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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-41751

 

MDB CAPITAL HOLDINGS, LLC

(Exact name of registrant as specified in its charter)

 

Delaware   87-4366624

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

14135 Midway Road, Suite G-150

Addison, TX 75001

   75001
(Address of principal executive offices)   (Zip code)

 

(945) 262-9010

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

None

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Shares, representing Limited Liability Interests   MDBH   Nasdaq Capital Markets

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES ☒ NO ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐ Accelerated Filer ☐
Non-accelerated Filer ☐ Smaller Reporting Company ☒
    Emerging Growth Company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

 

As of May 13, 2024, the number of outstanding shares of Class A Common Shares, representing limited liability interests, of the registrant was 4,295,632.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
Number
PART I FINANCIAL INFORMATION 2
   
Item 1 Unaudited Condensed Consolidated Financial Statements 2
   
Condensed Consolidated Balance Sheets –March 31, 2024 and December 31, 2023 2
   
Unaudited Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2024 and 2023 3
   
Unaudited Condensed Consolidated Statements of Changes in Equity – Three Months Ended March 31, 2024 and 2023 4
   
Unaudited Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2024 and 2023 5
   
Notes to Unaudited Condensed Consolidated Financial Statements 6
   
Item 2 Management’s Discussion and Analysis of Financial Conditions and Results of Operations 27
     
Item 3 Quantitative and Qualitative Disclosures About Market Risk 36
     
Item 4 Controls and Procedures 36
     
PART II OTHER IFNORMATION 37
     
Item 1 Legal Proceedings 37
     
Item 1A Risk Factors 37
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 37
     
Item 3 Defaults upon Senior Securities 37
     
Item 4 Mine Safety Disclosures 37
     
Item 5 Other Information 37
     
Item 6 Exhibits 37

 

1
 

 

PART I – FINANCIAL INFORMATION

 

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

  

March 31, 2024

(Unaudited)

  

December 31, 2023

 
         
Cash and cash equivalents  $5,492,612   $6,109,806 
Cash segregated in compliance with regulations   2,959,994    1,247,881 
Grants receivable, includes unbilled receivables of $503,777 and $783,520   1,111,611    882,319 
Clearing deposits   703,740    260,000 
Prepaid expenses and other current assets   494,463    523,788 
Investment securities, at amortized cost (U.S. Treasury Bills)   21,381,362    24,658,611 
Investment securities, at fair value (held by our licensed broker dealer) (Note 2)   4,999,237    5,771,634 
Investment securities, at cost less impairment   200,000    200,000 
Deferred offering cost   266,945    69,303 
Deferred costs related to deferred revenue   147,503    75,328 
Property and equipment, net   946,850    866,490 
Operating lease right-of-use assets, net   2,235,559    2,320,119 
Total assets  $40,939,876   $42,985,279 
           
LIABILITIES AND EQUITY          
Accounts payable  $916,782   $578,214 
Accrued expenses   515,853    1,105,078 
Payables to non-customers   2,374,132    1,405,293 
Payables to customers   1,115,663    - 
Deferred grant reimbursement   133,909    140,703 
Deferred revenue   20,000    20,000 
Operating lease liabilities   2,339,955    2,415,889 
Total liabilities   7,416,294    5,665,177 
Commitments and Contingencies (Note 9)   -     -  
Equity:          
Preferred shares, 10,000,000 authorized shares at no par value; 0 issued and outstanding   -    - 
Class A common shares, 95,000,000 authorized shares at no par value; 4,295,632 and 4,295,632 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively   -    - 
Class B common shares, 5,000,000 authorized shares at no par value; 5,000,000 shares issued and outstanding   -    - 
           
Paid-in-capital   53,075,777    49,405,779 
Accumulated deficit   (19,308,352)   (12,092,927)
Total MDB Capital Holdings, LLC Members’ equity   33,767,425    37,312,852 
Non-controlling interest   (243,843)   7,250 
Total equity   33,523,582    37,320,102 
Total liabilities and equity  $40,939,876   $42,985,279 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

2
 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

   2024   2023 
   Three Months Ended March 31, 
   2024   2023 
Operating income (loss):          
Unrealized gain (loss) on investment securities, net (from our licensed broker dealer) (Notes 1 and 2)  $(747,268)  $54,779 
Other operating income   86,879    62,212 
Total operating income (loss), net   (660,389)   116,991 
           
Operating costs:          
General and administrative costs:          
Compensation   4,892,675    872,027 
Operating expense, related party   320,292    301,702 
Professional fees   919,089    604,662 
Information technology   205,991    147,407 
Clearing and other charges   2,036    10,754 
General and administrative-other   669,126    304,079 
Total general and administrative costs   7,009,209    2,240,631 
Research and development costs, net of grants amounting to $708,700 and $793,540   277,582    31,592 
Total operating costs   7,286,791    2,272,223 
Net operating loss   (7,947,180)   (2,155,232)
Other income:          
Interest income   337,852    187,291 
Net loss before income taxes   (7,609,328)   (1,967,941)
Income taxes   -    - 
Net loss   (7,609,328)   (1,967,941)
Less net loss attributable to non-controlling interests   (393,903)   (94,193)
Net loss attributable to MDB Capital Holdings, LLC  $(7,215,425)  $(1,873,748)
Loss per share attributable to MDB Capital Holdings, LLC:          
Loss per Class A common share – basic and diluted  $(0.78)  $(0.25)
Weighted average of Class A common shares outstanding – basic and diluted   4,295,632    2,628,966 
Loss per Class B common share – basic and diluted  $(0.78)  $(0.25)
Weighted average of Class B common shares outstanding – basic and diluted   5,000,000    5,000,000 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

3
 

 

MDB CAPITAL HOLDINGS, LLC

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

 

Three Months Ended March 31, 2024 and 2023

 

   Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Equity 
  

Class A

Common Shares

  

Class B

Common Shares

   Paid-In   Accumulated   Noncontrolling   Total 
   Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Equity 
                                 
