Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2025 included in our most recent Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss certain factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q.

Our Company

StartEngine Crowdfunding, Inc. was incorporated on March 19, 2014 in the State of Delaware. The Company was originally incorporated as StartEngine Crowdsourcing, Inc., but changed to the current name on May 8, 2014. The Company's revenue-producing activities commenced in 2015 with the effectiveness of the amendments to Regulation A under the Securities Act adopted in response to Title IV of the JOBS Act. Operations expanded in 2016, as Regulation Crowdfunding, adopted in response to Title III of the JOBS Act, went into effect. On June 10, 2019, our subsidiary, StartEngine Primary LLC, was approved for membership as a broker-dealer with FINRA. The Company's subsidiary, StartEngine Adviser LLC filed as an exempt reporting advisor with the SEC on January 8, 2024.

Business and Trends

For Regulation A offerings, our broker-dealer subsidiary is permitted to charge commissions to the companies that raise funds on our platform. Regulation A offerings are subject to a commission ranging between 4% and 7% and usually include warrants to purchase shares of the Company or the securities that are the subject of the offering. The amount of commission is based on the risks and other factors associated with the offering. Through StartEngine Primary, we can also charge commissions on Regulation D offerings hosted on our platform. During the periods covered in these financial statements we did not receive any Regulation D commissions. In Regulation Crowdfunding offerings, our funding portal subsidiary is permitted to charge commissions to the companies that raise funds on our platform. We typically charge 6% to 10% for Regulation Crowdfunding offerings on our platform. We also generate revenue from services, which include a consulting package for Regulation Crowdfunding issuers called StartEngine Premium priced at $20,000 to help companies who raise capital with Regulation Crowdfunding, as well as transfer agent services marketed as StartEngine Secure. In Q2 2024, the Company shifted the Secure billing from annual invoices at $10 per user to tiered service annual contract for $250 or $350 per month. We additionally charge a $1,000 fee for certain amendments we file on behalf of companies raising capital under Regulation Crowdfunding as well as fees to run the required bad actor checks for companies utilizing our services. The Company also receives revenues from other programs such as the StartEngine Venture club program and StartEngine Secondary. Our annual memberships for the StartEngine Venture Club bonus program are $275 per year.

We launched StartEngine Secondary on May 18, 2020 and generate revenues by charging trade commissions to the sellers of the shares. Through March 31, 2026, the Company itself as well as twenty-four additional companies have been quoted on this platform. Currently, for StartEngine Secondary, we generate revenues by charging trade commissions to the sellers of the shares and we intend to generate revenues by charging a 5% commission to the seller. In Q3 2023 the Company began providing accredited investors the opportunity to purchase membership interests in funds ("SE Funds") which own shares of venture capital backed, late-stage private companies via its StartEngine Private product offering. The SE Funds are managed by StartEngine Private Manager LLC and advised by StartEngine Adviser LLC, an exempt reporting adviser.

The Company also provides a service named StartEngine Gold, which launched in July 2025. This service provides dedicated crowdfunding marketing support and access to licensed registered representatives who engage with leads and investors within an issuer's proprietary funnel to help facilitate additional investments in the offering, where appropriate at a cost of $7,500 per month.

Trend Information

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

As we are a financial services company, our business, results of operations, and reputation are directly affected by elements beyond our control, such as economic and political conditions including unemployment rates, inflation and tax and interest rates, financial market

volatility (including related to tariffs), war and fears of war (including the recent conflict with Iran), outbreaks of disease, broad trends in business and finance, and changes in the markets in which such transactions occur (such as the bear markets that developed for equities in the second and third quarter of 2022), we might be disproportionately affected by declines in investor confidence caused by adverse economic conditions.

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On August 6, 2023, the Company launched "StartEngine Private", a venture to provide accredited investors the opportunity to purchase membership interests in series which own shares of VC backed, and generally late-stage private companies(the "underlying securities"). The Company treats the amount it receives for selling underlying securities as revenues, and the acquisition cost related to such underlying securities as cost of revenues. StartEngine Private is currently our largest source of revenue. While StartEngine Private offerings have been successful in 2025 and the Company expects that it will continue as its largest revenue source in foreseeable future, the Company has experienced an expected slowdown in revenue from this line of business due to limited availability of stock for purchase of in demand companies, and limited purchase slots available for each offering. In both Q1 2025 and Q2 2025, the underlying securities for the offering were of the world's largest privately held companies. Since then, including during Q1 2026, many of the companies on the Platform were smaller and lesser known. The Company continues to invest in this line of business and anticipate that expenses related to the purchases and sales of StartEngine Private securities will change in tandem with the revenue generated. Currently, the Company has 7 sales associates dedicated to selling investments in StartEngine Private offerings and will continue to evaluate necessary headcount as StartEngine Private grows.

