Brand Engagement Network Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
BNAI$4.38+2.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001628280-24-023239
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001838163-24-000011
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 104 current paragraphs.
58 unchanged; 13 reworded; 30 added; 17 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
Co-Chief Executive Officer Transition
Current report
Effective June 28, 2024, the Company entered into a Second Amendment to that Certain Employment Agreement, dated March 14, 2024 by and between the Company and Michael Zacharski (the “Employment Agreement Amendment”). The Employment Agreement Amendment amends the terms of the cash bonus Mr. Zacharski was entitled to receive upon the successful closing of the Company’s initial business combination to provide that Mr. Zacharski is entitled to receive a vested bonus equal to $0.5 million with (i) 50% of the bonus payable in the form of the number of fully-vested restricted shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and (ii) the remaining 50% of the bonus payable in cash to Mr. Zacharski by September 30, 2024 or upon the completion of an acquisition by the Company, whichever is earlier, but in no event later than December 31, 2024. In addition, the Employment Agreement Amendment modifies Mr. Zacharski’s professional duties, effective June 24, 2024, such that Mr. Zacharski shall serve as the Company’s Co-Chief Executive Officer with responsibilities, duties and authority limited solely to providing strategic advice to the Company related to potential acquisitions and related transactions, reporting directly to the Company’s Board of Directors. Effective June 28, 2024, the Company entered into an amendment to that certain Option Agreement, dated
Current report
March 15, 2023, by and between the Company and Mr. Zacharski, to extend Mr. Zacharski’s option exercise period until the end of its maximum ten-year term, March 15, 2033.
Current report
On July 1, 2024, the Company entered into a Securities Purchase Agreement with The Williams Family Trust (the “July SPA”) 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.
Current report
Effective June 30, 2024, Prior BEN and the Company entered into a Debt Conversion Agreement with October 3 rd Holdings, LLC, pursuant to which the Company agreed to issue 93,333 shares of Common Stock at a price of $4.50 per share to October 3 rd Holdings, LLC in exchange for the conversion of certain outstanding indebtedness owed by Prior BEN to October 3 rd Holdings, LLC in the amount of $0.4 million.
Current report
On May 28, 2024, the Company entered into a Securities Purchase Agreement (the “May SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers an aggregate of 1,980,000 shares of Common Stock and 3,960,000 warrants, consisting of 1,980,000 May Warrants with a term of one year (the “May One-Year Warrants”) and 1,980,000 May Warrants with a term of five years (the “May Five-Year Warrants,” together with the May One-Year Warrants, the “May Warrants”), for aggregate gross proceeds of approximately $5.0 million. The May Warrants are exercisable for shares of Common Stock at an exercise price of $2.50 per share. On May 30, 2024, the Company issued to the Purchasers an aggregate of 200,000 shares of Common Stock and 400,000 May Warrants and the Purchasers paid an aggregate of $0.5 million to the Company in connection with the closing of the private placement. Pursuant to the May SPA, the remaining 1,780,000 shares of Common Stock and May Warrants to purchase 3,560,000 shares of Common Stock are to remain in escrow until each Purchaser deposited amounts on a monthly basis no later than June 27, 2024, July 29, 2024, August 29, 2024, September 27, 2024 and October 29, 2024 (the “Required Fundings”). Upon payment of each Required Funding, a pro rata portion of the shares of Common Stock and May Warrants in escrow are to be issued and released to the Purchasers. As of August 9, 2024, 1,107,500 shares of Common Stock have been issued to the Purchasers upon payment for aggregate gross proceeds of $2.8 million.
Current report
Cohen Convertible Note
Current report
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 (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 maturity date of the Cohen Convertible Note is March 14, 2025.
Current report
Gain on debt extinguishment is related to settlement of accounts payable through issuance of shares of Common Stock and negotiated cash settlement.
Current report
Gain on extinguishment of debt for the three months ended June 30, 2024 was approximately $1.8 million, related to settlement of accounts payable through the issuance of 93,333 shares of Common Stock and negotiated cash settlement. We did not have such extinguishment of debt during thethree months ended June 30, 2023.
Current report
Comparison of the Six Months Ended June 30, 2024 and 2023
Current report
Depreciation and amortization expenses
Current report
Depreciation and amortization expenses for thesix months ended June 30, 2024 were approximately$0.8 million, an increase of approximately$0.6 million, compared to thesix months ended June 30, 2023. The increase was primarily due to the amortization expense associated with the developed technology placed into service in the second quarter of 2024.