Balance, December 31, 2023   4,295,632   $-    5,000,000   $-   $49,405,779   $(12,092,927)  $7,250   $37,320,102 
Stock-based compensation   -    -    -    -    3,699,998    -    142,810    3,812,808 
Net loss   -    -    -    -    -    (7,215,425)   (393,903)   (7,609,328)
Balance, March 31, 2024   4,295,632   $-    5,000,000   $-   $53,075,777   $(19,308,352)  $(243,843)  $33,523,582 

 

  

Class A

Common Shares

  

Class B

Common Shares

   Paid-In   Accumulated   Noncontrolling   Total 
   Shares   Amount   Shares   Amount  Capital   Deficit   Interest   Equity 
                                 
Balance, December 31, 2022   2,628,966   $-    5,000,000   $-   $27,764,453   $(5,124,110)  $468,665   $23,109,008 
Stock-based compensation   -    -    -    -    -    -    54,126    54,126 
Net loss   -    -    -    -    -    (1,873,748)   (94,193)   (1,967,941)
Balance, March 31, 2023   2,628,966   $-    5,000,000   $-   $27,764,453   $(6,997,858)  $428,598   $21,195,193 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4
 

 

MDB CAPITAL HOLDINGS, LLC

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

   2024   2023 
   Three Months Ended March 31, 
   2024   2023 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(7,609,328)  $(1,967,941)
Adjustments to reconcile net loss to net cash used in operating activities:          
Unrealized (gain) loss on investment securities, net   747,268    (54,779

)

Stock-based compensation   3,812,809    54,126 
Accretion of investments at amortized cost (U.S Treasury Bills)   (305,047)   (187,291)
Proceeds from sale of investment securities, at fair value (made by our licensed broker dealer)   25,129    776,281 
Depreciation of property and equipment   62,792    44,124 
Deferred costs related to revenue   (72,175)     
Accretion of deferred grant reimbursement   (13,173)   12,960 
Deferred revenue   -    - 
Change in ROU Asset   84,560    57,070 
Change in lease liability   (75,934)   (19,286)
Changes in operating assets and liabilities:          
(Increase) decrease in -          
Grants receivable   (229,292)   (203,122)
Prepaid expenses and other current assets   (76,810)    39,788 
Clearing deposits   (443,740)   - 
Increase (decrease) in -          
Accounts payable   338,567    399,405 
Payables to non-customers   1,212,595    - 
Payables to customers   871,907      
Accrued expenses   (589,225)   (105,527)
Net cash used in operating activities   (2,259,097)   (1,154,192)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Proceeds of investments securities, at amortized cost (U.S Treasury Bills)   12,066,207    - 
Purchases of investments securities, at amortized cost (U.S Treasury Bills)   (8,483,911)   - 
Deferred grant reimbursement   6,379    (48,375)
Purchases of property and equipment   (143,152)   (6,942)
Net cash provided by (used in) investing activities   3,445,523    (55,317)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Deferred costs of initial public offering   (91,507)   (272,322)
Net cash used in financing activities   (91,507)   (272,322)
           
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH   1,094,919    (1,481,831)
           
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - BEGINNING OF PERIOD   7,357,687    4,952,624 
           
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - END OF PERIOD  $8,452,606   $3,470,793 
           
Supplemental disclosures of cash flow information:          
Cash paid for -          
Interest  $-   $- 
Income taxes  $-   $- 
           
Non-cash investing and financing activities:          
           
Ownership change of non-controlling interest  $-   $153,044 
Deferred costs of initial public offering  $106,135   $- 

 

The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows:

 

  

March 31, 2024

  

December 31, 2023

 
Cash and cash equivalents  $5,492,612   $6,109,806 
Cash segregated in compliance with regulations   2,959,994    1,247,881 
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows  $8,452,606   $7,357,687 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5
 

 

MDB CAPITAL HOLDINGS, LLC

(Formerly Public Ventures, LLC and Subsidiaries)

 

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Three Months Ended March 31, 2024 and 2023

 

1. Organization and Description of Business

 

MDB Capital Holdings, LLC (“the Company” or “MDB”), a Delaware limited liability company, is a holding company that has three wholly-owned subsidiaries: MDB CG Management Company (“MDB Management”); Public Ventures, LLC (“Public Ventures”); and PatentVest, Inc. (“PatentVest”), and has a majority-owned partner company, Invizyne Technologies, Inc. (“Invizyne”).

 

MDB Management is an “administrative” entity whose purpose is to conduct, and to consolidate wherever possible, to consolidate shared services and other resources, for our US-based operations.

 

Public Ventures is a U.S. registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority (“FINRA”), the Depository Trust Company (“DTC”), and the National Securities Clearing Corporation (“NSCC”). Public Ventures is dual clearing, operating as a self-clearing firm and carrying accounts for its customers, and on a fully disclosed basis with a nonrelated FINRA member firm, Interactive Brokers, LLC (“Interactive Brokers”). Interactive Brokers serves as custodian of certain investments maintained by Public Ventures.

 

PatentVest is a wholly-owned subsidiary that performs intellectual property validation services for Public Ventures’, due diligence functions on the intellectual property of clients and prospective client companies, creates an intellectual property roadmap for client companies, and is also a law firm specializing in patent matters,

 

Invizyne was formed with the business objective of taking nature’s building blocks to make molecules of interest, effectively simplifying nature. Invizyne is a biology technology development company that is a majority-owned subsidiary. Invizyne’s technology is a differentiated and unique synthetic biology platform which is designed to enable the scalable exploration of a large number of molecules and properties found in nature.

