G2758T109

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes related thereto which are included elsewhere in this Quarterly Report on Form 10-Q (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 unaudited condensed consolidated financial statements and related notes thereto presented in this Report. Overview 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. Recent Developments 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. 23 Table of Contents 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. Operational Results and Strategic Milestones: 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. 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) filed with the SEC on January 15, 2026. Key Factors and Trends Affecting our Business Productions and Operations We expect to continue to incur significant operating costs that will impact our future profitability, including research and development expenses as we introduce new products and improves existing offerings; capital expenditures for the expansion of our development and sales capacities and driving brand awareness; additional operating costs and expenses for production ramp-up; general and administrative expenses as we scale our operations; interest expense from debt financing activities; and selling and distribution expenses as we build our brand and market our products. To date, we have not yet sold any of our products beyond their pilot stage. As a result, we will require substantial additional capital to develop products and fund operations for the foreseeable future. Revenues We are a development stage company and have not generated any significant revenue to date, but we anticipate additional revenue from our acquisition of Cataneo GmbH. Public Company Costs If we cease to be an emerging growth 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. Components of Results of Operations Operating expenses General and administrative expenses General and administrative expenses consist of employee-related expenses including salaries, benefits, and stock-based compensation as well as fees paid for legal, accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expense. We have and expect to further incur significant expenses as a result of being a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations and other administrative expenses and professional services. 24 Table of Contents Depreciation and amortization Depreciation expense relates to property and equipment which consists of equipment, furniture and capitalized software. Amortization expense relates to intangible assets. Research and development cost Costs incurred in connection with research and development activities are expensed as incurred. These costs include rent for facilities, hardware and software equipment costs, consulting fees for technical expertise, prototyping, and testing. Interest expense Interest expense consists of interest on our related party note payable and short-term debt. Interest income Interest income consists of interest earned on our excess cash. Change in fair value of warrant liabilities Change in fair value of warrant liabilities reflected the non-cash charge for changes in the fair value of the warrant liability that is subject to re-measurement at each balance sheet date. Other expenses Other expenses primarily consists of foreign currency gains or losses as a result of exchange rate fluctuations on transactions denominated in Korean won. Results of Operations Comparison of the Three and Six Months Ended June 30, 2026 and 2025 For the three months ended June 30, 2026 2025 Increase (Decrease) $ Revenue $ 160,083 $ 5,000 $ 155,083 Cost of goods sold - - - Gross profit 160,083 5,000 155,083 Operating expenses General and administrative expenses 2,634,629 1,848,021 786,068 Research and development 5,004 7,398 (2,394 ) Depreciation and amortization 1,051,344 974,889 76,455 Total operating expenses 3,690,977 2,830,308 860,669 - Loss from operations (3,530,984 ) (2,825,308 ) (705,586 ) - Other income (expense) - Interest expense, net (14,693 ) (21,609 ) 6,916 Change in fair value of warrant liabilities 197,292 (190,715 ) 388,007 Gain on debt extinguishment - 3,959,054 (3,959,054 ) Other income (expense), net (5,033 ) (16,342 ) 11,309 Total other income, net 177,566 3,730,388 (3,552,822 ) - Loss before income tax expense (3,353,328 ) 905,080 (4,258,408 ) Income tax expense (10,000 ) - (10,000 ) Net loss $ (3,363,328 ) $ 905,080 $ (4,268,408 ) Net loss per common share, basic and diluted (*) $ (0.49 ) $ 0.21 Weighted average number of common shares outstanding, basic and diluted (*) 6,824,379 4,216,612 25 Table of Contents For the six months ended June 30, 2026 2025 Increase (Decrease) $ Revenue $ 264,394 $ 15,000 $ 249,394 Cost of goods sold - - - Gross profit 264,394 15,000 249,394 Operating expenses General and administrative expenses 4,998,533 5,062,210 (63,677 ) Research and development 31,948 18,095 13,853 Depreciation and amortization 2,098,755 1,914,095 184,660 Total operating expenses 7,129,236 6,994,400 134,836 Loss from operations (6,824,842 ) (6,979,400 ) 114,558 Other income (expense) Interest expense, net (72,300 ) (146,651 ) 74,351 Change in fair value of warrant liabilities 491,585 424,177 67,408 Gain on debt extinguishment 89,340 3,959,054 (3,869,714 ) Other income (expense), net (11,099 ) 37,670 (48,769 ) Total other income, net 497,526 4,274,250 (3,776,724 ) Loss before income tax expense (6,367,316 ) (2,705,150 ) (3,662,166 ) Income tax expense (56,989 ) - (56,989 ) Net loss $ (6,424,305 ) $ (2,705,150 ) $ (3,719,155 ) Net loss per common share, basic and diluted (*) $ (1.00 ) $ (0.66 ) Weighted average number of common shares outstanding, basic and diluted (*) 6,426,123 4,124,018 Revenues 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. General and administrative expenses 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 was primarily related to an increase in stock based compensation relating to shares issued for services. The decrease for the six months was primarily attributable to lower professional fees, employee-related costs, and insurance expense. We expect, in the near term, to continue utilizing the issuance of equity-based instruments as compensation to reduce our cash outlays. 