Payment of $100,000 to be credited toward the Cash Consideration. The closing of the Acquisition is dependent, upon other things, on the Company obtaining the financing necessary to pay such cash purchase price and the down payments on terms that are mutually acceptable to the parties. We will need to raise additional capital through debt or equity financings to fund such cash purchase price. A failure to obtain such financing on favorable terms, or at all, could cause the Company to be unable to complete the Acquisition, which could materially harm our business. There can be no assurance that our business or our financial condition will not be adversely affected, as compared to the condition prior to the announcement of the Acquisition, if the Acquisition is not consummated.
We may be unable to successfully integrate our business with Cataneo or realize the expected benefits of the Acquisition on our expected timeframe or at all. In addition, ifIf we choose to acquire or invest in other new businesses, products or technologies, we may be unable
to complete these acquisitions or successfully integrate them in a cost-effective and/or non-disruptive manner.
In October 2024, the Company entered into the Purchase Agreement with the Sellers to help us enhance our product offerings, grow our customer bases, improve our path to profitability and strengthen our future financial position. In connection with any acquisitions, we could issue additional equity securities, which would dilute our stockholders, incur substantial debt to fund the acquisitions or assume significant liabilities.
Acquisitions
involve many and diverse risks and uncertainties, including risks associated with conduction due diligence, the inability to satisfy
closing conditions, problems integrating the purchased operations, assets, technologies or products, unanticipated costs, liabilities,
and economic, political, legal and regulatory challenges due to our inexperience operating in new regions or countries, inability to
achieve anticipated synergies, overpaying for acquisitions, invalid sales assumptions underlying potential acquisitions, issues maintaining
uniform standards, procedures, controls and policies, diversion of management attention, adverse effects on existing business relationships
or acquired company business relationships, risks associated with entering new markets, potential loss of key employees of acquired businesses,
increased legal, accounting and compliance costs, and failure to successfully integrate acquired companies, such as Cataneo,companies or retain
key personnel from the acquired company.
We
may acquire or invest in companies and technologies, which may divert our management'smanagement’s attention, and result in additional dilution
to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits
of such acquisitions or investments .investments.
A
significant number of our employees and operations are located in South Korea. There is currently a high level of political unrest occurring in South Korea. As a result, we are subject to political, economic,
legal and regulatory risks specific to South Korea, and our performance and successful fulfilment of our operational strategies are
dependent in part on the overall South Korean economy. The economic indicators in South Korea in recent years have shown mixed signs
of growth and uncertainty, and the current political environment in South Korea is expected to continue to result in an erosion of the currency exchange rate between the Korean won and the U.S. dollar.uncertainty. As a result, future growth of the Korean economy is subject
to many factors beyond our control, including developments in the global economy.
The
South Korean economy is closely tied to, and is affected by developments in, the global economy. In recent years, adverse conditions
and volatility in the worldwide financial markets,markets and fluctuations in oil and commodity prices, and the COVID-19 pandemic,prices have
contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely
affect, the South Korean economy. Due to liquidity and credit concerns and volatility in the global financial markets, the value of the Korean won relative to the U.S. dollar and other foreign currencies and the stock prices of South Korean companies have fluctuated significantly in recent years. Any future deterioration of the South Korean economy or the global economy could adversely
affect our business, financial condition, and results of operations.
Our
systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic
occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, natural
disasters, public health crises such as the COVID-19 pandemic, geopolitical and similar events, or acts of misconduct. Despite any precautions
we may take, the occurrence of a catastrophic disaster or other unanticipated problems at our or our third-party vendors'vendors’ hosting
facilities, or within our systems or the systems of third parties upon which we rely, could result in interruptions, performance problems,
or failure of our infrastructure, technology, or software, which may adversely impact our business. In addition, our ability to conduct
normal business operations could be severely affected. In the event of significant physical damage to one of these facilities, it may
take a significant period of time to achieve full resumption of our services, and our disaster recovery planning may not account for
all eventualities. In addition, any negative publicity arising from these disruptions could harm our reputation and brand and adversely
affect our business.
Our
failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets .assets.
As
of March 27,24, 2025,2026, we hadhave 2123 issued patents, including 1012 U.S. issued patents and 11 issued abroad. Our U.S. issued patents expire between
September 9, 2028, and April 18,1, 2031.2044. We also have 2524 pending patent applications, including 24 U.S. nonprovisional patent applications,
9 U.S. provisional patent applications (2 of which are in the process of being revived as a matter of unintentional abandonment),applications, one
Patent Cooperation Treaty patent application, and three patent applications in other jurisdictions. The pending U.S. patent applications, if issued, would expire between 2041 and 2044. We continually review our
development efforts to assess the existence and patentability of new intellectual property. These patents and patent applications
seek to protect our proprietary inventions relevant to our business, in addition to other proprietary technologies. We intend to pursue
additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. We make business decisions
about when to seek patent protection for a particular technology and when to rely upon copyright or trade secret protection, and the
approach we select may ultimately prove to be inadequate. Even in cases where we seek patent protection, there is no assurance that the
resulting patents will effectively protect every significant feature of our products. In addition, we believe that the protection of
our trademark rights is an important factor in AI platform and application recognition, protecting our brand and maintaining goodwill.
If we do not adequately protect our rights in our trademarks from infringement and unauthorized use, any goodwill that we have developed
in those trademarks could be lost or impaired, which could harm our brand and our business. Third parties may knowingly or unknowingly
infringe our proprietary rights, third parties may challenge our proprietary rights, pending and future patent, trademark and copyright
applications may not be approved, and we may not be able to prevent infringement without incurring substantial expense. We have also
devoted substantial resources to the development of our proprietary technologies and related processes. In order to protect our proprietary
technologies and processes, we rely in part on trade secret laws and confidentiality agreements with our employees, consultants, and
third parties. These agreements may not effectively prevent unauthorized disclosure of confidential information
and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently
discover our trade secrets, in which case we would not be able to assert trade secret rights or develop similar technologies and processes.
Further, laws in certain jurisdictions may afford little or no trade secret protection, and any changes in, or unexpected interpretations
of, the intellectual property laws in any country in which we operate may compromise our ability to enforce our intellectual property
rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. If the
protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our products, brand,
and other intangible assets may be diminished, and competitors may be able to more effectively replicate our products. Any of these events
would harm our business.
Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of our products obsolete or less attractive to our customers, which could adversely affect our results of operations. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in our ability to be competitive. There is a risk that we will not be able to achieve the technological advances that may be necessary for us to be competitive or that certain of our products will become obsolete. We are also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly. These risks could have a material adverse effect on our business, results of operations development and failure of products to operate properly. These risks could have a material adverse effect on our business, results of operations and financial condition.
We,
and the third-party business partners and vendors upon which we have relied, have experienced, and may in the future experience, cybersecurity
threats, including threats or attempts to disrupt our information technology infrastructure and unauthorized attempts to gain access
to sensitive or confidential information. In April 2024, our former primary commercial partner and exclusive reseller for the automotive industry, AFG, publicly disclosed that it was the victim of a ransomware attack in the Fall of 2023.
We do not intend to pay dividends for the foreseeable future.
We do not intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Moreover, the terms of any credit facility into which we or any of our subsidiaries enters may restrict our ability to pay dividends, and any additional debt we or any of our subsidiaries may incur in the future may include similar restrictions. As a result, shareholders must rely on sales of their Common Stock after price appreciation as the only way to realize any future gains on their investment.
We will
incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to
compliance with our public company responsibilities and corporate governance practices.
As
a company with publicly-tradedpublicly traded securities, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended,
(the “Exchange Act”), Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing
requirements of the Nasdaq and other applicable securities laws and regulations. These rules and regulations require that we adopt additional
controls and procedures and disclosure, corporate governance and other practices thereby significantly increasing our legal, financial
and other compliance costs. These new obligations will also make other aspects of our business more difficult, time-consuming or costly
and increase demand on our personnel, systems and other resources. For example, to maintain and improve the effectiveness of our disclosure
controls and procedures and internal control over financial reporting, we will need to commit significant resources, hiremaintain additional
staff and provide additional management oversight. Furthermore, as a result of disclosure of information in this Annual Report on Form
10-K and in our Exchange Act and other filings required of a public company, our business and financial condition will becomeis more visible,
which we believe may give some of our competitors who may not be similarly required to disclose this type of information a competitive
advantage. In addition to these added costs and burdens, if we are unable to satisfy our obligations as a public company, we could be
subject to delisting of our Common Stock, fines, sanctions, other regulatory actions and civil litigation, any of which could negatively
affect the price of our Common Stock.
Nasdaq may delist our securities from trading on its exchange, which could limit investors' ability to make transactions in our securities and subject us to additional trading restrictions.
Our Common Stock and Public Warrants are listed on Nasdaq under the symbols "BNAI" and "BNAIW", respectively. In order to continue listing our securities on Nasdaq, we are required to maintain certain financial, distribution and stock price levels. Generally, we will be required to maintain a minimum market capitalization and a minimum number of holders of our securities.
We
are required to comply with the SEC'sSEC’s rules implementing Sections 302 and 404 of Sarbanes-Oxley, which will requirerequires management
to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness
of controls over financial reporting. As an emerging growth company, our independent registered public accounting firm willis not be required
to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(a) until the later of
(i) the year following our first annual report required to be filed with the SEC or (ii) we are no longer an emerging growth company.