 

Prior to January 14, 2022, Public Ventures owned the majority of interests in PatentVest and Invizyne. On January 14, 2022, Public Ventures distributed 100% of its equity interests in PatentVest and Invizyne to its members in proportion to their respective interests. On January 15, 2022, Public Ventures filed with the Internal Revenue Service to be treated as a corporation for federal income tax purposes. On January 16, 2022, the members of Public Ventures contributed their entire interests in the equity of Public Ventures, Invizyne and PatentVest to MDB, as result of which MDB became the new parent holding company. There was no effective change in the beneficial ownership of Public Ventures as a result of this transaction. On the same day as part of the reorganization, MDB established a management company subsidiary, MDB Management. These reorganization steps are collectively referred to as the “reorganization”. In connection with the reorganization, 5,000,000 Class B common shares were issued in exchange for the members’ equity.

 

The reorganization was completed between entities that were under common control, and the assets contributed and liabilities assumed are recorded based on their historical carrying values. These unaudited condensed consolidated financial statements retroactively reflect the financial statements of the Company and Public Ventures on an unaudited condensed consolidated basis for the periods presented.

 

On January 16, 2022, the Company issued 100,000 shares of Class A common shares for all the then non-controlling interests in PatentVest. PatentVest is now wholly owned by the Company.

 

On July 1, 2022, the Company made a cash distribution for $2,723,700 to the former members of Public Ventures in accordance with its private offering memorandum. This cash distribution was declared on January 16, 2022.

 

6
 

 

On June 8, 2022, MDB completed the first closing of a private placement, consisting of the sale of 2,517,966 shares of Class A common shares at $10.00 per share, for gross proceeds of $25,179,660. On June 15, 2022, the Company completed the second closing of the private placement, consisting of the sale of an additional 11,000 shares of Class A common shares, for gross proceeds of $110,000. Accordingly, the Company received total gross proceeds of $25,289,660 from the sale of 2,528,966 shares of Class A common shares, or $24,746,142 net of $543,518 of offering expenses in conjunction with the private placement, the Company issued warrants to the placement agent to purchase 18,477 shares of Class A common shares, exercisable upon issuance for a period of 10 years at $13.00 per share, for a cash consideration of $0.001/share. The placement agent’s warrants had a fair value of $106,940, as calculated pursuant to the Black-Scholes option-pricing model and were accounted for as issuance costs that were recorded against paid in capital. The warrants issued are accounted for as equity and recorded under paid in capital.

 

On September 20, 2023, MDB completed an initial public offering (IPO), consisting of the sale of 1,666,666 shares of Class A common shares at $12.00 per share, for gross proceeds of $19,999,992. Accordingly, the Company received total gross proceeds of $19,999,992 from the sale of 1,666,666 shares of Class A common shares, or $17,444,659 net of $2,555,333 of offering expenses. In conjunction with the IPO, the Company issued warrants to the placement agent to purchase 16,667 shares of Class A common shares, exercisable upon issuance for a period of 5 years at $15.00 per share, for a cash consideration of $0.001/share. The placement agent’s warrants had a fair value of $65,411, as calculated pursuant to the Black-Scholes option-pricing model and accounted for as issuance costs that were accounted for as equity instruments and recorded against paid in capital.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and wholly-owned and majority owned subsidiaries. The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of December 31, 2023, and related notes were derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year or any future period. The unaudited condensed consolidated financial information should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests at March 31, 2024 and 2023, relate to the interests of third parties in the majority owned subsidiaries.

 

The managing members of the Company have a controlling interest in PatentVest, S.A., a company organized and based in Nicaragua (which was renamed MDB Capital, S.A in 2022). As the Company does not have a controlling financial interest in this entity, and management has determined PatentVest, S.A. is not a variable interest entity and as such should not be consolidated as it has no ownership interests nor is a variable interest, so has excluded this entity from the Company’s unaudited condensed consolidated financial statements. It is the Company’s policy to reevaluate this conclusion on an annual basis or if there are significant changes in ownership.

 

Income Taxes

 

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest and Invizyne are Subchapter C-corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity, it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company.

 

7
 

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the valuation of investment securities, valuing equity instruments issued for services, stock-based compensation and the realization of any deferred tax assets.

 

Emerging Growth Company

 

The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents.

 

The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively.

 

The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company did not experience any credit risk losses during the three-months ended March 31, 2024 and 2023.

 

Segregated Cash and Deposits

 

From time to time the Company provides deposits or enters into agreements that would require funds to be held in a segregated cash account. At March 31, 2024, the Company had $2,959,994 of segregated cash consisting of funds held in reserve for non-customers and customers. At December 31, 2023, the Company had $1,247,881 of segregated cash consisting of funds held in reserve for non-customers.

 

Clearing Deposits

 

The Company is obligated to maintain security deposits with the DTC and NSCC. At March 31, 2024, these deposits totaled $703,740.

 

8
 

 

Prepaid Expenses and Other Current Assets

 

The Company has prepaid and other expenses totaling $494,463 at March 31, 2024 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $50,000, security deposits totaling $47,380, various prepaid expense of $312,531, and other current assets of $41,052. Prepaid expenses and other assets totaling $523,788 at December 31, 2023 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $95,000, security deposits totaling $47,380, various prepaid expense of $325,777, and other assets of $12,131.

 

Leases

 

Leases of the Company consist primarily of contracts for the right to use and direct use of an individual property. Leases were analyzed for evidence of significant additional components and to determine if these components were separately identifiable within the context of the contract. As an accounting policy, to account for these components, the Company has elected the practical expedient for property leases that have both lease and non-lease components for them to be combined into a single component and account for as a lease. This policy is effective for all current and future property operating leases and applied uniformly and will be disclosed as such within the financial statements. Operating lease assets are included within right-of-use assets and the corresponding operating lease liabilities are included within liabilities on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023.