26 Table of Contents Depreciation and amortization expenses Depreciation and amortization expenses for the three and six months ended June 30, 2026 were approximately $1.1 million and $2.1 million, respectively, compared to the three and six months ended June 30, 2025 of $1.0 million and $1.9 million, respectively. This represents an increase of approximately $0.1 million and $0.2 million, respectively. Research and development expenses Research and development expenses for the three and six months ended June 30, 2026 were approximately $0.01 million and $0.03 million, respectively, compared to approximately $0.01 million and $0.02 million for the three and six months ended June 30, 2025, respectively. Research and development expenses primarily consisted of consulting-related expenses. Change in fair value of warrant liabilities Change in fair value of warrant liabilities for the three and six months ended June 30, 2026 was approximately $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 noncash remeasurement of warrant liabilities at each balance sheet date. Liquidity and Capital Resources Capital Resources and Available Liquidity 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 June 30, 2026, the Company had an accumulated deficit of 62,066,889, a net loss of 6,424,305 and net cash used in operating activities of 5,608,706 during the six months ended June 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. The Company believes that its existing cash and cash equivalents and proceeds from the May SPA, August SPA, and Yorkville Promissory Note (Note G) will be insufficient to meet its anticipated cash requirements for at least the next 12 months from the date the consolidated financial statements are issued. 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. However, the Company cannot conclude these are probable of being implemented or, if probable of being implemented, being in sufficient enough amounts to satisfy the Company’s contractual amounts as they presently exist that are coming due over the next 12 months as of the date of such filing. The assumptions upon which the Company has based its estimates are routinely evaluated and may be subject to change. The actual amount of the Company’s expenditures will vary depending upon several factors including but not limited to the design, timing, and the progress of the Company’s research and development programs, and the level of financial resources available. The Company can adjust its operating plan spending based on available financial resources. Cash Exercise of Warrants There is no assurance that the holders of our warrants described under this section 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. 27 Table of Contents 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. 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. Cash Flows The following table summarizes our cash flows for the periods presented: For the six months ended June 30, 2026 2025 Cash used in operating activities $ (5,608,706 ) $ (5,237,134 ) Cash used in investing activities (9,798,507 ) (141,512 ) Cash provided by financing activities 15,943,291 5,249,729 Net decrease in cash and cash equivalents $ 536,078 $ (128,917 ) Operating activities Cash used in operating activities was approximately $5.6 million during the six months ended June 30, 2026, primarily due to our net loss of approximately $6.4 million. The net loss included noncash charges of approximately $2.5 million, consisting primarily of approximately $2.1 million of depreciation and amortization expense, $0.8 million of equity-based compensation expense, $0.1 million of noncash interest expense, and $0.1 million related to the reduction in the right-of-use asset partially offset by a gain of $0.5 million due to change in the fair value of warrant liabilities, and a gain of $0.1 million due to a gain on debt extinguishment. The net cash outflow of approximately $1.7 million from changes in operating assets and liabilities was primarily due to a decrease in accounts payable of $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 and other current assets of $0.3 million and a decrease in operating lease liabilities 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. Investing activities Cash used in investing activities during the six months ended June 30, 2026 was approximately $9.8 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 June 30, 2025 was approximately $0.1 million, which consisted primarily of business acquisitions and capitalized internal-use software costs. Financing activities Cash provided by financing activities during the six months ended June 30, 2026 was approximately $ $15.9 million, which consisted primarily of proceeds from the sale of Common Stock and 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