At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with
the level at which our controls are documented, designed or operating.
Prior
to the Business Combination, BEN did not have an internal audit function. To comply with the requirements of being a public company,
we have undertaken various actions, and will need to take additional actions, such as implementing numerous internal controls and procedures
and hiring additional accounting or internal audit staff or consultants. Testing and maintaining internal control can divert management's management’s
attention from other matters that are important to the operation of our business. If we identify any material weaknesses in our internal
control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal
control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion
as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors
may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be negatively
affected. We could also become subject to investigations by the SEC, Nasdaq or other regulatory authorities, which could require additional
financial and management resources. In addition, if we fail to remedy any material weakness, our financial statements could be inaccurate,
and we could face restricted access to capital markets.
The
Company may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous to the holder, thereby making
the Public Warrants worthless .worthless.
We
have the ability to require holders of the Public Warrants to exercise such warrants on a cashless basis, which will cause holders to
receive fewer shares of Common Stock upon their exercise of the Public Warrants than they would have received had they been able to exercise
their Public Warrants for cash .cash.
The
exclusive forum clause set forth in the warrant agreement governing the Public Warrants may have the effect of limiting an investor's investor’s
rights to bring legal action against us and could limit the investor'sinvestor’s ability to obtain a favorable judicial forum for disputes
with us .us.
Our
business and operations could be negatively affected if we become subject to any securities litigationlitigation, shareholder activism or shareholder“short activism,squeeze” trading activity, which
could cause us to incur significant expense, hinder execution of business and growth strategy and impact our stock
price.
Additionally, securities of certain companies have recently experienced significant and extreme volatility in stock price due short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in both the stock prices of those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment, as in many cases the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.
We
may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance
will consist of forward-looking statements, subject to the risks and uncertainties described in this Annual Report on Form 10-K and in
our other public filings and public statements. The ability to provide this public guidance, and the ability to accurately forecast our
results of operations, could be impacted by the global macroeconomic events, such as the COVID-19 pandemic and the current conflict in
Ukraine and in the Middle East. Our actual results may not always be in line with or exceed any guidance we have provided, especially
in times of unfavorable or uncertain economic and market conditions, such as the current global economic uncertainty experienced as a
result of the COVID-19 pandemic and the current inflationary environment in the United States. If, in the future, our operating or financial
results for a particular period do not meet any guidance provided or the expectations of investment analysts, or if we reduce our guidance
for future periods, the market price of our Common Stock and Public Warrants may decline as well. Even if we do issue public guidance,
there can be no assurance that we will continue to do so in the future.
Our management does not have prior experience in operating a public company.
Our management does not have prior experience in managing a publicly traded company. As such, the management team may encounter difficulties in successfully or effectively complying with our reporting and other obligations under federal securities laws and other regulations and in connection with operating as a public company. Their lack of prior experience in dealing with the reporting and other obligations and laws pertaining to public companies could result in management being required to devote significant time to these activities, which may result in less time being devoted to our management and growth. Additionally, we will be required to hire additional personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies. We may be required to incur significant expense in connection with these efforts.
InOn
July accordance1, with Nasdaq Listing Rule 5810(c)(3)(A),2025, the Company received a letter from Nasdaq notifying the Company that it has been providedgranted an initial periodextension of 180 calendar
days, or until JuneDecember 28,29, 2025 (the “Compliance Date”),2025, to regain compliance with the Minimum Bid Price Requirement.Requirement If,under atNasdaq anyListing timeRule before5550(a). On
December 31, 2025, the ComplianceCompany Date, the bid price for the Common Stock closes at $1.00 or more forreceived a minimumletter of 10 consecutive business days,from the Staff will provide written notification tonotifying the Company that it has regained compliance with the Bid
Price Requirement (unless the Staff exercises its discretion to extend the 10-day period).Requirement.
If the Company is not in compliance with the Bid Price Requirement by the Compliance Date, the Company may qualify for a second 180 calendar day period to regain compliance with the Bid Price Requirement. To qualify for an additional compliance period, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If the Company does not qualify for or fails to regain compliance during the second compliance period, then the Staff will provide written notification to the Company that its Common Stock will be subject to delisting. At that time, the Company may appeal the Staff's delisting determination to the Nasdaq Listing Qualifications Panel. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination, that such an appeal would be successful.
TheIf
the Company intendsfalls toout monitorof compliance with the closingBid bidPrice priceRequirement ofin itsthe future, the Common Stock andmay isbe evaluating available options, including seekingsubject to effectdelisting. a reverse stock split, to resolve the noncompliance matters described herein and intends to take appropriate steps to maintain its listing on Nasdaq. However, there There
can be no assurance that the Company will be ablecontinue to regainbe compliancecompliant with the Bid Price Requirement.
The issuances of additional shares of Common Stock under the SEPA may result in dilution of holders of Common Stock and have a negative impact on the market price of the Common Stock.
Pursuant to the SEPA, we may issue and sell up to $50 million of shares of Common Stock to YA II PN, Ltd. ("Yorkville”), of which we have sold $1,825,518 through March 28, 2025. The price at which we may issue and sell shares may be at either (i) 96% of the daily VWAP of the Common Stock for any period commencing on the receipt of the advance notice by Yorkville and ending on 4:00 p.m. on the applicable advance notice date or (ii) 97% of the lowest daily VWAP of the Common Stock during the three trading days following a notice to sell to Yorkville, provided that we are subject to certain caps on the amount of shares of Common Stock that we may sell on any single day. Assuming that (a) we issue and sell the full $50 million of shares of Common Stock under the SEPA to Yorkville, (b) no beneficial ownership limitations, and (c) the issue price for such sales is $1.00 per share, such additional issuances would represent in the aggregate approximately 47,537,977 additional shares of Common Stock, respectively, or approximately 52.9% of the total number of shares of Common Stock outstanding as of March 27, 2025, after giving effect to such issuance. The timing, frequency, and the price at which we issue shares of Common Stock are subject to market prices and management's decision to sell shares of Common Stock, if at all.
Yorkville may resell all, some or none of the shares of Common Stock it beneficially owns from time to time in its discretion and at different prices subject to the terms of the SEPA. As a result, investors will likely pay different prices for those shares, and so may experience different levels of dilution (and in some cases substantial dilution) and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase as a result of future issuances by the Company, whether to Yorkville or others at prices lower than the prices such investors paid for their shares. In addition, if we issue a substantial number of shares to such parties, or if investors expect that we will do so, the actual sales of shares or the mere existence of the SEPA may adversely affect the price of our Common Stock or make it more difficult for us to sell equity or equity-related securities in the future at a desirable time and price, or at all.
The issuance, if any, of Common Stock would not affect the rights or privileges of the Company's existing stockholders, except that the economic and voting interests of existing stockholders would be diluted. Although the number of shares of Common Stock that existing stockholders own would not decrease as a result of these additional issuances, the shares of Common Stock owned by existing stockholders would represent a smaller percentage of the total outstanding shares of Common Stock after any such issuance, potentially significantly smaller.