 

The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Because the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

 

Stock-based Compensation

 

Stock-based compensation primarily consists of restricted stock units with service or market/performance conditions and stock options. The MDB and Invizyne issues restricted stock units are measured at the fair market value of the underlying stock at the grant date. The Company recognize stock compensation expense using the straight-line attribution method over the requisite service period for the restricted stock units. The Company’s subsidiary issued stock-option and the fair value is determined utilizing Black-Scholes options-pricing model. The Company account for forfeitures as they occur, rather than applying an estimated forfeiture rate. For performance-based restricted stock units, the compensation cost is recognized based on the number of units expected to vest upon the achievement of the performance conditions. Shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued to the employee than the number of awards outstanding. The Company record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

 

Investment Securities

 

The Company strategically invests funds in U.S. Treasury Bills, early-stage technology companies, and equity securities and options of publicly traded and privately held companies. The Company classifies investment securities as investment securities, at amortized cost, investment securities, at fair value, or investment securities, at cost less impairment.

 

Investment securities, at amortized cost – This is comprised of debt securities held by MDB and are classified as investment securities held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. These securities were originally recorded at fair value and are subsequently measured at amortized cost, adjusted for unamortized purchase premiums and discounts, and an allowance for credit losses. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the interest income in the statements of operations. Interest income is recognized when earned. The Company recognizes estimated expected credit losses over the life of the investment security through the allowance for credit losses account. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the investment security to present the net amount expected to be collected. In determining expected credit losses, the Company considers relevant qualitative factors including, but not limited to, term and structure of the instrument, credit rating by rating agencies and historic credit losses adjusted for current conditions and reasonable and supportable forecasts. The Company currently only holds investments securities, at amortized cost in U.S. Treasury Bills, so there are no expected credit losses. Declines in fair value of these securities is due to changes in market interest rates, and because we expect to hold these securities until maturity, we do not expect to realize any losses.

 

9
 

 

Investment securities, at fair value – This is comprised of equity investments held by the broker dealer subsidiary and are reported at fair value with changes in fair value recognized in the statements of operations. Purchases and sales of equity securities, consisting of common stock and warrants to purchase common stock, are recorded based on the respective market price quotations on the trade date. Realized gains and losses on investments represent the net gains and losses on investments sold during the period based on the average cost method. Changes in fair value of investments are recorded on the unaudited condensed consolidated statements of operations as unrealized gains and losses.

 

Investment securities, at cost less impairment – This is comprised of equity securities and a simple agreement on future equities without a readily determinable fair value held by the broker dealer subsidiary, the Company has elected to apply the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company will reassess whether such an investment qualifies for the measurement alternative at each reporting period. In evaluating an investment for impairment or observable price changes, we will use inputs including recent financing events, as well as other available information regarding the investee’s historical and forecasted performance. The Company has assessed this investment and no impairment is warranted.

 

Investment securities are as follows:

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at amortized cost:          
U.S Treasury Bills  $21,381,362   $24,658,611 
Investment securities, at amortized cost  $21,381,362   $24,658,611 

 

Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at fair value:          
Common stock of publicly traded companies  $2,389,011   $2,603,579 
Warrants of publicly traded companies   2,610,226    3,168,055 
Investment securities, at fair value  $4,999,237   $5,771,634 

 

Non-Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at cost less impairment          
Simple agreement on future equities (not market listed)  $200,000   $200,000 
Investment securities, at cost less impairment  $200,000   $200,000 

 

For investment securities at fair value, net unrealized loss of $747,268 and net unrealized gain of $54,779 were recognized in the statements of operations for three-months ended March 31, 2024 and 2023, respectively.

 

10
 

 

The amortized cost, excluding gross unrealized holding loss and fair value of held to maturity securities on March 31, 2024 and December 31, 2023 are as follows:

 

  

Amortized

Cost as of

March 31, 2024

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

March 31, 2024

 
U.S Treasury Bills maturing 04/04/24, 04/18/24, 04/23/24 and 6/11/24  $21,381,362   $1,035   $        -   $21,382,397 
Total assets  $21,381,362   $1,035   $-   $21,382,397 

 

  

Amortized

Cost as of

December 31, 2023

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

December 31, 2023

 
U.S Treasury Bills maturing 02/13/24, 04/04/24, 04/18/24 and 04/23/24  $24,658,611   $6,031   $-   $24,664,642 
Total assets  $24,658,611   $6,031   $-   $24,664,642 

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There is no significant concentration of credit risk, due to the majority of assets being invested in U.S. Treasury Bills.

 

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

 

Level 1–- Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.

 

Level 2–- Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

 

Level 3–- Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.

 

The Company’s financial instruments primarily consist of cash and investment securities. As of the unaudited condensed consolidated balance sheets date, certain investment securities are required to be recorded at fair value with the change in fair value during the period being recorded as an unrealized gain or loss. As of March 31, 2024 and December 31, 2023, the estimated fair values of investment securities, at amortized cost were not materially different from their carrying values as presented on the unaudited condensed consolidated balance sheets. This is primarily attributed to the short-term maturities of these instruments.

 

11
 

 

Investment securities, at amortized cost: The fair value of U.S. Treasury Bills classified as held-to-maturity investment securities is based on the market price and is classified as level 1 of the fair value hierarchy.

 

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:

 

Investment securities: Public equity securities are assessed for valuation at the close of each month. Warrants are valued using the Black-Scholes model, which considers the stock price at the date of the valuation, the warrants strike price, the term to expiry, the risk-free rate of return, and the expected volatility of the underlying stock.

 

Investment securities, at cost less impairment: Non-public equity securities and simple agreements for future equity are valued based on the initial investment, less impairment. The Company determined that no impairment was warranted. Since these securities are not actively traded, we will apply valuation adjustments when they become available, and they are categorized in level 3 of the fair value hierarchy.

 

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities–- common stock  $2,389,011   $-   $-   $2,389,011 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    17,680    2,592,546    2,610,226 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,389,011   $17,680   $2,592,546   $4,999,237 

 

During the three months ended March 31, 2024, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

 

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2023  $3,133,458 
      
Receipt from investment banking fees   - 
Realized gains   - 
Unrealized losses   (540,912)
Sales or distribution     
Purchases   - 
March 31, 2024  $2,592,546 

 

The following table presents information about significant unobservable inputs related to material components of Level 3 warrants as of March 31, 2024.

