NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

As of September 30, 2026, the Company has authorized the issuance of our 519,000,000 shares of preferred stock with par value of $0.00001. Of these authorized shares, 207,000,000 are designated as Series A, 99,000,000 are designated as Series T, and 213,000,000 are designated as Series Seed.

Series A Preferred Stock

The Series A has liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series A shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series T in proportion to its respective liquidation preference. Holders of Series A will receive an amount equal to $0.0286 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series A votes on an as-converted basis. The Series A is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series A is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $0.1430 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series A has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Series T Preferred Stock

The Series T have liquidation priority over the Series Seed and common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series T shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment is made to Series Seed or common stock, liquidation distributions, which will be paid ratably with the Series A in proportion to its respective liquidation preference. Holders of Series T will receive an amount equal to $0.1465 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of the Series A and Series T ratably in proportion to the full preferential amounts for which they are entitled. The Series T votes on an as-converted basis. The Series T is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series T is automatically convertible into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, coverts the offer and sale of common stock at an offering price of not less than $0.1465 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series T has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

Series Seed Preferred stock

The Series Seed have liquidation priority over the common stock. In the event of the liquidation, dissolution or winding up of the Company, the Series Seed shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, after any payment made to Series A and Series T, but before any payment is made to the Company’s common stock, an amount equal to $0.0083 per share, as adjusted, plus all declared and unpaid dividends thereon to the date fixed for such distribution. If upon such event the assets of the Company legally available for distribution are insufficient to permit payment of the full preferential amount, the entire assets available for distribution to stockholders shall be distributed to the holders of Series A and Series T first, then ratably in proportion to the full preferential amounts for which they are entitled to the Series Seed. The Series Seed votes on an as-converted basis. The Series Seed is convertible by the holder at any time after issuance at the conversion price, which equates to a one-to-one basis for common stock. The Series Seed is automatically converted into common stock upon the earlier of 1) the vote or written consent of at least a majority of the voting power represented by the then outstanding shares of preferred stock or 2) the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, converts the offer and sale of common stock at an offering price of not less than $0.1430 per share, as adjusted, with aggregate gross proceeds to the Company of not less than $15,000,000. In addition, the Series Seed has various anti-dilution provisions which take into account future sales and issuances of common stock and other dilutive instruments.

The following table summarizes the designation, shares authorized, and shares outstanding for the Company’s Preferred Stock:

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Common Stock

As of September 30, 2026 we had authorized the issuance of 1,580,000,000 shares of common stock with par value of $0.00001.

During the nine months ended September 30, 2026, the Company sold 3,726,152 shares of common stock through its prior Regulation A offering, which ended in February 2026, for gross proceeds of $5,214,689 and charged offering costs of $4,101,971 to stockholders’ equity.

During the nine months period ended September 30, 2025, the Company sold 9,347,504 shares of common stock through its Regulation A offering for gross proceeds of $10,325,991 and incurred offering costs of $6,006,272.

Stock Options

In 2015, the Board of Directors adopted the StartEngine Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of equity awards to employees and consultants, including stock options, stock purchase rights and restricted stock units to purchase shares of common stock. Up to 231,800,000 shares of common stock may be issued pursuant to awards granted under the 2015 Plan. The 2015 Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

The Company’s 2025 Equity Incentive Plan became effective on June 4, 2025, authorizing up to 80,000,000 additional shares of Common Stock for issuance.

The Company valued options granted under the 2015 Plan under ASC 718 using the Black-Scholes pricing model. The granted options in 2026 and 2025 have exercise prices of $1.60 - $1.78 and $1.25 - $1.38, respectively, generally vest over four years and expire in ten years. The stock options granted during the nine months ended September 30, 2026 and 2025 were valued using the Black-Scholes pricing model using the range of inputs as indicated below:

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The weighted average grant date fair values of options granted during the nine months ended September 30, 2026 and 2025 were $0.93 and $0.61 per option, respectively. The total grant date fair value of options granted during the nine months ended September 30, 2026 was approximately $12.7 million. The Company’s fair market value is generally based on the offering price in its Regulation A offerings at the time of grant.

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

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

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

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

The Company currently recognizes option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates. A summary of the Company’s stock option activity and related information is as follows:

A summary of option activity under the 2015 Plan for nine months ended September 30, 2026 is as follows:

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Stock option expense for the three months ended September 30, 2026 and 2025 was $2,425,984 and $1,252,418 respectively. For the nine months ended September 30, 2026 and 2025 was $7,603,444 and $6,429,936, respectively, and are included within the condensed consolidated statements of operations as follows:

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At September 30, 2026, the total compensation cost related to nonvested awards not yet recognized was approximately $19,728,034 and the weighted-average period over which the total compensation cost related to nonvested awards not yet recognized is expected to be recognized is 2.63 years.

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Restricted Stock Units

During the nine months ended September 30, 2026, the Company granted 6,000,000 restricted stock units (“RSUs”) under the 2025 Plan with a weighted-average grant-date fair value of $1.60 per unit, based on the offering price in the Company’s Regulation A offering at the time of grant. The RSUs vest only upon satisfaction of both a service condition, which is satisfied in 48 equal monthly installments beginning on the grant date, and a performance condition, which is satisfied upon the occurrence of a liquidity event, defined as a change in control or an initial public offering. The RSUs are forfeited if a liquidity event has not occurred by the earlier of the tenth anniversary of the grant date or the fifth anniversary of the holder’s termination of service. Because a liquidity event is not considered probable until

it occurs, the Company has not recognized any stock-based compensation expense related to the RSUs for the three and nine months ended September 30, 2026. Upon a liquidity event, the Company will recognize cumulative expense for the portion of the service condition satisfied as of that date, with the remainder recognized over the remaining service period. As of September 30, 2026, total unrecognized compensation cost related to unvested RSUs was $9,600,000. No RSUs vested or were forfeited during the period.