Management's Discussion & Analysis (MD&A)
New heading “Financing Registration Statements”
New heading “Operating Results Improvement”
New heading “Balance Sheet Improvement”
Removed heading “Risk Relating to Forward-Looking Statements”
Removed heading “Cohen Convertible Note”
Removed heading “May Private Placement”
Removed heading “July Private Placement”
Removed heading “August Private Placement”
Removed heading “Standby Equity Purchase Agreement”
Removed heading “The Cataneo Purchase Agreement”
Removed heading “Yorkville Promissory Note”
Removed heading “Nasdaq Minimum Bid Price Compliance”
Removed heading “Warrant Exercise and Reload Agreement”
Removed heading “AFG Subscription Agreement; Termination of Reseller Agreement”
Removed heading “Impairment of deferred customer acquisition costs”
Removed heading “Other income (expenses)”
Removed heading “Gain on debt extinguishment”
Removed heading “Impairment of deferred customer acquisition costs”
Removed heading “Cohen Convertible Note”
Removed heading “May Private Placement”
Removed heading “July Private Placement”
Removed heading “August Private Placement”
Removed heading “Standby Equity Purchase Agreement”
Removed heading “The Cataneo Purchase Agreement”
Removed heading “Yorkville Promissory Note”
Removed heading “Warrant Exercise and Reload Agreement”
Removed heading “AFG Subscription Agreement; Termination of Reseller Agreement”
Removed heading “Material Cash Requirements”
Removed heading “Research and Development Sponsorship”
Removed heading “The Cataneo Purchase Agreement”
Removed heading “Research and development expenses”
Removed heading “Stock-based compensation”
Removed heading “Impairment of Definite Lived Intangible Assets”
Removed heading “In-Process Research and Development”
Largest changes
“The transaction is expected to close in the first half of 2025 and is subject to conditions, including, (i) the making of the Cash Election, (ii) the initiation of the process to register for resale the Equity Consideration, (iii) written confirmation that the Company has not received any delisting notice or similar notification affecting its listing status with Nasdaq, (iv) the execution by one or several of the Company's major stockholders of a personal guarantee of the Agreed Share Value (as defined therein) for a period of one year following the Cataneo Closing Date (the "Personal …”see in full comparison
“On November 11, 2024, the Company issued a non-convertible unsecured promissory note (the "Promissory Note") in the aggregate original principal amount of approximately $1.7 million to Yorkville. The Promissory Note does not bear interest, subject to a potential increase of the interest rate to 18.0% per annum upon the occurrence of certain events of default as described in the Promissory Note. The Promissory Note matured on March 11, 2025, and was issued at an original issue discount of 10%. …”see in full comparison
“On November 11, 2024, the Company issued the Promissory Note in the aggregate original principal amount of approximately $1.7 million to Yorkville. The Promissory Note does not bear interest, subject to a potential increase of the interest rate to 18.0% per annum upon the occurrence of certain events of default as described in the Promissory Note. The Promissory Note matured on March 11, 2025, and was issued at an original issue discount of 10%. …”see in full comparison
“On January 16, 2025, the Company filed a lawsuit against AFG and its Chief Executive Officer, Ralph Wright Brewer III, in the Northern District of Texas, Dallas Division alleging fraudulent misrepresentation, breach of contract, and the concealment of a ransomware attack on its own network shortly before the Reseller Agreement was executed (the "AFG Lawsuit").”see in full comparison
“On October 29, 2024, Company entered into a Share Purchase and Transfer Agreement with Christian Unterseer, in his individual capacity ("Unterseer"), CUTV GmbH, a limited liability company incorporated under the laws of the Federal Republic of Germany ("CUTV"), and CUNEO AG, a stock corporation incorporated under the laws of the Federal Republic of Germany ("Cuneo" and together with Unterseer and CUTV, the "Sellers") (as amended by the Addendum, the "Purchase Agreement") pursuant to which the Sellers have agreed to sell all of the outstanding equity interests of Cataneo GmbH, a limited …”see in full comparison
“On April 12, 2024, we issued the Cohen Convertible Note, to settle outstanding invoices totaling $1.9 million related to investment banking services rendered to the Company in connection the Business Combination. Beginning on October 14, 2024, interest will accrue at the fixed rate of 8% per annum on the outstanding principal amount until the Cohen Convertible Note is paid in full. Interest is payable monthly in cash or in-kind at the election of the Company. The Company may prepay the Cohen Convertible Note in whole or in part at any time or from time to time without penalty or premium. …”see in full comparison
Full comparison: every changed paragraph (130)
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Cautionaryour Note Regarding Forward-Looking Statements,” “Business,” “Risk Factors” and the consolidated audited
financial statements and accompanyingthe notes related thereto appearingwhich are included elsewhere in this Annual Report on Form 10-K.Unless10-K (this “Report”).
Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company”
or “BEN” refer to Brand Engagement Network Inc., a Delaware corporation. The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes
thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Annual Report”) and with the
consolidated financial statements and related notes thereto presented in this Report.
Risk Relating to Forward-Looking Statements
This discussion and analysis contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the fact that they do not strictly relate to historical or current facts. They use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” the negative version of these words, or other comparable words or phrases. Such forward-looking statements are subject to various risks and uncertainties. In particular, these include statements relating to future actions, statements regarding future performance or results and anticipated services or products, sales efforts, expenses, the outcome of contingencies, trends in operations and financial results. Actual results could differ materially from those expressed or implied in the forward-looking statements. See “- Cautionary Note Regarding Forward-Looking Statements.”
We are an emerging provider of conversational artificial intelligence (“AI”) assistants, with the purpose of transforming engagement and analytics for businesses through our security-focused, multimodal communication and human-like AI assistants. Our AI assistants are built on proprietary natural language processing, anomaly detection, multisensory awareness, sentiment and environmental analysis, as well as real-time individuation and personalization capabilities. We believe these powerful tools will empower businesses to elevate customer experiences, optimize cost management and supercharge operational efficiency. Our platform is designed to configure, train and operate AI assistants that engage with professionals and consumers through multiple channels, boosting customer experience and providing instant personalized assistance for consumers in the automotive and healthcare markets.
We are a generative AI ("GenAI") company specializing in conversational AI solutions. Through our secure, human-like AI agents ("AI Agents"), available in different modalities, we seek to transform consumer engagement and elevate customer experience, productivity, and business performance. Our AI Agents are built on 16+ advanced AI modules spanning perception, understanding, and response, with advanced capabilities in natural language processing ("NLP"), multisensory awareness, sentiment and environmental analysis, and real-time individuation and personalization. Our conversational AI solutions are tailored to meet the unique needs of our business customers - from AI Agent customization in look, sound, and feel, to conversation design, business system integration, and cross-platform execution.
Financing Registration Statements
We currently do not have an effective registration statement on file with the Securities and Exchange Commission other than our Registration Statement on Form S-8 (File No. 333-292748) and our Registration Statement on Form S-4 (file No. 333-275058).
Cohen Convertible Note
On April 12, 2024, we issued a convertible promissory note to J.V.B. Financial Group, LLC, acting through its Cohen & Company Capital Markets division in the principal amount of $1.9 million (the "Cohen Convertible Note"), to settle outstanding invoices totaling $1.9 million related to investment banking services rendered to the Company in connection with its merger with Prior BEN and DHC Acquisition Corp. (the "Business Combination"). Beginning on October 14, 2024, interest will accrue at the fixed rate of 8% per annum on the outstanding principal amount until the Cohen Convertible Note is paid in full. Interest is payable monthly in cash or in-kind at the election of the Company. The Company may prepay the Cohen Convertible Note in whole or in part at any time or from time to time without penalty or premium. The Company may be required to prepay all or a portion of the Cohen Convertible Note upon the consummation of certain capital raising activities as described therein. The Cohen Convertible Note matured on March 14, 2025.
May Private Placement
On May 28, 2024, the Company entered into a Securities Purchase Agreement (the "May SPA") with certain investors (the "May Purchasers"), pursuant to which the Company sold to the May Purchasers an aggregate of 1,980,000 shares of common stock, par value $0.0001 per share ("Common Stock") and 3,960,000 warrants, consisting of warrants to purchase 1,980,000 shares of Common Stock with a term of one year (the "May One-Year Warrants") and warrants to purchase 1,980,000 shares of Common Stock with a term of five years (the "May Five-Year Warrants" and, together with the May One-Year Warrants, the "May Warrants"), for aggregate proceeds consisting of approximately $4.4 million in cash and approximately $0.5 million through the offset of an obligation of the Company to the Purchasers. All May Warrants were originally exercisable for shares of Common Stock at an exercise price of $2.50 per share.
July Private Placement
On July 1, 2024, the Company entered into a July Securities Purchase Agreement with The Williams Family Trust (the "July Securities Purchase Agreement") for the issuance and sale of 120,000 shares of Common Stock and 240,000 warrants, consisting of 120,000 July Warrants with a term of one year (the "July One-Year Warrants") and 120,000 July Warrants with a term of five years (the "July Five-Year Warrants," together with the July One-Year Warrants, the "July Warrants") to The Williams Family Trust for an aggregate purchase price of $0.3 million. The July Warrants are exercisable for Common Stock at a price of $2.50 per share and were immediately issued upon the closing date of July 1, 2024.
August Private Placement
On August 26, 2024 2024 (the “SEPA Effective Date”), we consummated a series of transactions for an aggregate purchase price of $5,925,000 (the "August Financing") whereby we (i) agreed to issue 1,185,000 shares of our Common Stock at a price per share of $5.00 pursuant to that certain Securities Purchase Agreement (the "August SPA"), dated August 26, 2024, by and among the Company and certain investors signatory thereto (the "August Purchasers"), (ii) issued 960,000 warrants (the "August Warrants") to purchase our Common Stock at an exercise price of $5.00 pursuant to that certain Warrant Purchase Agreement ("Warrant Purchase Agreement"), dated August 26, 2024, by and among the Company and certain purchasers signatory thereto and (iii) facilitated the transfer of 1,185,000 shares held by DHC Sponsor, LLC ("Sponsor") issued in connection with the Company's predecessor, DHC Acquisition Corp.'s ("DHC") initial public offering to the August Purchasers, pursuant to that certain share assignment and lockup release agreement (the "Assignment Agreement") with certain members of Sponsor and certain other existing stockholders and affiliates of the Company and the August Purchasers in exchange for releases from certain restrictions on transfer contained in either a (i) prior letter agreement by and among the Company's predecessor, DHC, Sponsor and the other signatories thereto or (ii) in certain lock-up agreements executed by certain members of Sponsor in connection with the consummation of the Company's prior business combination.
On August 30, 2024, the Company issued to the August Purchasers an aggregate of 100,000 shares of Common Stock and 960,000 August Warrants, and the August Purchasers paid an aggregate of $0.5 million in connection with the closing of the August Financing.