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As a Company, we are always reevaluating processes and procedures as it pertains to the success of the business. As such, the Company remains agile on changes in the market as well as the demand for services provided by the Crowdfunding industry. At the end of 2024, the Company determined that a reduction in workforce was necessary as the staffing required to support current issuer activity on the platform. This adjustment reflects the Company's strategic focus on higher-growth business lines that require fewer personnel.

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In 2024, the Company began hosting its new Regulation Crowdfunding issuances with the broker-dealer entity for regulatory and compliance reasons. As the legacy Regulation Crowdfunding raises complete their issuance, the remaining revenue from them will be booked to the current StartEngine Capital entity, which is not a broker-dealer. We expect that this transition to all Regulation A and Crowdfunding raises will be complete by the end of 2025. As of December 31, 2025, all of our current crowdfunding raises are conducted through our broker-dealer.

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In March 2026, the company acquired Vinovest, Inc., a leading platform for fine wine and whiskey investment. Vinovest uses data and industry expertise to source, authenticate, and facilitate the storage of high-quality bottles in bonded warehouses. The platform supports portfolio management, including coordinating insurance, and logistics, while investors can track performance over time and choose to sell or take delivery of their holdings. Vinovest has also developed relationships in the wine industry, allowing top wineries from around the world to reach the next generation of collectors and investors in the company's network. The Company has onboarded 4 employees from Vinovest to StartEngine and has begun integrating systems and customer lists. Vinovest will continue to operate independent of the Company to offer products to investors.

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Operating Results

Three Months Ended March 31, 2026 Compared with the Three Months Ended March 31, 2025

The following table summarizes the results of our operations for the three months ended March 31, 2026 ("Q1 2026") as compared to the three months ended March 31, 2025 ("Q1 2025") and includes Adjusted EBITDA. For discussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see "Non-U.S. GAAP Financial Measures" below.

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Our revenues during the three months ended March 31 2026 were $25,049,691, compared to $30,364,357 for the three months ended March 31, 2025, which represented a decrease of $5,314,666 or 18%. The table below represents the major components of our revenues during the three month periods ended March 1, 2026 and 2025:

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The decrease in total revenues during the three months ended March 31, 2026 as compared to the same period in 2025 is primarily due to the decrease inStartEngine Private revenue of $4,128,495. The decrease in Private revenue is driven by less inventory for sale as well as delcininig interest in the Company's current offerings. As such, the Company has begun taking measures to add new offerings and funds that will create higher interest in offerings for the remainder of 2026. There can be no assurance that these measure will be successful.

For the three months ended March 31, 2026, compared to the same period in 2025, the Company observed the following revenue trends across its other product lines:

Cost of Revenues

Cost of revenues consists of internal employees, hosting fees, processing fees, certain software subscription fees that are required to provide services to our issuers, and for StartEngine Private acquisition costs related to underlying securities that it has sold to an SE Fund. Specifically, cost of revenues for StartEngine Private were $15,041,467 and $16,976,724 for the three months ended March 31, 2026 and 2025, respectively. Our total cost of revenues during the three months ended March 31, 2026 and 2025 was $18,190,810 and $20,299,424, respectively. The decrease was primarily due to the decrease in StartEngine Private revenue for the quarter.

Operating Expenses

Our total operating expenses during the three months ended March 31, 2026 amounted to $9,585,871, which represented an inecrease of $1,221,149, or 15%, from the expenses in the same period in 2025. The decrease in operating expenses is primarily due to the following:

Other Expense (Income), net

Our other income, net during the three months ended March 31, 2026 amounted to $513,820, which represented a gain on sale from the Company's owned portion of Private investments, cashback earned from our credit cards during the period as well as interest earned in the Company's money-market accounts. During the same period in 2025 our other income, net was $25,580 which was also related to cashback earned.

Net Loss (Income)

Net loss attributable to stockholders totaled $2,234,904 for the three months ended March 31, 2026, an decrease of $3,952,355 compared to the net income attributable to shareholders of $1,717,451 recognized during the three months ended March 31, 2025.

Adjusted EBITDA

Adjusted EBITDA totaled $1,525,655 for the three months ended March 31, 2026, a decrease of $3,713,138 compared to $5,238,793 in Adjusted EBITDA during the three months ended March 31, 2025.

Critical Accounting Policies

See Note 2 in the accompanying financial statements.