Current report
Research and development expenses
Current report
Gain on extinguishment of debt for the six months ended June 30, 2024 was approximately $1.8 million, related to settlement of accounts payable through the issuance of 93,333 shares of Common Stock and negotiated cash settlement. We did not have such extinguishment of debt during thesix months ended June 30, 2023.
Current report
Co-Chief Executive Officer Transition
Current report
Effective June 28, 2024, the Company entered into the Employment Agreement Amendment with Mr. Zacharski, which amended the terms of the cash bonus Mr. Zacharski was entitled to receive upon the successful closing of the Company’s initial business combination to provide that Mr. Zacharski is entitled to receive a vested bonus equal to $0.5 million with (i) 50% of the bonus payable in the form of the number of fully-vested restricted shares of Common Stock, and (ii) the remaining 50% of the bonus payable in cash to Mr. Zacharski by September 30, 2024 or upon the completion of an acquisition by the Company, whichever is earlier, but in no event later than December 31, 2024.
Current report
On July 1, 2024, the Company entered into the July SPA for the issuance and sale of 120,000 shares of Common Stock and 240,000 July Warrants, consisting of 120,000 July One-Year Warrants and 120,000 July Five-Year Warrants to The Williams Family Trust for an aggregate purchase price of $0.3 million.
Current report
Effective June 30, 2024, Prior BEN and the Company entered into a Debt Conversion Agreement with October 3 rd Holdings, LLC, pursuant to which the Company agreed to issue 93,333 shares of Common Stock at a price of $4.50 per share to October 3 rd Holdings, LLC in exchange for the conversion of certain outstanding indebtedness owed by Prior BEN to October 3 rd Holdings, LLC in the amount of $0.4 million.
Current report
On May 28, 2024, the Company entered into the May SPA for the issuance and sale of 1,980,000 shares of Common Stock and 3,960,000 May Warrants, consisting of 1,980,000 May One-Year Warrants and 1,980,000 May Five-Year Warrants for aggregate gross proceeds of approximately $5.0 million. On May 30, 2024, the Company issued to the Purchasers an aggregate of 200,000 shares of Common Stock and 400,000 May Warrants and the Purchasers paid an aggregate of $0.5 million to the Company in connection with the closing of the private placement. Pursuant to the May SPA, the remaining 1,780,000 shares of Common Stock and May Warrants to purchase 3,560,000 shares of Common Stock are to remain in escrow until each Purchaser deposited amounts on a monthly basis no later than June 27, 2024, July 29, 2024, August 29, 2024, September 27, 2024 and October 29, 2024. Upon payment of each Required Funding, a pro rata portion of the shares of Common Stock and May Warrants in escrow are to be issued and released to the Purchasers. As of August 9, 2024, 1,107,500 shares of Common Stock have been issued to the Purchasers upon payment for aggregate gross proceeds of $2.8 million.
Current report
In connection with the May SPA, on May 28, 2024, the Company also entered into a Letter Agreement to Exercise Warrants (the “May Warrant Exercise Agreement”) with certain of the Purchasers (the “Required Warrant Parties”). In the event the Company uses commercially reasonable efforts to raise an additional $3.3 million (not including amounts raised under the May SPA) in additional capital but is unable to do so by October 31, 2024, the Required Warrant Parties shall be required to exercise for cash certain of their Warrants on a monthly basis in the amounts and on the dates set forth below.
Current report
In consideration for each May Warrant held by a Required Warrant Party so exercised, the Company shall issue to such Required Warrant Party one new May One-Year Warrant and one new May Five-Year Warrant, each with an exercise price of $2.50.
Current report
Cohen Convertible Note
Current report
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 with 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 maturity date of the Cohen Convertible Note is March 14, 2025.
Current report
Cash Exercise of Warrants
Current report
There is no assurance that the holders of the Warrants will elect to exercise for cash any or all of such Warrants, especially when the trading price of our Common Stock is less than the exercise price per share of such Warrants. We believe the likelihood that warrantholders will exercise their respective Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our Common Stock. If the trading price for our Common Stock is less than the exercise price per share of a Warrant, we expect that a warrantholder would not exercise their Warrants. To the extent that any Warrants are exercised on a “cashless basis” under certain conditions, we would not receive any proceeds from the exercise of such Warrants.