The remaining shares were issued to an escrow account and such shares remain in escrow until the conditions in the August SPA are satisfied. The August Purchasers are required to pay to the Company monthly cash installments in the amounts and on the dates as determined in the August SPA ending on April 5, 2025. For every $5.00 paid to the Company, the Company will release one share of Common Stock under the August SPA and one share of Common Stock under the Assignment Agreement to the August Purchasers. If an investor fails to pay its required funding by the respective deadline, the investor's entire commitment under the August SPA will become immediately due and payable. As of March 27, 2025, a total of 110,000 shares of Common Stock have been issued to the August Purchasers for gross proceeds of $550.000. As of March 27, 2025, the August SPA has been terminated with respect to certain Purchasers who have exercised their portion of the Committed Warrants under the January Warrant Exercise Agreement. As of the date hereof, one Purchaser has failed to make its required exercises for the January 31, 2025 exercise date under the January Warrant Exercise Agreement. To the extent a Purchaser fails to exercise its portion of the Committed Warrants, the obligations of such Purchaser under the August SPA and such obligations of any investor under the August SPA who is not a Purchaser under the January Warrant Exercise Agreement, shall remain, and the August SPA will only terminate as to the Purchasers who have completed their January 31, 2025 exercise pursuant to the terms of the January Warrant Exercise Agreement. For additional information, please see "Warrant Exercise and Reload Agreement" below.
Standby Equity Purchase Agreement
On August 26, 2024, the Company issued 280,899 shares (the "Commitment Shares") of Common Stock to YA II PN, Ltd. ("Yorkville"), pursuant a Standby Equity Purchase Agreement (the "SEPA"), dated August 26, 2024. The issuance of such shares to Yorkville pursuant to the SEPA was not registered under the Securities Act. As of March 27, 2025, the Company has issued 2,462,023 shares to Yorkville under the SEPA.
The Cataneo Purchase Agreement
On October 29, 2024, Company entered into a Share Purchase and Transfer Agreement with Christian Unterseer, in his individual capacity ("Unterseer"), CUTV GmbH, a limited liability company incorporated under the laws of the Federal Republic of Germany ("CUTV"), and CUNEO AG, a stock corporation incorporated under the laws of the Federal Republic of Germany ("Cuneo" and together with Unterseer and CUTV, the "Sellers") (as amended by the Addendum, the "Purchase Agreement") pursuant to which the Sellers have agreed to sell all of the outstanding equity interests of Cataneo GmbH, a limited liability company incorporated under the laws of the Federal Republic of Germany ("Cataneo") to the Company for an aggregate purchase price of $19.5 million, consisting of (i) $9.0 million in cash (the "Cash Consideration") and (ii) 4,200,000 shares of the Company's Common Stock at an agreed upon value of $2.50 per share ("Equity Consideration," collectively with the Cash Consideration, the "Consideration Shares") (the transactions governed by the Purchase Agreement, the "Acquisition"), subject to customary adjustments. Prior to the closing of the Acquisition (the "Cataneo Closing Date"), the Sellers may elect to convert a portion of the Equity Consideration to cash for up to $3.0 million at a price per share of $2.50 (the "Cash Election"). Additionally, an aggregate of 400,000 shares of Common Stock issued as part of the Equity Consideration shall be subject to an escrow arrangement for a period of one year (the "Escrow Period") following Cataneo Closing Date (the "Escrow Shares"). The Escrow Shares may be utilized to offset certain claims, fines, penalties, outstanding debts or other costs owed by the Sellers following the Cataneo Closing Date. Thirty days prior to the end of the Escrow Period, certain of the Sellers shall have the right, but not the obligation, to cause the Company to repurchase their portion of the Escrow Shares at a price per share of $2.50.
The Purchase Agreement contains customary representations, warranties and covenants, as well as indemnification provisions subject to specified limitations. Among other things, the Sellers have agreed, subject to certain exceptions, to cause Cataneo to conduct its business in the ordinary course, consistent with past practice, from the date of the Purchase Agreement until the Cataneo Closing Date and not to take certain actions prior to the Cataneo Closing Date without the prior written consent of the Company.
The transaction is expected to close in the first half of 2025 and is subject to conditions, including, (i) the making of the Cash Election, (ii) the initiation of the process to register for resale the Equity Consideration, (iii) written confirmation that the Company has not received any delisting notice or similar notification affecting its listing status with Nasdaq, (iv) the execution by one or several of the Company's major stockholders of a personal guarantee of the Agreed Share Value (as defined therein) for a period of one year following the Cataneo Closing Date (the "Personal Guarantee"), (v) the obtaining of joint approval of the terms of the financing of the cash purchase price of the Acquisition by the Company and the Sellers, (vi) the receipt of customary third-party approvals and the release of the Sellers from customary bank guarantees, securities and indemnities, and (vii) the Company's board of directors' approval of the Company's due diligence investigation (collectively, the "Closing Conditions"). The Company intends to finance the transaction through third-party financing, which may take the form of debt or equity.
The Purchase Agreement contains certain customary termination rights, as amended and described below, for the Company and the Sellers, including the right to terminate the Purchase Agreement if (i) not all of the Closing Conditions have been satisfied by January 29, 2025 (which has been extended as described below), (ii) a party has not performed all of its Closing Actions (as defined therein) within ten business days of the Cataneo Closing Date, or (iii) the registration process of the Equity Consideration has not been initiated prior to the Cataneo Closing Date to the satisfaction of the Sellers. Notwithstanding any termination right, any party may seek specific performance of the other parties to the Purchase Agreement. In the event the Purchase Agreement is terminated by the Sellers by virtue of the failure of the Company to deliver the Personal Guarantee, the Sellers shall be entitled to a termination fee of approximately $0.4 million.
On February 6, 2025, the Company and the Sellers entered into that certain Addendum to Share Purchase and Transfer Agreement (the "Addendum"), pursuant to which the parties amended certain provisions of the Purchase Agreement to provide the parties additional time to prepare for and close the Acquisition. More specifically, the Addendum amends the Purchase Agreement to, among other things: (i) provide that the Company pay to Mr. Unterseer, as authorized recipient of the Sellers $0.4 million as a partial down payment ("Initial Down Payment") on the Cash Consideration by February 13, 2025, which amount was paid in full on February 12, 2025 and temporarily suspend Sellers' right to withdraw from the Purchase Agreement until February 28, 2025, unless the Company fails to pay Initial Down Payment; (ii) provide for additional temporary suspensions of Sellers' right to withdraw for two successive one-month periods through April 30, 2025, dependent upon the Company's payment each month of a down payment of $0.1 million to Mr. Unterseer, as authorized recipient of the Sellers (each an "Additional Down Payment"), with each Additional Down Payment to be credited toward the Cash Consideration to be owed by the Company; (iii) add a requirement of Sellers to use their best efforts to coordinate and to cause Cataneo to work with the Company and the Company's financial advisors towards the implementation of the percentage of completion method of accounting for past and current customer projects; (iv) provide that Sellers' agree to rescind Sellers' previous notification to exercise their right (the "Election Right") to receive the Equity Consideration in the amount of $3.0 million in cash instead of Consideration Shares as set forth in the Purchase Agreement, provided that the Sellers' may re-exercise such Election Right prior to the Closing of the Acquisition; (v) waive Sellers' right to approve the terms of the financing of the transaction; and (vi) provide that if the Purchase Agreement were to be terminated upon the Company's failure to pay or the expiration of April 30, 2025, or for other reasons the Company withdraws from the Purchase Agreement pursuant to the early termination provisions of the Purchase Agreement or should the Purchase Agreement terminate before Closing, Seller's agree to set-off under certain circumstances any claims Sellers may have pursuant to such early termination provisions of the Purchase Agreement against the Initial Down Payment and any Additional Down Payment; however, the remainder of the Initial Down Payment and any Additional Down Payment will not be repayable to the Company by Sellers. On March 14, 2025, the Company paid an Additional Down Payment of $100,000 to be credited toward the Cash Consideration.
Yorkville Promissory Note
On November 11, 2024, the Company issued a non-convertible unsecured promissory note (the "Promissory Note") in the aggregate original principal amount of approximately $1.7 million to Yorkville. The Promissory Note does not bear interest, subject to a potential increase of the interest rate to 18.0% per annum upon the occurrence of certain events of default as described in the Promissory Note. The Promissory Note matured on March 11, 2025, and was issued at an original issue discount of 10%. The Company is required to make monthly cash payments beginning on December 15, 2024, and continuing on the same day of each successive calendar month (each, an "Installment Date") of principal in the amount of the sum of (i) $0.4 million of principal (or the outstanding principal amount if less than such amount), plus (ii) a payment premium in an amount equal to 5% of the principal amount being paid, if applicable (the "Payment Premium"), and (iii) any accrued and unpaid interest as of each Installment Date ("Installment Amounts"). The Company shall, at its own option, repay each Installment Amount either (i) in cash on or before each Installment Date, or (ii) by submitting one or more an advance notice(s) under the SEPA (as defined below) (an "Advance Repayment"), on or before the applicable Installment Date, or any combination of (i) or (ii) as determined by the Company. If the Company repays the Installment Amount in cash, the cash payment shall include the Payment Premium. If the Company elects an Advance Repayment for all or a portion of an Installment Amount, then no Payment Premium will apply. In addition, for so long as the Promissory Note is outstanding, with respect to any advance notice submitted by the Company under the SEPA, the Company shall select an Option 2 Pricing Period (as defined in the SEPA), unless otherwise agreed by Yorkville.