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Use of Estimates

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

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A significant portion of the Company's assets relate to investments in stock and previously warrants received as compensation from issuer companies undertaking Regulation Crowdfunding or Regulation A offerings. As described in Note 2, in the accompanying financial statements, stock and warrants require significant unobservable inputs, primarily related to the underlying stock price of the

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

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

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Investments - Stock

n connection with negotiated platform fee agreements, the Company obtains shares of stock in its customers. Our accounting for investment in our customers stock depends on several factors, including the level of ownership, and power to control. We base our accounting for such securities on: (i) fair value accounting, (ii) equity method accounting, and (iii) cost method accounting. As the stock received from customers have no readily determinable fair values and generally represent small amounts of ownership in our customers, the Company accounts for this stock received using the cost method, less adjustments for impairment in accordance with ASC 321 10 35 2. During the three months ended March 31, 2026 and 2025, the Company received stock with a cost of $220,179 and $609,121, respectively, as payment for fees. During the three months ended March 31, 2026 and 2025, write down expense related to shares received amounted to $442,030 and $298,945, respectively.

Stock-Based Compensation

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Stock-based compensation is measured at the grant date based on the estimated fair value of the award and recognized as expense over the requisite service period, which is generally the vesting period. The Company grants equity awards with a four-year vesting schedule, consisting of a 12-month cliff under which 25% of the award vests upon the first anniversary of the grant date, and the remaining 75% vests ratably over the subsequent 36 months. The fair value of stock-based awards is estimated using the Black-Scholes option pricing model, which requires the use of subjective assumptions, including expected volatility, expected term, risk-free interest rate, and expected dividend yield. These assumptions involve significant management judgment and may differ from actual results. Accordingly, the Company recognizes stock-based compensation expense on a straight-line basis over the service period, adjusted for estimated forfeitures, and revises its estimates as necessary if actual forfeitures differ from initial expectations.

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Collectibles

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The Company records collectibles at cost in accordance with the Company's policy. These long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, we believe that we purchase these assets in arms-length transactions at fair value and such transactions are evidence of fair market value in the near term. For collectibles, over time, and as trends change and economic factors affect various markets for which we hold assets, the estimation of certain assets that do not trade in a regular market may be difficult to assess for fair value. Certain assets may be subject to market manipulation or overproduction that could affect the underlying value of like or similar items. The quality of authentication bodies may affect future valuation. If there are limited data points to assess fair value, especially for one-of-a-kind collectibles, we may not identify impairments in a timely manner. Many of the collectibles have value that is in the eye of the beholder. Accordingly, there is significant uncertainty to what these assets would be valued at in subsequent arms-length transactions.

Liquidity and Capital Resources

Statement of Cash Flows

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

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Cash used in operating activities for the three months ended March 31, 2026 was $2,351,559 as compared to cash provided by operating activities of $5,884,277 for the same period in 2025. This decrease was driven by a change from net income to net loss from Q1 2025 to Q1 2026, an increase in accounts receivable for the period ended March 31, 2026 compared to 2025 as well as a decrease in accrued liabilities in 2026 related to the Company paying accrued year-end performance bonuses.

Cash provided by investing activities for the three months ended March 31, 2026 was $3,525,206, as compared $1,475,446 in the same period in 2025. The increase was driven by the cash proceeds from the acquisition of Vinovest in March 2026.

Cash provided by financing activities for the three months ended March 31, 2026 was $1,024,108, as compared to cash provided by investing activities of $680,271 in the same period in 2025. This relates to our Regulation A raises during both these periods.

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Balance Sheet

The following table summarizes our assets and liabilities as of March 31, 2026 as compared as of December 31, 2025:

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The Company's current assets increased by $3,255,840 from December 31, 2025 to March 31, 2026. The increase was primarily driven by an increase in cash in the amount of $2,197,755, driven by the sale of additional StartEngine Private investments. Additionally, Accounts Receivable increased by $739,007 from December 31, 2025 to March 31, 2026.

The Company's long-term assets increased by $13,224,721 from December 31, 2025 to March 31, 2026, primarily due to acquisition of Vinovest, Inc. for $14 million in Q1 2026, including an intangible asset of $12,653,239.

Current liabilities increased by $853,091 which is primarily due to the increase of accounts payable as of March 31, 2026.

Liquidity and Capital Resources

We do not currently have any significant loans or available credit facilities. As of March 31, 2026, the Company's current assets were $33,682,376. To date, our activities have been funded from our revenues, investments from our founders, the previous sale of Series Seed Preferred Shares, Series A Preferred Shares, Series T Preferred Shares, and our Common Stock in our Regulation A and Regulation CF offerings.

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

The Company currently has no material commitments for capital expenditures.

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

Non-U.S. GAAP Financial Measures

We are presenting a non-GAAP financial measure "Adjusted EBITDA", which is a measure adjusted for the impact of specified items and are not in accordance with GAAP.

We define Adjusted EBITDA as net income (loss) calculated in accordance with GAAP, plus interest expense, interest income, income taxes, depreciation, and amortization. We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. We believe Adjusted EBITDA provides useful information to investors regarding our operational performance and our ability to generate cash flows. Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP financial measures presented by other companies.

The following table reconciles net income (loss), the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:

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