Current report
As of the date of this filing, we have neither included nor intend to include any potential cash proceeds from the exercise of our Warrants in our short-term or long-term liquidity sources or capital resource planning. We do not expect to rely on the cash exercise of Warrants to fund our operations. Instead, we intend to seek additional funds, primarily through the issuance of debt or equity securities for cash to operate our business, including through the business development activities discussed above to continue to support our operations. Therefore, the availability or unavailability of any proceeds from the exercise of our Warrants is not expected to affect our ability to fund our operations. We will continue to evaluate the probability of Warrant exercise over the life of our Warrants and the merit of including potential cash proceeds from the exercise thereof in our liquidity sources and capital resources planning.
Current report
To the extent such Warrants are exercised, additional Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares of Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock, which increases the likelihood of periods when our Warrants will not be in the money prior to their expiration.
Current report
In June 2023, we entered into a promissory note agreement with a related party for $0.6 million. During the second quarter of 2024, we issued 93,333 shares of Common Stock to extinguish the outstanding balance of $0.4 million.
Current report
Cash used in investing activities during thesix months ended June 30, 2023 was approximately $0.6 million, which consisted primarily of deposits on patents, capitalized internal-use software costs and assets acquired from DM Lab.
Removed paragraphs (17)
Previous report
Business Combination with DHC
Previous report
On March 14, 2024, we (formerly publicly-held DHC) consummated our previously announced business combination (the “Closing”) pursuant to the Business Combination Agreement, dated September 7, 2023 (as amended, the “Business Combination Agreement”), by and among DHC Acquisition Corp., a Cayman Islands exempted company (“DHC”), Brand Engagement Network Inc., a Wyoming corporation (“Prior BEN”), BEN Merger Subsidiary Corp., a Delaware corporation and a direct, wholly owned subsidiary of DHC (“Merger Sub”) and DHC Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The Business Combination Agreement provided for the merger of Merger Sub with and into Prior BEN (the “Merger” and together with the other transactions related thereto, the “Business Combination”), with Prior BEN surviving the Merger as a direct, wholly owned subsidiary of BEN. In connection with the Merger, we issued 25,641,321 shares of common stock, par value $0.0001 per share (“Common Stock”) to Prior BEN stockholders.
Previous report
The Business Combination has been accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Under this method of accounting, BEN has been deemed to be the accounting acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination has been treated as the equivalent of a capital transaction in which BEN issued stock for the net assets of DHC. The net assets of DHC are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Closing would be those of BEN.
Previous report
Recent Financings
Previous report
Subscription Agreements
Previous report
In connection with the Closing, we entered into subscription agreements (the “Shareholder Subscription Agreements”), to purchase an aggregate of 25,000 shares of Common Stock at a price per share of $10.00. As additional consideration for the purchases of the Company’s Common Stock, the Sponsor agreed to transfer an aggregate of 25,000 shares of its Common Stock to Prior BEN’s shareholders, including Jon Leibowitz, one of our directors (the “Subscribing Shareholders”). The foregoing description of the Shareholder Subscription Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Shareholder Subscription Agreements with the Subscribing Shareholders, a form of which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Previous report
AFG Agreements
Previous report
In connection with the Business Combination, (i) on August 19, 2023, we entered into an exclusive reseller agreement with AFG (the “Reseller Agreement”), providing for, among other things, AFG to act as our exclusive reseller of certain products on terms and conditions set forth therein and, as partial consideration to AFG for such services to us, we issued a number of shares of our Common Stock to AFG (the “AFG Reseller Shares”) as of immediately prior to Closing with an aggregate value of $17.5 million as of the issuance date (such shares, to the extent issued in accordance with the Reseller Agreement and outstanding immediately prior to the time at which the Business Combination became effective (the “Effective Time”), and (ii) on September 7, 2023, we and the investors listed therein (the “AFG Investors”) entered into a subscription agreement (the “Subscription Agreement”) providing for, among other things, the purchase of shares of our Common Stock in a private placement by the AFG Investors as of immediately prior to the Effective Time in exchange for $6.5 million in cash contributed to us such shares, to the extent issued in accordance with the Subscription Agreement after giving effect to the purchase of 456,621 shares of Common Stock for $2.19 per share for an aggregate purchase price of approximately $1.0 million on September 19, 2023 by AFG and outstanding as of immediately prior to the Effective Time, (the “AFG Financing”).