Nasdaq Minimum Bid Price Compliance
On December 30, 2024, the Company received a letter (the "Notice") from the Listing Qualifications Department (the "Staff") of Nasdaq notifying the Company that, for the previous 30 consecutive business days, the closing bid price for the Company's Common Stock, had been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5450(a)(1) (the "Bid Price Requirement"). The Notice has no effect at this time on the Common Stock, which continues to trade on The Nasdaq Capital Market under the symbol "BNAI".
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided an initial period of 180 calendar days, or until June 28, 2025 (the "Compliance Date"), to regain compliance with the Bid Price Requirement. If, at any time before the Compliance Date, the bid price for the Common Stock closes at $1.00 or more for a minimum of 10 consecutive business days, the Staff will provide written notification to the Company that it has regained compliance with the Bid Price Requirement (unless the Staff exercises its discretion to extend the 10-day period).
If the Company is not in compliance with the Bid Price Requirement by the Compliance Date, the Company may qualify for a second 180 calendar day period to regain compliance with the Bid Price Requirement. To qualify for an additional compliance period, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If the Company does not qualify for or fails to regain compliance during the second compliance period, then the Staff will provide written notification to the Company that its Common Stock will be subject to delisting. At that time, the Company may appeal the Staff's delisting determination to the Nasdaq Listing Qualifications Panel. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination, that such an appeal would be successful.
The Company intends to monitor the closing bid price of its Common Stock and is evaluating available options, including seeking to effect a reverse stock split, to resolve the noncompliance matters described herein and intends to take appropriate steps to maintain its listing on Nasdaq. However, there can be no assurance that the Company will be able to regain compliance with the Bid Price Requirement.
Warrant Exercise and Reload Agreement
On January 13, 2025, the Company entered into that certain Warrant Exercise and Reload Agreement (the "January Warrant Exercise Agreement") with certain investors (the "Purchasers"). Pursuant to the August SPA, the Purchasers previously purchased 110,000 shares of Common Stock, and the Company issued the contribution warrant (the "Contribution Warrant") to purchase up to 960,000 shares of Common Stock at an exercise price of $5.00 per share in exchange for certain holders of Common Stock contributing 1,185,000 shares of Common Stock into an escrow account maintained in connection with the August SPA, of which 1,075,000 shares of Common Stock remain in such escrow account (the "Escrow Shares").
Under the January Warrant Exercise Agreement, the exercise price of 1,074,999 May Warrants (the "Committed Warrants") was reduced to $1.96 per share, until May 30, 2025, after which point the exercise price for any unexercised Committed Warrants shall automatically revert back to $2.50 per share. Pursuant to the January Warrant Exercise Agreement, the Purchasers agreed to exercise the Committed Warrants for cash on a schedule set forth in the January Warrant Exercise Agreement, with exercises taking place on or before January 31, 2025, February 28, 2025 and March 27, 2025 (the "Exercise Schedule"). Upon each Committed Warrant exercised in accordance with the Exercise Schedule, the Company shall issue (i) one new warrant to purchase one share of Common Stock exercisable for a term of two years and (ii) one new warrant to purchase one share of Common Stock exercisable for a term of five years, each with an exercise price of $1.71 per share (together, the "Reload Warrants"). Upon a Purchaser's completion in full under the Warrant Exercise but no later than May 30, 2025, all remaining May Warrants issued under the May SPA held by such Purchaser shall immediately upon completion of such exercise automatically be amended to become exercisable for $1.96 per share for the remainder of their term (the "Optional Warrants"). If a Purchaser exercises an Optional Warrant by June 30, 2025, the Company shall issue to such Purchaser (i) one new warrant to purchase one share of Common Stock with an exercise price of $1.71 per share with a term of two years and (ii) one new warrant to purchase one share of Common Stock with an exercise price of $1.71 with a term of five years (the "Optional Reload Warrants"). In addition, under the January Warrant Exercise Agreement, for each share of Common Stock for which a Purchaser exercises a Committed Warrant, one Escrow Share will be released from escrow and transferred to such Purchaser, for an aggregate of up to 1,074,999 Escrow Shares among all Purchasers, rounded down to the nearest whole share. Additionally, the exercise price of the Contribution Warrant was reduced to $1.71 per share.
As of the date of March 27, 2025, Purchasers have exercised 718,513 Committed Warrants to purchase 718,513 shares of Common Stock pursuant to the January Warrant Exercise Agreement for aggregate gross proceeds of $1.4 million, and such Purchasers shall be issued 718,513 shares of Common Stock, 718,513 Escrow Shares, and 1,437,000 Reload Warrants. The August SPA has been terminated with respect to such Purchasers. As of March 27, 2025, one Purchaser has failed to make its required exercises for the January 31, 2025 exercise date under the January Warrant Exercise Agreement, in an aggregate amount of $0.2 million. To the extent a Purchaser fails to exercise its portion of the Committed Warrants, the obligations of such Purchaser under the August SPA and such obligations of any investor under the August SPA who is not a Purchaser under the January Warrant Exercise Agreement, shall remain, and the August SPA will only terminate as to the Purchasers who have completed their January 31, 2025 exercise pursuant to the terms of the January Warrant Exercise Agreement.
AFG Subscription Agreement; Termination of Reseller Agreement
On August 19, 2023, the Company and AFG entered into a Reseller Agreement (the "Reseller Agreement") providing for, among other things, AFG to act as BEN's exclusive reseller of certain products in a designated territory on certain terms and conditions. As partial consideration to AFG for such services to BEN, (i) Prior BEN issued to AFG a number of shares of Prior BEN common stock which converted into 1,750,000 shares of Common Stock and (ii) a non-transferable warrant to purchase up to 3,750,000 shares of Common Stock at a price of $10.00 per share, with AFG's right to exercise such warrant vesting based upon revenues earned from the sales of BEN products paid by AFG to BEN pursuant to the Reseller Agreement (the "Reseller Warrant").
On September 7, 2023, the Company and AFG entered into a Subscription Agreement (the "AFG Subscription Agreement") providing for (i) the purchase of shares of Prior BEN Common Stock in a private placement by the AFG and certain of its affiliates (the “AFG Investors”) as of immediately prior to the Closing Date, which converted into the right to receive 650,000 shares of Common Stock with an aggregate initial value of $6.5 million (such obligation to purchase such shares of BEN Common Stock, the "Initial Commitment") and (ii) the purchase of shares Common Stock in four installments commencing on March 14, 2025, with an aggregate purchase price of $26.0 million, at a purchase price per share prior to the installment purchase date that is the lesser of $10.00 and the average of the last reported sales prices of Common Stock for the twenty (20) trading days immediately preceding the applicable installment purchase date, subject to a floor price of $2.11 (the "AFG Installment Shares").
On January 17, 2025, the Company delivered a notice of termination ("Notice") to AFG Companies, Inc. ("AFG") terminating the Exclusive Reseller Agreement, dated August 19, 2023, as amended, by and between the Company and AFG (the "Reseller Agreement"). The Notice only applies to the Reseller Agreement and does not affect AFG's obligations under the Subscription Agreement; however, in light of the Notice and the AFG Lawsuit (as defined below), the Company is uncertain whether AFG will fulfill its obligations under the Subscription Agreement. Accordingly, none of the information presented in this Annual Report on Form 10-K assumes that either the Reseller Warrant will become exercisable or that any AFG Installment Shares will be issued.
On January 16, 2025, the Company filed a lawsuit against AFG and its Chief Executive Officer, Ralph Wright Brewer III, in the Northern District of Texas, Dallas Division alleging fraudulent misrepresentation, breach of contract, and the concealment of a ransomware attack on its own network shortly before the Reseller Agreement was executed (the "AFG Lawsuit").
The Company remains committed to, and intends to continue developing, its automotive vertical. The Company intends to utilize additional channel partners and grow its sales team to further expand its customer base and drive revenues. The Company is finalizing preparations to launch its Automotive AI Agent, a solution that integrates with major automotive data and service platform providers and supports over 13,000 dealerships nationwide. Additionally, the Company plans to expand its efforts through pilot programs in the Midwest, stronger reseller partnerships in Mexico, and collaborations with Canadian dealership groups. Recently, the Company has secured automotive pilots using its AI agent, which the Company believes will improve lead conversions, automates scheduling tools, enhances service efficiency, and enables advanced analytics to streamline operations.
Impairment of deferred customer acquisition costs
Impairment of deferred customer acquisition costs is related to the impairment of the fair value of the common shares issued to AFG in connection with the termination of the Reseller Agreement.
Other income (expenses)
Gain on debt extinguishment
Gain on debt extinguishment is related to settlement of accounts payable through issuance of shares of Common Stock and negotiated cash settlement.
Comparison
of the yearyears endedEnded December 31, 20242025 and 20232024
During the years ended December 31, 2025 and 2024, revenue was immaterial.
During the year ended December 31, 2024, we earned $0.1 million in revenue through proof of concept and revenue sharing. Such revenues were immaterial during the year ended December 31, 2023.