 

Assets  Fair Value   Valuation Techniques  Significant Unobservable Inputs  Range of Inputs   Weighted-Average 
                      
Warrants  $2,592,546   Black Scholes  Volatility   96.26 -106.28%   99.60%

 

12
 

 

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities -
common stock		  $2,603,579   $-   $-   $2,603,579 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    34,597    3,133,458    3,168,055 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,603,579   $34,597   $3,133,458   $5,771,634 

 

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2022  $- 
Receipt from investment banking fees   2,645,620 
Realized gains   - 
Unrealized gains   652,925 
Sales or distribution   (165,087)
Purchases   - 
December 31, 2023  $3,133,458 

 

During the year ended December 31, 2023, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

 

Secured Debt–- Revolving Credit Facility

 

The Company entered into a revolving credit facility with a bank, (the “Lender”) on July 26, 2023 for a commitment of up to $2,000,000 and which matures July 26, 2024. The loan has a variable interest rate equal to a defined index, currently the Lender’s rate on the sale of Federal Funds, plus 2.25%. The loan commenced with a calculated interest rate of 7.75%. If the Lender determines, in its sole discretion, that the index becomes unavailable or unreliable, either temporary, indefinitely, or permanently, during the term of this loan, the Lender may amend this loan by designating a substantially similar substitute index. The agreement provides for a quarterly payment of the greater of accrued interest or a non-usage fee of $5,000. The Company has not made any draw downs on the credit facility.

 

The Company granted the Lender a security interest in a cash checking account held at the bank as collateral. The Lender has a right of setoff available from this cash account when the line of credit is accessed. As of March 31, 2024, there is $2,037,845 deposited in this account.

 

The Company is responsible for the payment of all of the Lender’s legal and other fees incurred in connection with administering the loan. The Company has incurred no such costs or debt issue costs.

 

As of March 31, 2024, there is no outstanding indebtedness under the credit facility and interest expense totaled $0. The Company is in compliance with all covenants under the agreement.

 

13
 

 

Property and Equipment

 

Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statements of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:

 

Laboratory equipment   5 years
Furniture and fixtures   7 years
Leasehold improvements   Lesser of the lease duration or the life of the improvements

 

Property and equipment consist of the following as of March 31, 2024 and December 31, 2023, respectively:

 

  

March 31, 2024

  

December 31, 2023

 
         
Laboratory equipment  $1,030,004   $885,696 
Furniture and fixtures   54,338    49,838 
Developed software   107,458    113,114 
Leasehold improvements   279,161    279,161 
Total property and equipment   1,470,961    1,327,809 
Less: Accumulated depreciation   (524,111)   (461,319)
Property and equipment, net  $946,850   $866,490 

 

Revenue

 

The Company generates revenue primarily from providing brokerage services and investment banking services through Public Ventures. PatentVest and Invizyne have had limited financial activity during the three-months ended March 31, 2024 and 2023, respectively.

 

Brokerage revenues consist of (a) trade-based commission income from executed trade orders, (ii) net realized gains and losses from proprietary trades, and (iii) other income consisting primarily of stock loan income earned on customer accounts. Public Ventures recognizes revenue from trade-based commissions and other income when performance obligations are satisfied through the transfer of control, as specified in the contract, of promised services to the customers of Public Ventures. Commissions are recognized on a trade date basis. Public Ventures believes that each executed trade order represents a single performance obligation that is fulfilled on the trade date because that is when the underlying financial instrument is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer. When another party is involved in transferring a good or service to a customer, Public Ventures assesses whether revenue is presented based on the gross consideration received from customers (principal) or net of amounts paid to a third party (agent). Public Ventures has determined that it is acting as the principal as the provider of the brokerage services and therefore records this revenue on a gross basis. Clearing, custody and trade administration fees incurred are recorded effective as of the trade date. The costs are treated as fulfillment costs and are recorded in operating expenses in the unaudited condensed consolidated statements of operations.

 

Brokerage revenue is measured by the transaction price, which is defined as the amount of consideration that Public Ventures expects to receive in exchange for services to customers. The transaction price is adjusted for estimates of known or expected variable consideration based upon the individual contract terms. Variable consideration is recorded as a reduction to revenue based on amounts that Public Ventures expects to refund back to the customer. There were no variable considerations for the three-months ended March 31, 2024, and 2023, respectively.

 

Investment banking revenues consist of private placement fees. Public Ventures does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions, and therefore, as of March 31, 2024, the Company did not have any contract assets or liabilities related to these revenues on its unaudited condensed consolidated balance sheets.

 

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Private placement fees are related to non-underwritten transactions such as private placements of equity securities, private investments in public equity, and Rule 144A private offerings and are recorded on the closing date of the transaction. Client reimbursements for costs associated for private placement fees are recorded gross within investment banking and various expense captions, excluding compensation. The Company typically receives payments on private placements transactions at the completion of the contract. The Company views the majority of placement fees as a single performance obligation that is satisfied when the transaction is complete, and the revenue is recognized at that point in time.

 

Taxes and regulatory fees assessed by a government authority or agency that are both imposed on and concurrent with a specified revenue-producing transaction, which are collected by Public Ventures from a customer, are excluded from revenue and recorded against general and administrative expenses.

 

PatentVest recognize revenue when performance obligations are satisfied by transferring promised goods and services to customers in an amount the Company expects to receive in exchange for those goods or services. PatentVest enters into contracts that can include various combinations of its offerings which are generally capable of being distinct and accounted for as a separate performance obligation for the entre contract or a portion of the contract. When performance obligations are combined into a single contract, PatentVest utilize stand-alone selling price to allocate the transaction price among the performance obligations.

 

Certain contracts or portions of contracts are duration-based which, in the event of customer cancellation, provide PatentVest with an enforceable right to a proportional payment for the portion of the services provided. Accordingly, revenue from duration-based is recognized using a time-based measure of progress, which PatentVest believes best depicts how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from certain contracts is recognized over the expected period of performance using a single measure of progress, typically based on hours incurred. Payments received in advance of services being rendered are recorded as a component of contract liabilities.