Previous report
Immediately prior to the Closing, Prior BEN consummated the AFG Financing and the issuance of Common Stock and a warrant exercisable for Common Stock pursuant to the Reseller Agreement, dated August 19, 2023.
Previous report
General and administrative expenses
Previous report
General and administrative expenses
Previous report
Interest expense
Previous report
Interest income
Previous report
Interest income for thethree months ended March 31, 2024 was related to interest earned on excess cash. We did not earn such income during thethree months ended March 31, 2023
Previous report
Other expenses
Previous report
In March 2024, concurrent with the Merger, we received $5.5 million from AFG pursuant to the Subscription Agreement. We ultimately did not receive net cash from the Merger due to the transaction expenses.
Previous report
In June 2023, we entered into a promissory note agreement with a related party for $0.6 million. The note bears interest at 7% per annum and matures on June 25, 2025. As of March 31, 2024, the promissory note had a balance of$0.5 million.
Reworded paragraphs (13)
Previous wording
Depreciation and amortization expenses for thethree months ended March 31, 2024 were approximately$0.1 million, an increase of approximately$0.1 million, compared to thethree months ended March 31, 2023. The increase was primarily due to the depreciation expense associated with the property and equipment acquired from DM Lab.
Current wording
Depreciation and amortization expenses for thethree months ended June 30, 2024 were approximately$0.7 million, an increase of approximately$0.5 million, compared to thethree months ended June 30, 2023. The increase was primarily due to the amortization expense associated with the developed technology placed into service in the second quarter of 2024.
Previous wording
Change in fair value of the warrant liabilities for thethree months ended March 31, 2024 was approximately 0.06 million associated with thenon-cash charge for changes in the fair value of the warrant liabilities that is subject to re-measurement at each balance sheet date. We did not incur such expenses during thethree months ended March 31, 2023.
Current wording
Change in fair value of the warrant liabilities for thethree months ended June 30, 2024 was approximately $1.5 million associated with thenon-cash charge for changes in the fair value of the warrant liabilities that is subject to re-measurement at each balance sheet date. We did not incur such expenses during thethree months ended June 30, 2023.
Previous wording
During thethree months ended March 31, 2024, we earned$0.05 million in revenue through proof of concept and revenue sharing. There were no revenues for thethree months ended March 31, 2023.
Current wording
During thesix months ended June 30, 2024, we earned$0.05 million in revenue through proof of concept and revenue sharing. There were no revenues for thesix months ended June 30, 2023.
Previous wording
General and administrative expenses for thethree months ended March 31, 2024 were approximately$6.5 million, an increase of approximately$3.9 million, compared tothree months ended March 31, 2023. The increase was primarily due to transaction costs of $3.2 million incurred in connection with the Closing, a $1.5 million increase in employee related costs, a $1.0 million increase in professional fees, a $0.2 million increase in promotional costs, and a $0.1 million increase in insurance costs, all related to the expansion of our operations and including an aggregate of $0.1 million of insurance, professional services and payroll expense as a result of the acquisition of DM Lab Co., LTD (“DM Lab”) in May 2023, partially offset by a decrease in stock-based compensation of $2.1 million due to the issuance of Prior BEN warrants and options which vested on the date of grant during the three months ended March 31, 2023. 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 based instruments as compensation to reduce our cash outlays. In addition, we expect our professional fees to increase in future periods, especially after completing the Merger.
Current wording
General and administrative expenses for thesix months ended June 30, 2024 were approximately$11.8 million, an increase of approximately$6.4 million, compared tosix months ended June 30, 2023. The increase was primarily due to transaction costs of $3.3 million incurred in connection with the Business Combination, a $3.2 million increase in employee related costs including $1.2 million in one-time bonuses in connection with the Business Combination, a $2.7 million increase in professional fees, a $0.3 million increase in insurance and taxes, a $0.1 million increase in office related expenses, and a $0.1 million increase in promotional costs, and all related to the expansion 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 $3.2 million due to the issuance of Prior BEN warrants and options which vested on the date of grant during the first quarter of 2023. 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 based instruments as compensation to reduce our cash outlays.
Previous wording
Research and development expenses for thethree months ended March 31, 2024 were approximately$0.3 million, an increase of approximately$0.2 million, compared to thethree months ended March 31, 2023. The increase in research and development expenses was primarily due to an increase in our stock-based compensation due to an increase in headcount as a result of the acquisition of DM Lab in May 2023.