General
and administrative expenses for the year ended December 31, 20242025 were approximately $19.2$8,872,915, million, an increasedecrease of approximately $8.4 million,
$10,369,656, compared to the year ended December 31, 2023.2024. The increasedecrease was primarily due to a $4.7 million increase in professional fees, a $3.3 million increase in employee related costs including $1.2 million in one-time bonuses in connection with the Business Combination, transaction costs of $3.3$3.1 million
incurred in connection with the Business Combination, a $0.5 million increaseCombination in insurance and taxes, a $0.1 million increase in office related expenses, and all related to the expansionprior of our operations as a result of the acquisition of DM Lab in May 2023, partially offset by a decrease in stock-based compensation of $3.3 million due to the issuance of Prior BEN warrants and options which vested on the date of grant during the first quarter of 2023 and a $0.1 decrease in marketing costs.period. We have only recently begun to raise proceeds through the
offering of our Common Stock and convertible notes to investors and therefore expect, in the near term at a minimum, to continue to
utilize the issuance of equity basedequity-based instruments as compensation to reduce our cash outlays.
Depreciation and amortization expenses for the year ended December 31, 2024
2025 were approximately $2.7 million,$3,865,381 an increase of approximately $2.1 million,$1,136,970 compared to the year ended December 31, 2023.2024. The increase
was primarily due to the amortization expense associated with the developed technology placed into service in the second quarter of 2024.mid-2024.
Research
and development expenses for the year ended December 31, 20242025 were approximately $1.1$162,973 million,a an increasedecrease of approximately $0.9 million, $964,806,
compared to the year ended December 31, 2023.2024. The increasedecrease in research and development expenses was primarily due to anthe increasesponsorship agreement with Korea University no longer being active and a decrease in our stock-basedstock compensation due to an increase in headcount as a result of the acquisition of DM Lab in May 2023.
expense.
Impairment of deferred customer acquisition costs
During the year ended year ended December 31, 2024, we incurred $13.5 million in expense in connection with the impairment of deferred customer acquisition costs incurred as part of the Reseller Agreement with AFG. The impairment was triggered in connection with the termination of the Reseller Agreement. We did not have such impairment during the year ended December 31, 2023.
Gain
on extinguishment of debt for the year ended December 31, 20242025 was approximately $1.9 million,$4,191,074, related to settlement of accounts payable and accrued expenses
through the issuance of 93,333 and 151,261 shares, respectively,shares of Common Stock and negotiated cash settlement. We did not have such extinguishment of debt during the year ended December 31, 2023.
Change
in fair value of the warrant liabilities for the year ended December 31, 20242025 was approximately $1.0$197,292 millionloss associated with the non-cash
charge for changes in the fair value of the warrant liabilities that is subject to re-measurement at each balance sheet date. WeThe didchange
in notthe incurfair suchvalue expensesof the warrant liabilities during the year ended December 31, 2023.2024 was $994,687 associated with the non-cash charge
for changes in the fair value of the warrant liabilities that is subject to re-measurement at each balance sheet date.
As
of December 31, 2024,2025, our principal source of liquidity was cash of approximately $0.1 million.$172,124. We have financed operations to date with proceeds
from the Yorkville Promissory Note, transactions with AFG, sales of our Common Stock, the SEPA, warrant exercises
and debt issuances to related and non-related parties. As described in Note A of our audited consolidated financial statements and consolidated financial statements, we have incurred
recurring losses and negative cash flows from operations since inception and had an accumulated deficit of approximately $47.0 million$55,642,584 at December
31, 2024.2025. We expect losses and negative cash flows to continue for the foreseeable future, primarily as a result of increased general
and administrative expenses, continued product research and development and marketing efforts. Management anticipates that significant
additional expenditures will be necessary to develop and expand our business, including through stock and asset acquisitions, before
significant positive operating cash flows can be achieved. Our ability to continue as a going concern is dependent upon our ability to
raise additional capital and to ultimately achieve sustainable revenues and profitable operations. Current available funds are insufficient
to complete our business plan and as a consequence, we will need to seek additional funds, primarily through the issuance of debt or
equity securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available,
that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions
on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.
Our history of losses, our negative cash flow from operations, our limited cash resources on hand and our dependence on our ability to
obtain additional financing to fund our operations after the current cash resources are exhausted raises substantial doubt about our
ability to continue as a going concern. Our management concluded that our recurring losses from operations, and the fact that we have
not generated significant revenue or positive cash flows from operations, raised substantial doubt about our ability to continue as a
going concern for the next 12 months after issuance of our financial statements. Our auditors also included an explanatory paragraph
in their report onto our consolidated financial statements as of and for the year ended December 31, 20242025 with respect to this uncertainty.
On January 17, 2025, the Company delivered the Notice to AFG terminating the Reseller Agreement. The Notice only applies to the Reseller Agreement and does not affect AFG's obligations under the Subscription Agreement; however, in light of the Notice and the AFG Lawsuit (as defined below), the Company is uncertain whether AFG will fulfill its obligations under the Subscription Agreement.
The
Company will need to raise additional capital to continue to fund operations and product research and development. The Company believes
that it will be able to obtain additional working capital through equity financings, additional debt, or other arrangements to fund future
operations, and it intends to raise capital through equity or debt investments in the Company by third parties, including through the SEPA and the Promissory Note or other public offerings or private placements. However, the Company'sCompany cannot conclude these are probable of being implemented
or, if probable of being implemented, being in sufficient enough amounts to satisfy our contractual amounts as they presently exist that
are coming due over the next 12 months as of the date of such filing.
What changed in the latest 10-Q
Risk Factors
Largest changes
“We are involved in multi-jurisdictional litigation with AFG Companies, Inc. and related parties, the outcome of which is uncertain. We are currently party to related litigation proceedings in the Southern District of New York, the Northern District of Texas, and Tarrant County, Texas, arising out of disputes with AFG Companies, Inc. and related parties concerning funding obligations under a September 2023 stock purchase agreement. The litigation is ongoing, and we cannot predict the outcome or the timing of any resolution. …”see in full comparison
“We may not realize the anticipated benefits of the Cataneo acquisition. On June 30, 2026, we completed the acquisition of Cataneo GmbH. The success of the acquisition will depend, in part, on our ability to successfully integrate Cataneo’s operations, technology, personnel, and customer relationships with our existing business. Integration may be complex, time-consuming, and costly, and we may encounter difficulties, including unexpected costs, delays, or loss of key employees or customers. …”see in full comparison
see in full comparisonAsAdditionalof the date of this Report, there have been no material changes from theriskfactors disclosed in our 2025 Annual Report. Any of these factors could result in a significant or material adverse effect on our result of operations or financial conditions. Additional riskfactors not presently known to us may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
“As of the date of this Report, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, except the following:”see in full comparison
Full comparison: every changed paragraph (4)
As of the date of this Report, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, except the following:
We may not realize the anticipated benefits of the Cataneo acquisition. On June 30, 2026, we completed the acquisition of Cataneo GmbH. The success of the acquisition will depend, in part, on our ability to successfully integrate Cataneo’s operations, technology, personnel, and customer relationships with our existing business. Integration may be complex, time-consuming, and costly, and we may encounter difficulties, including unexpected costs, delays, or loss of key employees or customers. If we are unable to realize the anticipated benefits of the acquisition in a timely manner or at all, our business, financial condition, and results of operations could be adversely affected.
We are involved in multi-jurisdictional litigation with AFG Companies, Inc. and related parties, the outcome of which is uncertain. We are currently party to related litigation proceedings in the Southern District of New York, the Northern District of Texas, and Tarrant County, Texas, arising out of disputes with AFG Companies, Inc. and related parties concerning funding obligations under a September 2023 stock purchase agreement. The litigation is ongoing, and we cannot predict the outcome or the timing of any resolution. An adverse outcome, or even a favorable outcome that is delayed, could result in significant legal fees and expenses, diversion of management attention, and a material adverse effect on our financial condition, results of operations, or the market price of our Common Stock.
AsAdditional
of the date of this Report, there have been no material changes from the risk factors disclosed in our 2025 Annual Report. Any of these
factors could result in a significant or material adverse effect on our result of operations or financial conditions. Additional risk
factors not presently known to us may also impair our business or results of operations. We may disclose changes to such factors
or disclose
additional factors from time to time in our future filings with the SEC.
Management's Discussion & Analysis (MD&A)
New heading “Acquisition of Cataneo GmbH”
New heading “Russell Index Inclusion”
New heading “Investment in Accelevate Solutions”
New heading “Healthcare Initiatives”
New heading “Capital Structure and Legacy Liabilities”
New heading “Subsequent Events”
New heading “Cataneo U.S. Expansion”
New heading “Transportation Media Network”
New heading “INTERVENT Health AI Leadership”
New heading “Skye Africa Intelligence”
New heading “Grupo Skye and Related Entities”
New heading “Africa Licensing Agreement”
New heading “Impairment of Definite Lived Intangible Assets”
Largest changes
“Leadership Transition: Effective March 31, 2026, Jon Leibowitz was appointed as Chairman of the Board of Directors, succeeding Bernard Puckett. Mr. Leibowitz previously served as the Chairman of the Federal Trade Commission (FTC) and as a senior partner at Davis Polk & Wardwell LLP. The Board believes his extensive experience in regulatory policy, consumer protection, and corporate governance supports the Company’s strategic focus on privacy and enterprise-grade AI security. …”see in full comparison
“We are an emerging provider of conversational artificial intelligence (“AI”) assistants, with the purpose of transforming engagement and analytics for businesses through our security-focused, multimodal communication and human-like AI assistants. Our AI assistants are built on proprietary natural language processing, anomaly detection, multisensory awareness, sentiment and environmental analysis, as well as real-time individuation and personalization capabilities. …”see in full comparison
“The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of the asset exceeds its estimated undiscounted net cash flows, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset will be accounted for as its new cost. …”see in full comparison
Full comparison: every changed paragraph (63)
We are a technology company building the infrastructure for intelligent engagement. We develop proprietary artificial intelligence (“AI”), enterprise software, and other technology designed to help organizations understand, engage, personalize, and activate interactions with the people and environments around them.