 

Patent Vest’s contract liabilities which is presented as deferred revenue, consist of advance payments. The table below shows changes in deferred revenue:

 

Balance as of December 31, 2022  $- 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2023   - 
Amounts billed but not recognized   100,000 
Revenue recognized   80,000 
Balance as of December 31, 2023   20,000 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2024  $20,000 

 

During the three-months ended March 31, 2023, the Company’s technology development segment revenue, which was derived from a single feasibility study, which is not a typical service offered by the Company. The revenue generated from this study represents a direct reimbursement of costs incurred in completing the study.

 

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Research Grants

 

Invizyne receives grant reimbursements, which are offset against research and development expenses in the unaudited condensed consolidated statements of operations. In addition to actual reimbursements, Invizyne also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs, resulting in a negative impact. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the unaudited condensed consolidated balance sheet.

 

Grants that operate on a reimbursement basis are recognized on the accrual basis and are offsets to expenses to the extent of disbursements and commitments that are reimbursable for allowable expenses incurred as of March 31, 2024 and 2023, and respectively, expected to be received from funding sources in the subsequent year. Management considers such receivables at March 31, 2024 and 2023, respectively, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying unaudited condensed consolidated financial statements.

 

Summary of grants receivable activity for the three-months ended March 31, 2024 and 2023, is presented below:

 

Summary of Grants Receivable Activity

   2024   2023 
         
Balance at beginning of period  $882,319   $809,532 
Grant costs expensed   674,158    766,867 
Grants for equipment purchased   6,379    - 
Grant fees   28,163    26,673 
Grant funds received   (479,408)   (590,418)
Balance at end of period  $1,111,611   $1,012,654 

 

Invizyne has received five grants provided by National Institute of Health and the Department of Energy. The first grant was awarded on October 1, 2019 and the latest grant is set to expire on August 31, 2024, however grants can be extended or new phases can be granted, extending the expiration of the grant. None of the grants has commitments made by the parties, provisions for recapture, or any other contingencies, beyond the complying with the normal terms of each research and development grant. Research grants received from organizations are subject to the contract agreement as to how Invizyne conducts its research activities, and Invizyne is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. Invizyne is permitted to draw down the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the unaudited condensed consolidated statements of operations. For the three-months ended March 31, 2024 and 2023, respectively, grants amounting to $674,158 and $766,867 were offset against the research and development costs. Grant drawdowns, which includes grants costs expensed, grants for equipment purchased, and grant fees, for the three-months ended March 31, 2024 and 2023, respectively, totaled $708,700 and $793,540.

 

Research and Development Costs

 

Research and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to consultants, and other expenses relating to the development of Invizyne’s technology. For the three-months ended March 31, 2024 and 2023, research and development costs prior to offset of the grants amounted to $986,282, and $825,132, respectively, which includes grant costs expensed, grants fees, and research and development costs, net of the grant received.

 

Patent and Licensing Legal and Filing Fees and Costs

 

Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.

 

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Patent and licensing legal and filing fees and costs were $73,297 and $34,420 for the three-months ended March 31, 2024 and 2023, respectively. Patent and licensing legal and filing fees and costs are included in general and administrative costs in the unaudited condensed consolidated statements of operations.

 

3. Segment Reporting

 

In its operation of the business, management, including the Company’s chief operating decision maker, who is also the Company’s Chief Executive Officer, reviews certain financial information, including segmented statements of operations and the balance sheets.

 

The Company currently operates in two reportable segments: in the broker dealer and intellectual property service segment as well as in the technology development segment.

 

The broker dealer and intellectual property service segment currently has two subsidiaries, Public Ventures and PatentVest. Public Ventures is a full-service broker dealer firm focusing on conducting private and public securities offerings. PatentVest offers in-depth patent research used for investment banking due diligence.

 

The technology development segment currently has one subsidiary, Invizyne. Invizyne is a research and development stage company synthetic biology company.

 

Non-income generating subsidiaries for management of the business, including MDB CG Management Company, Inc. are reported as other.

 

The segments are based on the discrete financial information reviewed by the Chief Executive Officer to make resource allocation decisions and to evaluate performance. The reportable segments are each managed separately because they will provide a distinct product or provide services with different processes. All reported segment revenues are derived from external customers.

 

The accounting policies of the Company’s reportable segments are in consideration of ASC 280 and the same as those described in the summary of significant accounting policies (see Note 2).

 

The following sets forth the long-lived assets and total assets by segment at March 31, 2024:

 

ASSETS  Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Eliminations   Consolidated 
Long-lived assets  $107,458   $2,367,496   $707,455   $          -   $3,182,409 
Total assets  $16,301,072   $4,005,204   $20,633,600   $-   $40,939,876 

 

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The following sets forth statements of operations by segment for the three-months March 31, 2024:

 

   Broker
Dealer &
Intellectual
Property
Service		   Technology Development   Other   Eliminations     Consolidated 
Operating income:                            
Unrealized gain on investment securities, net (from our licensed broker dealer)  $(747,268)  $-   $-   $             -     $(747,268)
Other operating income   86,879    -    -     -      86,879 
Total operating income, net   (660,389)    -    -     -      (660,389) 
                             
Operating costs:                            
General and administrative costs:                            
Compensation   679,907    390,043    3,822,725     -      4,892,675 
Operating expense, related party   243,876    -    76,416     -      320,292 
Professional fees   145,907    256,563    516,619     -      919,089 
Information technology   180,914    3,891    21,186     -      205,991 
Clearing and other charges   2,036    -    -     -      2,036 
General and administrative-other   218,936    80,378    369,812     -      669,126 