Current wording
Research and development expenses for thesix months ended June 30, 2024 were approximately$0.6 million, an increase of approximately$0.5 million, compared to thesix months ended June 30, 2023. The increase in research and development expenses was primarily due to an increase in our stock-based compensation due to an increase in headcount as a result of the acquisition of DM Lab in May 2023.
Previous wording
As of March 31, 2024, our principal source of liquidity was cash of approximately$3.3 million. We have financed operations to date with proceeds from the AFG Financings, sales of our Common Stock, warrant exercises and debt issuances to related and non-related parties. As described in Footnote A of our audited consolidated financial statements and unaudited consolidated interim financial statements, we have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of approximately$20.2 million at March 31, 2024. 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, including through the Business Combination or through business development activities. 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 on our consolidated financial statements as of and for the year ended December 31, 2023 with respect to this uncertainty.
Current wording
As of June 30, 2024, our principal source of liquidity was cash of approximately$1.4 million. We have financed operations to date with proceeds from the Cohen Convertible Note, transactions with AFG, sales of our Common Stock, warrant exercises and debt issuances to related and non-related parties. As described in Note A of our audited consolidated financial statements and unaudited consolidated interim financial statements, we have incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of approximately$23.2 million at June 30, 2024. 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, including through the Business Combination or through business development activities. 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 on our consolidated financial statements as of and for the year ended December 31, 2023 with respect to this uncertainty.
Previous wording
We are party to a research and development sponsorship agreement with Korea University. Pursuant to the sponsorship agreement, we agreed to pay 275 million Korean won to Korea University during the period from April 1, 2023 through December 31, 2023. As of March 31, 2024, we owed a remaining 40 million Korean won (approximately $0.03 million). In November 2023, we entered into an additional research and development sponsorship agreement with Korea University. Pursuant to the sponsorship agreement, we agreed to pay 21.6 million Korean won to Korea University during the period from November 1, 2023 through March 10, 2024. During the three months ended March 31, 2024, we paid the remaining $0.012 million. In December 2023, we entered into a Research and Development Agreement with Korea University for total consideration of up to 528 million Korean won (approximately $0.4 million) from January 2024 through December 2024. We can terminate the agreement upon written notice to Korea University for a period of at least one month. As of March 31, 2024, we paid 211 million Korean won (approximately $0.2 million) in connection with the Research and Development Agreement and will owe the remaining 269 million Korean won (approximately $0.2 million) throughout the remainder of 2024.
Current wording
In December 2023, we entered into a research and development sponsorship agreement with Korea University for total consideration of up to 528.0 million Korean won (approximately $0.4 million) from January 2024 through December 2024. We can terminate the agreement upon 30 days written notice to Korea University. As of June 30, 2024, we paid 211.2 million Korean won (approximately $0.2 million) and owe the remaining 316.8 million Korean won (approximately $0.2 million) throughout the remainder of 2024.
Previous wording
Cash used in operating activities was approximately$4.5 million during thethree months ended March 31, 2024 primarily due to our net loss of approximately$6.9 million. The net loss included non-cash charges of approximately$2.0 million, which consisted of approximately $1.4 million of write offs of deferred financing fees, $0.4 million in equity-based compensation expense, $0.1 million of depreciation and amortization expense, and $0.1 million in changes in fair value of the warrant liabilities. The net cash outflow of approximately$0.3 million from changes in our operating assets and liabilities was primarily due to an increase in prepaid expenses and other current assets of approximately $0.8 million offset by an increase in accounts payable of approximately $0.7 million and an increase in accrued expenses of approximately $0.4 million .
Current wording
Cash used in operating activities was approximately$8.6 million during thesix months ended June 30, 2024 primarily due to our net loss of approximately$9.9 million. The net loss included non-cash charges of approximately$0.3 million, which consisted of approximately $1.4 million of write offs of deferred financing fees, $1.3 million in equity-based compensation expense, including the issuance of restricted shares, $0.8 million of depreciation and amortization expense, partially offset by $1.8 million in gains on debt extinguishment and $1.4 million in changes in fair value of the warrant liabilities. The net cash inflow of approximately$1.0 million from changes in our operating assets and liabilities was primarily due to an increase in accounts payable of$3.6 million, partially offset by a decrease of accrued expenses of$1.7 million, an increase in prepaid expense and other current assets of$0.8 million.