Our technology combines AI, software, data, automation, and enterprise integration capabilities to enable intelligent engagement across a range of environments and use cases. Our proprietary technology, including our Engagement Language Model (“ELM™”), is designed to connect conversational and other forms of interaction with organizational data, workflows, and systems, enabling organizations to deploy intelligent experiences across digital, physical, conversational, and multimodal environments. Our technology is designed for secure, enterprise-grade deployment.
By applying intelligence to interactions and environments, our technology is designed to improve experiences, support enterprise operations, automate meaningful work, and enable organizations to make interactions more personalized, efficient, and actionable. Our technology can be applied across industries and engagement environments, including hospitality, healthcare, automotive, transportation and mobility, enterprise operations, advertising, and media.
On June 30, 2026, we completed the acquisition of Cataneo GmbH (“Cataneo”), expanding our technology ecosystem into media and advertising infrastructure. Cataneo is a Munich-based provider of enterprise software for advertising sales, scheduling, traffic, content management, inventory, analytics, and related media operations. The acquisition adds media technology and monetization capabilities to our broader technology ecosystem and provides opportunities to apply our AI, automation, and engagement capabilities within media and other environments.
Our technology is supported by proprietary software, AI capabilities, intellectual property, and a patent portfolio. We continue to develop these technologies for applications across industries and markets in which organizations seek to make interactions and operations more intelligent, personalized, efficient, and actionable.
We
are an emerging provider of conversational artificial intelligence (“AI”) assistants, with the purpose of transforming engagement
and analytics for businesses through our security-focused, multimodal communication and human-like AI assistants. Our AI assistants are
built on proprietary natural language processing, anomaly detection, multisensory awareness, sentiment and environmental analysis, as
well as real-time individuation and personalization capabilities. We believe these powerful tools will empower businesses to elevate
customer experiences, optimize cost management and supercharge operational efficiency. Our platform is designed to configure, train and
operate AI assistants that engage with professionals and consumers through multiple channels, boosting customer experience and providing
instant personalized assistance for consumers in the automotive and healthcare markets.
We
still hold significant intellectual property in the form of a patent portfolio that we believe will be a cornerstone of our artificial
intelligence solutions for certain industries that we expect to target, including the automotive, healthcare, and financial services
industries.
Recent
EventsDevelopments
Acquisition of Cataneo GmbH
On June 30, 2026, we completed our previously announced acquisition of Cataneo GmbH (“Cataneo”), a provider of enterprise software for advertising operations and infrastructure. Cataneo’s MYDAS platform supports advertising sales, scheduling, traffic, content management, monetization, analytics, CRM integration, and real-time reporting for broadcasters and media organizations. Cataneo’s platform manages more than €6 billion in annual advertising inventory across more than 1,000 media brands and more than 200 broadcast and digital channels across four continents. Cataneo generated more than €8.6 million in revenue in 2025. Total consideration for the acquisition was approximately $13.7 million, consisting of $9 million in cash and 255,014 shares of our common stock. In connection with the transaction, our Board of Directors appointed Cataneo Co-Founder Christian Unterseer to serve as a member of our Board, effective July 1, 2026.
Russell Index Inclusion
Effective at the close of U.S. markets on June 26, 2026, we were added to the Russell 3000® Index as part of the 2026 annual reconstitution of the Russell U.S. Indexes, resulting in concurrent inclusion in the Russell 2000® Index and applicable Russell style indexes.
Investment in Accelevate Solutions
On June 5, 2026, we completed a $1 million investment in Accelevate Solutions, a division of HighTide Energy, Inc., for an approximately 10% ownership stake. In connection with the investment, we received a warrant that may increase our ownership interest in Accelevate to approximately 20% over the following six months, subject to the terms of the warrant, and secured a matching $1 million investor capital commitment to support the exercise of that warrant.
Healthcare Initiatives
On June 11, 2026, we launched INTERVENT Health AI, a 50/50 joint venture with INTERVENT International formed to commercialize AI-powered health coaching and chronic disease management solutions. On June 23, 2026, our Skye Salud program in Mexico advanced to its next phase as we continued to expand our healthcare technology initiatives in the region.
Capital Structure and Legacy Liabilities
During the six months ended June 30, 2026, we continued to reduce legacy liabilities and streamline our capital structure. On January 29, 2026, we repaid in full an aggregate of $640,332 of outstanding indebtedness, including $630,332 owed to Hana Bank, South Korea, satisfying our obligations under the Asset Purchase Agreement dated May 3, 2023 through January 30, 2026. During the six months ended June 30, 2026, we also completed $596,005 of debt-to-equity conversions. On February 4, 2026, we also terminated our $50 million Standby Equity Purchase Agreement (“SEPA”) facility as part of our efforts to streamline our capital structure.
Subsequent Events
Cataneo U.S. Expansion
On July 13, 2026, we established a U.S. commercial headquarters for Cataneo on Madison Avenue in New York and appointed Don Durand as Chief Sales Officer of Cataneo to lead its commercial strategy and U.S. expansion.
Transportation Media Network
On July 14, 2026, together with Cataneo and Accelevate Solutions, we launched an AI-powered Transportation Media Network designed to convert connected vehicle fleets into advertising-supported media platforms.
INTERVENT Health AI Leadership
On August 1, 2026, INTERVENT Health AI, our 50/50 joint venture with INTERVENT International, appointed James F. Hughes as Chief Executive Officer to lead the venture’s commercialization efforts.
Skye Africa Intelligence
On August 5, 2026, Skye Africa Intelligence (Pty) Ltd., a joint venture owned by Valio Technologies (Pty) Ltd. and us, signed a non-binding Memorandum of Understanding with the East, Central and Southern Africa Health Community (“ECSA-HC”) to explore the deployment of AI-enabled health solutions across the ECSA-HC membership.
During
the quarter ended March 31, 2026, Brand Engagement Network Inc. (the “Company”) implemented a comprehensive realignment of
its financial and operational framework. Management initiated a strategic program directed at the systematic retirement of legacy reorganization
liabilities. These strategic actions, combined with debt conversions, resulted in a $2,814,047 reduction of the
Company’s total liabilities compared to the quarter ended March 21, 2025.
Grupo Skye and Related Entities: The Company owns a 25% common equity interest in Grupo Skye. Through this interest, the Company holds a 50% interest in Skye Salud (with Grupo Knobloch owning the other 50%) and, through Grupo Skye, 100% of Skye Intelligencia (formerly Skye Intelligencia LATAM), which serves as the vehicle for government-related business. The Company also holds a preferred equity interest that has been recorded at nominal value for accounting purposes.
Africa Licensing Agreement: On January 20, 2026, the Company, through its wholly owned subsidiary Skye AI USA LLC, entered into a licensing partnership related to the African market. The Company owns 25% of the common equity of Skye Africa Intelligence, Pty. Ltd, with Valio Technologies owning the remaining 75% and holds preferred equity with a nominal value. The Company is entitled to a 35% recurring revenue share.
Africa
Licensing Agreement: On January 20, 2026, the Company executed a licensing partnership with Valio Technologies (Pty)
Ltd. This agreement facilitates the Company’s entry into the African market and includes a clinical AI pilot at Nelson Mandela
University to evaluate the ELM™ technology in regulated healthcare and academic environments. Under the terms of the agreement,
the Company maintains a 25% equity interest in the regional venture and a 35% recurring revenue share.
Settlement
of Legacy Debt and Conversions: On January 29, 2026, the Company satisfied its remaining obligations under the May 2023 Asset Purchase
Agreement by completing a final payment of $630,332.46 to Hana Bank (South Korea). Additionally, during the quarter ended March 31, 2026,
the Company completed $596,005 in debt-to-equity conversions, further reducing outstanding liabilities.
Termination
of Financing Facility: On February 4, 2026, the Company formally terminated its $50 million Standby Equity Purchase Agreement (SEPA)
facility to further streamline its capital structure.
Commercial
Deployment: On March 2, 2026, the Company’s AI Concierge transitioned from pilot phase to active guest-facing deployment at
the Seven Visions Resort & Places, The Dvin. This deployment serves as a commercial validation of the Engagement Language Model (ELM™)
within the hospitality sector.
Private
Placement and Warrant Activity: On March 25, 2026, the Company closed a $1.518 million private placement with Ben Capital Fund I,
LLC at a price of $63.25 per share. During the quarter, the Company also received approximately $4.47 million in cash proceeds from the
exercise of outstanding warrants.
Leadership
Transition: Effective March 31, 2026, Jon Leibowitz was appointed as Chairman of the Board of Directors, succeeding Bernard Puckett.