General and administrative costs

   1,471,576    730,875    4,806,758     -      7,009,209 
Research and development costs   -    277,582    -     -      277,582 
Total operating costs   1,471,576    1,008,457    4,806,758     -      7,286,791 
Net operating income (loss)   (2,131,965)   (1,008,457)   (4,806,758)    -      (7,947,180)
Other income and expense:                            
Less: interest expense   110,625    -    -     110,625      - 
Interest income   52,459    -    285,393     -      337,852 

Income (loss) before income taxes

   (2,190,131)   (1,008,457)   (4,521,365)    110,625      (7,609,328)

Income tax expense

   -    -    -     -      - 

Net income (loss)

   (2,190,131)   (1,008,457)   (4,521,365)    110,625      (7,609,328)
Less net loss attributable to non-controlling interests   -    (393,903)   -     -      (393,903)
Net loss attributable to MDB Capital Holdings, LLC  $(2,190,131)  $(614,554)  $(4,521,365)  $ 110,625     $(7,215,425)

 

The following sets forth the long-lived assets and total assets by segment at December 31, 2023:

 

ASSETS  Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Consolidated 
Long-lived assets  $113,114   $2,344,895   $728,600   $3,186,609 
Total assets  $15,038,602   $3,558,509   $24,388,168   $42,985,279 

 

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The following sets forth statements of operations by segment for the three-months ended March 31, 2023:

 

   Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Consolidated 
Operating income:                    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2)  $54,779   $-   $-   $54,779 
Other operating income   3,053    59,159    -    62,212 
Total operating income, net   57,832    59,159    -    116,991 
                     
Operating costs:                    
General and administrative costs:                    
Compensation   546,801    31,536    293,690    872,027 
Operating expense, related party   258,453    -    43,249    301,702 
Professional fees   165,812    181,707    257,143    604,662 
Information technology   121,876    9,826    15,705    147,407 
Clearing and other charges   10,754    -    -    10,754 
General and administrative-other   108,993    45,734    149,352    304,079 
General and administrative costs   1,212,689    268,803    759,139    2,240,631 
Research and development costs   -    31,592    -    31,592 
Total operating costs   1,212,689    300,395    759,139    2,272,223 
Net operating loss   (1,154,857)   (241,236)   (759,139)   (2,155,232)
Other income:                    
Interest income   28,362    86    158,843    187,291 
Loss before income taxes   (1,126,495)   (241,150)   (600,296)   (1,967,941)
Income tax expense   -    -    -    - 
Net loss   (1,126,495)   (241,150)   (600,296)   (1,967,941)
Less net loss attributable to non-controlling interests   -    (94,193)   -    (94,193)
Net loss attributable to MDB Capital Holdings, LLC  $(1,126,495)  $(146,957)  $(600,296)  $(1,873,748)

 

4. Equity and Non-Controlling Interests

 

Equity

 

Preferred shares – 10,000,000 shares authorized, no shares issued and outstanding. The board of directors may designate preferred shares to be issued, and may rank preferred shares as junior to, on parity with or senior to other preferred shares (in each case, with respect to distributions or other payments in respect of shares). Since the board of directors may set all the terms of any class of preferred shares, these are considered “blank check” preferred shares. Currently the board has not defined dividend and liquidation preference, participation rights, call prices and dates, sinking-fund requirements, or terms that may change the conversion or exercise price.

 

Class A common shares – 95,000,000 shares authorized, 4,295,632 shares issued and outstanding. These shares are common shares and have one vote per share. Currently there is not a defined dividend or liquidation preference.

 

Class B common shares – 5,000,000 shares authorized, 5,000,000 issued and outstanding. These shares are common shares and have five votes per share. Currently there is not a defined dividend or liquidation preference. These shares may be converted one to one for a Class A common shares at any time and from time to time, at the election of the holder.

 

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Non-Controlling Interests

 

During the three-months ended March 31, 2024, the ownership interest in Invizyne was 60.94% and the non-controlling interest was 39.06%. During the three-months ended March 31, 2023, the ownership interest in Invizyne was 60.94%, the non-controlling interest was 39.06%. Invizyne is accounted for the three-months ended March 31, 2024 and 2023, respectively, under the consolidation method.

 

The NCI ownership will be equal to the NCI percentage as of the reporting period. Therefore, there will be a redistribution of equity between MDB and the Non-controlling interest owner. As of March 31, 2024 and 2023, the Company’s equity interest in Invizyne was 60.94% and 60.94% respectively, and the remaining equity interest was owned by the non-controlling interests as presented below:

 

  

For the Three Months Ended

March 31,

 
   2024   2023 
         
Invizyne net loss  $(1,008,457)  $(241,150)
Weighted average non-controlling percentage   39.06%   39.06%
Net loss non-controlling interest  $(393,903)  $(94,193)
Prior period balance   7,250    468,665 
Stock-based compensation   142,810    54,126 
Ending period balance  $(243,843)  $428,598 

 

If a change in the parent ownership in a subsidiary from an additional investment or from the issuance of stock-based compensation, a change of the non-controlling ownership is recognized based on the amount invested and the carrying amount of the non-controlling interest is adjusted to reflect the change in the non-controlling ownership in the subsidiary’s net assets.

 

5. Stock-Based Compensation

 

MDB stock-based compensation

 

Between April 19, 2022 and September 21, 2022, the Company granted 3,675,000 restricted stock units (“RSUs”). These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange, then at a rate of 10% of one-half the number of RSUs each six months after the date of the initial vesting, until the last vesting on the fifth year anniversary of the Date of Grant, at which any previously unvested will fully vest. These RSUs were granted to officers, directors, employees, and contractors. As these RSUs do not begin to vest until the completion of an initial public offering by the Company, which occurred on September 20, 2023, $1,107,521 of stock-based compensation expense related to these RSUs was recorded for the three-months ended March 31, 2024. The total unrecognized compensation expense based on the shares price sold in the private placement is $34,302,984.