Previous wording
Cash used in operating activities was approximately$0.06 million during thethree months ended March 31, 2023, primarily due to our net loss of approximately$2.6 million. The net loss included non-cash charges of approximately$2.5 million, which primarily consisted of approximately $2.4 million in equity-based compensation expense. The net cash inflow of approximately$0.1 million from changes in our operating assets and liabilities was primarily due to an increase in accounts payable of approximately$0.1 million due to the timing of payment of trade payables.
Current wording
Cash used in operating activities was approximately$1.3 million during thesix months ended June 30, 2023, primarily due to our net loss of approximately$5.7 million. The net loss included non-cash charges of approximately$4.5 million, which primarily consisted of approximately $4.3 million in equity-based compensation expense and $0.2 million of depreciation and amortization expense. The net cash outflow of approximately$0.03 million from changes in our operating assets and liabilities was primarily due to a decrease in accounts payable, partially offset by an increase in accrued expenses.
Previous wording
Cash used in investing activities during thethree months ended March 31, 2024 was approximately$0.2 million, which consisted primarily of capitalized internal-use software costs. There were no investing activities during thethree months ended March 31, 2023.
Current wording
Cash used in investing activities during thesix months ended June 30, 2024 was approximately$0.1 million, which consisted primarily of capitalized internal-use software costs.
Previous wording
Cash provided financing activities during thethree months ended March 31, 2024 was approximately$6.3 million, which consisted of proceeds received from the sale of Common Stock.
Current wording
Cash provided by financing activities during thesix months ended June 30, 2024 was approximately$8.5 million, consisted primarily of proceeds received from the sale of Common Stock of $8.5 million.
Previous wording
Cash provided by financing activities during thethree months ended March 31, 2023 was approximately$0.05 million, which was attributable to proceeds received from related party advance repayments.
Current wording
Cash provided by financing activities during thesix months ended June 30, 2023 was approximately$2.1 million, which was attributable to $1.4 million in proceeds received from convertible notes, $0.6 million in proceeds from a related party note, and $0.1 million in related party advance repayments.
Previous wording
During thethree months ended March 31, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations of BEN”, which was filed as Exhibit 99.3 to our Current Report on Form 8-K filed with the SEC on March 20, 2024.
Current wording
During thesix months ended June 30, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations of BEN”, which was filed as Exhibit 99.3 to our Current Report on Form 8-K filed with the SEC on March 20, 2024.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
General and administrative expenses for thethree months ended June 30, 2024 were approximately$5.3 million, an increase of approximately$2.5 million, compared tothree months ended June 30, 2023. The increase was primarily due to a $1.7 million increase in professional fees, a $1.6 million increase in employee related costs, a $0.2 million increase in insurance and taxes, and a $0.1 million increase in transaction related costs, all related to the expansion of our operations as a result of the acquisition of DM Lab Co., LTD (“DM Lab”) in May 2023, partially offset by a decrease in stock-based compensation of $1.1 million. 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 based instruments as compensation to reduce our cash outlays.
Current report — wording carried from elsewhere
Research and development expenses for the three months ended June 30, 2024 were approximately $0.4 million, an increase of approximately $0.3 million, compared to the three months ended June 30, 2023. The increase in research and development expenses was primarily due to an increase in our stock-based compensation due to an increase in headcount as a result of the acquisition of DM Lab in May 2023.
Current report — wording carried from elsewhere
Change in fair value of the warrant liabilities for thesix months ended June 30, 2024 was approximately $1.4 million associated with thenon-cash charge for changes in the fair value of the warrant liabilities that is subject to re-measurement at each balance sheet date. We did not incur such expenses during thesix months ended June 30, 2023.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Change in fair value of warrant liabilities
Previous report — wording carried elsewhere
Interest expense for thethree months ended March 31, 2024 was approximately$0.03 million associated with our related party note payable and short-term debt. We did not incur such expenses during thethree months ended March 31, 2023.
Previous report — wording carried elsewhere
Change in fair value of warrant liabilities
Previous report — wording carried elsewhere
Other expenses for thethree months ended March 31, 2024 were associated with foreign currency losses as a result of exchange rate fluctuations on transactions denominated in Korean won. We did not incur such expenses during thethree months ended March 31, 2023.