Mr. Leibowitz previously served as the Chairman of the Federal Trade Commission (FTC) and as a senior partner at Davis Polk & Wardwell
LLP. The Board believes his extensive experience in regulatory policy, consumer protection, and corporate governance supports the Company’s
strategic focus on privacy and enterprise-grade AI security. This transition was part of a planned governance update and did not result
from any disagreement regarding the Company’s operations or policies.
We
are a development stage company and have not generated any significant revenue to date.date, but we anticipate additional revenue from our acquisition of Cataneo GmbH.
If
we cease to becomebe an emerging growth company,company and then qualify as an accelerated filer or large accelerated filer, we will
become subject to the provisions and requirements under Section 404(b) of the
Sarbanes-Oxley Act of 2002, which will require us to
undergo audits of our internal controls over financial reporting as part of our
yearly financial statement audits, resulting in a
significant increase in consultant and audit costs over previous levels going forward.
Comparison
of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
During the three months ended June 30, 2026 and 2025, revenue was immaterial. During the six months ended June 30, 2026, revenue increased to $264,394 from $15,000 during the six months ended June 30, 2025 primarily as a result of increased commercial traction for our Engagement AI solutions and related party revenue.
During
the three months ended March 31, 2026 and 2025, revenue was immaterial.
General
and administrative expenses for the three and six months ended June 30, 2026 were approximately $2.6 million and 5.0 millions,
respectively, compared to the three and six months ended June 30, 2025 which were approximately $1.8 million and $5.1 million,
respectively. This represents an increase of approximately $0.8 million and a decrease of $0.1 million, respectively. The increase
for the three months endedwas Marchprimarily 31, 2026 were approximately $2.4 million, decrease of approximately $0.8 million, comparedrelated to an increase in stock based compensation relating to shares issued for services. The
decrease for the
three six months ended March 31, 2025. The decrease was primarily dueattributable to a decrease of $0.2 million inlower professional fees, aemployee-related decrease of
in employee related costs of $0.5 million,costs, and by a decrease in insurance of $0.1 million.expense. We have only recently begun to raise
proceeds through the offering of our Common Stock and convertible notes to investors and therefore expect, in the near term at a
minimum,term, to continue to utilizeutilizing the issuance of equity basedequity-based instruments as compensation to reduce our cash
outlays.
Depreciation
and amortization expenses for the three and six months ended MarchJune 31,30, 2026 were approximately $1.0$1.1 million and $2.1 million, an increase of approximately $0.1respectively,
million, compared to the three and six months ended MarchJune 31,30, 2025.2025 Theof $1.0 million and $1.9 million, respectively. This represents an increase wasof
approximately primarily$0.1 duemillion toand dates$0.2 assetsmillion, placed in service.respectively.
Research
and development expenses for the three and six months ended MarchJune 31,30, 2026 were approximately $0.02,$0.01 anmillion increaseand of$0.03 million, respectively,
compared to approximately $0.01 million,
comparedmillion toand $0.02 million for the three and six months ended MarchJune 31,30, 2025.2025, Therespectively. increase in researchResearch and
development expenses were primarily dueconsisted toof consulting relatedconsulting-related expenses.
Change
in fair value of the warrant liabilities for the three and six months ended MarchJune 31,30, 2026 was approximately $0.3$0.2 million and $0.4 million,
respectively, compared to approximately $0.2 million and $0.5 million for the three and six months ended June 30, 2025, respectively.
The expense was associated with the
non-cash chargenoncash for changes in the fair valueremeasurement of the warrant liabilities that is subject to re-measurement at each balance sheet date.
The change in the fair value of the warrant liabilities was minimal during the three months ended March 31, 2025.
The
accompanying unaudited condensed consolidated financial statements have been prepared as though the Company will continue as a going
concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of MarchJune 31,30,
2026, the Company had an accumulated deficit of $58,703,561,62,066,889, a net loss of $3,060,9776,424,305 and net cash used in operating activities of $4,467,0295,608,706
during the threesix months ended MarchJune 31,30, 2026. Management expects to continue to incur operating losses and negative cash flows from operations
for at least the next 12 months. The Company has financed its operations to date from proceeds from the sale of Common Stock, exercises
of warrants, the issuance of promissory notes and convertible debt, and its transactions with AFG Companies Inc. (“AFG”).
The Company’s current liquidity position raises substantial doubt about the Company’s ability to continue as a going concern.
Cash
used in operating activities was approximately $3.7 million during the three months ended March 31, 2026 primarily due to our net loss
of approximately $3.1 million. The net loss included non-cash charges of approximately $0.9 million, which consisted of approximately
$1.0 million of depreciation and amortization expense, and noncash interest expense, partially offset by $0.3 million gain due to the
change in fair value of warrant liabilities. The net cash outflow of approximately $2.2 million from changes in our operating assets
and liabilities was primarily due to a decrease in accounts payable of $1.6 million, offset by an increase in prepaid expense and other
current assets of $0.5 million and a decrease in operating lease liability of $0.0 million.
Cash
used in operating activities was approximately $2.6$5.6 million during the threesix months ended MarchJune 31,30, 20252026, primarily due to our net loss
of approximately $3.6$6.4 million. The net loss included non-cashnoncash charges of approximately $0.8$2.5 million, which consistedconsisting
primarily of approximately
$0.9 $2.1 million of depreciation and amortization expense, $0.4$0.8 million inof equity-based compensation expense, including the issuance$0.1
million of restricted
shares, and noncash interest expense, and $0.1 million related to the reduction in the right-of-use asset partially offset by $0.6a gain of
$0.5 million gain due to the change in the fair value of warrant liabilities.liabilities, and a gain of $0.1 million due to a gain on debt extinguishment. The
net cash inflowoutflow of approximately $0.2$1.7 million from changes in our
operating assets and liabilities was primarily due to ana increasedecrease in
accounts payable of $0.9$2.2 million, partially offset by a decrease in
accounts receivable of $0.1 million, an increase in accrued expenses of $0.2 million, decrease in prepaid expense and other current assets of $0.6
$0.3 million and a decrease in
operating lease liabilityliabilities of $0.1 million.
Cash used in operating activities was approximately $2 million during the six months ended June 30, 2025, primarily due to our net loss of approximately $2.7 million. The net loss included non-cash charges of approximately $1.7 million, consisting primarily of approximately $1.9 million of depreciation and amortization expense, $0.5 million of equity-based compensation expense, including the issuance of restricted shares, and $0.1 million of non-cash interest expense, partially offset by a $0.4 million gain resulting from the change in fair value of warrant liabilities. The net cash inflow of approximately $0.2 million from changes in operating assets and liabilities was primarily due to an increase in accounts payable of $0.9 million, partially offset by an increase in prepaid expenses and other current assets of $0.6 million and a decrease in operating lease liabilities of $0.1 million.
Cash
used in investing activities during the three six
months ended MarchJune 31,30, 2026 was approximately $0.1$9.8 million,million which consisted primarily of
business acquisitions and capitalized internal-use
software costs.
Cash
used in investing activities during the three
and six months ended MarchJune 31,30, 2025 was approximately $0.2$0.1 million, which consisted primarily of business acquisitions and capitalized
capitalized internal-use software costs.
Cash
provided by financing activities during
the threesix months ended MarchJune 31,30, 2026 was approximately $5.5$ $15.9 million, which consisted primarily
of proceeds
received from the proceeds from warrant exercises Cash
provided financing activities during the three months ended March 31, 2025 was approximately $2.8 million, which consisted of proceeds
received from the sale of Common Stock and proceeds from warrant exercises.
Cash provided by financing activities during the six months ended June 30, 2025 was approximately $5.2 million, which consisted primarily of proceeds from the sale of Common Stock and warrant exercises.
Grupo Skye and Related Entities
The Company owns Grupo Skye. Through Grupo Skye, the Company holds the following interests:
* Skye Salud: 50% owned by the Company (through Grupo Skye) and 50% owned by Grupo Knobloch.
* Skye Intelligencia (formerly Skye Intelligencia LATAM): 100% owned by Grupo Skye. This entity serves as the vehicle for government-related business. In connection with the arrangements, the Company also received a contingent preferred equity interest with a nominal value and a 25% common equity interest. As the related entities were newly formed with limited or no operations or revenue history at the time the agreements were executed, the Company determined that collectibility of substantially all consideration was not probable at inception. Accordingly, the arrangements did not meet the criteria for revenue recognition under ASC 606. The preferred equity interest has been recorded as an equity security under ASC 321 with nominal value, and the common equity interests are accounted for under the equity method in accordance with ASC 323. Revenue attributable to any revenue share will be recognized as the related sales occur in accordance with ASC 606.
Africa Licensing Agreement
On January 20, 2026, the Company, through its wholly owned subsidiary Skye AI USA, LLC, entered into a licensing partnership with Valio Technologies (Pty) Ltd. Skye AI USA, LLC was established to limit potential liability of Brand Engagement Network Inc. outside the United States in connection with healthcare applications. Under the arrangement, the Company holds a 25% common equity interest in Skye Africa Intelligence Pty Ltd., and Valio Technologies (Pty) Ltd. owns the remaining. The Company also holds preferred equity with a nominal value. The Company is entitled to a 35% recurring revenue share. The 25% common equity interest is accounted for under the equity method of accounting.
Impairment of Definite Lived Intangible Assets
BNAI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding BNAI (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 20,204 | $765.7K | — | Sold out |