 

On April 19, 2022 the Company granted 2,000,000 restricted stock units (“RSUs”). These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange. Class A Share have traded in the market since September 20, 2023. The RSUs will vest once the Class A Shares are listed for any 90 consecutive calendar days at an average price of $20.00 or more during the period commencing from the Date of Grant and prior to the five year anniversary of the Date of Grant, with an average monthly trading volume of 2,000,000 Class A Shares or more during the 90 consecutive calendar day period, or the Class A Shares are listed for any 90 consecutive calendar days at an average price of $25.00 or more during the period commencing the Date of Grant and prior to the five year anniversary of the Date of Grant; provided further, that if there is a distribution of cash, stock or other property by the Company on the Class A Shares, then the foregoing average amounts of $20.00 or $25.00 will be reduced, from time to time, by the value of any one or more per share distributions after the Date of Grant until vested. As these RSUs do not begin to vest until the completion of an initial public offering by the Company, which occurred on September 20, 2023, $1,107,521 of stock-based compensation expense related to these RSUs was recorded for the three-months ended March 31, 2024. The estimated unrecognized compensation expense for performance/market vesting RSUs is $13,465,761.

 

A summary of restricted stock unit activity during the three-months ended March 31, 2024 and 2023 is presented below:

 

   Time-Based   Performance-Based 
   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Restricted stock units outstanding at March 31, 2023   3,675,000   $10.00    2,000,000   $7.91 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Restricted stock units outstanding at December 31, 2023   3,675,000   $10.00    2,000,000   $7.91 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Restricted stock units outstanding at March 31, 2024   3,675,000   $10.00    2,000,000   $7.91 
                     
Restricted stock units at March 31, 2023   -   $-    -   $- 
Restricted stock units at March 31, 2024   -   $-    -   $- 

 

Invizyne stock-based compensation

 

Invizyne’s 2020 Equity Incentive Plan (the “2020 Plan”), which was approved by the Invizyne shareholders, permits grants to its officers, directors, and employees for up to 1,877,664 shares of Invizyne’s Common Stock. On May 1st, 2023 the board approved an increase of 3,116,351. The 2020 Plan authorizes the use of stock options, shares of restricted stock, and restricted stock units, among other forms of equity based awards.

 

On May 1, 2023, stock options to purchase 103,880 shares of Common Stock were granted at an exercise price of $1.66 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $1.66, option exercise price of $1.66, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 3.64%, expected annual volatility of 121.70%, and annual rate of dividends of $0.

 

On November 1, 2023, stock options to purchase 914,129 shares of Common Stock were granted at an exercise price of $1.66 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $1.66, option exercise price of $1.66, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.67%, expected annual volatility of 144.94%, and annual rate of dividends of $0.

 

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On February 1, 2024, stock options to purchase 311,636 shares of Common Stock were granted at an exercise price of $1.66 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $1.66, option exercise price of $1.66, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.20%, expected annual volatility of 95.85%, and annual rate of dividends of $0.

 

As of March 31, 2024 stock options to purchase 695,035 shares of Common Stock were vested, the weighted average exercise price is $1.46, the aggregate intrinsic value is $0.00, and the weighted average remaining contractual term is 5.55 years. Invizyne stock-based compensation were $142,810 and $54,126 for the years ended March 31, 2024 and 2023. As of March 31, 2024, the unrecognized stock-based compensation is $2,145,319.

 

A summary of stock option activity during the three months ended March 31, 2024 and 2023 is presented below:

 

   Number of Shares  

Weighted Average

Exercise Price

   Weighted
Average
Remaining
Contractual Life
(in Years)		 
Stock options outstanding at January 1, 2023   1,067,356   $1.22    4.83 
Granted   -    -    - 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at March 31, 2023   1,067,356   $1.22    4.83 
Granted   1,018,012    1.66    7.00 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at December 31, 2023   2,085,368   $1.43    5.47 
Granted   311,636    1.66    7.00 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at March 31, 2024   2,397,004    1.46    5.55 
                
Stock options exercisable at March 31, 2023   462,518   $1.22    4.83 
Stock options exercisable at March 31, 2024   695,035   $1.46    5.55 

 

On March 28, 2022, Invizyne granted 232,689 restricted stock units (“RSUs”) at a value of $1.22 per share. These RSUs were issued in 2021 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up subsequent to an initial public offering of the Company, or upon the change of control of the Company by Invizyne, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period subsequent to an initial public offering, or upon the change of control of Invizyne. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $788,705.

 

On May 1, 2023, Invizyne granted 97,050 restricted stock units (“RSUs”) at a value of $1.66 per share. These RSUs were issued in 2023 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up subsequent to an initial public offering of the Company, or upon the change of control of the Company by Invizyne, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period subsequent to an initial public offering, or upon the change of control of Invizyne. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $333,852.

 

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6. Earnings Per Share

 

The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because warrants outstanding were anti-dilutive, for a total of 35,144 shares.

 

Earnings (loss) per share is presented below for the three months ended March 31, 2024 and 2023, respectively.

 

Basic and fully diluted earnings (loss) per share is calculated at follows for the three-months ended March 31, 2024 and 2023:

 

                     
   For the Three Months Ended 
   March 31, 2024   March 31, 2023 
   Class A common shares   Class B common shares   Class A common shares   Class B common shares 
Net loss attributable to MDB Capital Holdings, LLC  $(3,334,431)  $(3,881,084)  $(645,700)  $(1,228,048)
                     
Weighted average shares outstanding – basic and diluted   4,295,632    5,000,000    2,628,966    5,000,000 
                     
Net loss per share – basic and diluted  $(0.78)  $(0.78)  $(0.25)  $(0.25)

 

Class A common shares and Class B common stock are equal for ownership, Class B shares have five times the voting rights of Class A shares and Class B shares can be exchanged on a one-to-one basis for purposes of sale.

 

22
 

 

7. Related Party Transactions

 

The principal members of the Company have a controlling interest in MDB Capital, S.A., a company organized and based in Nicaragua that provides outsourced services to the Company and other non-related entities. During the three months ended March 31, 2024 and 2023, the Company paid $320,792 and $301,702, respectively, which is inclusive of expenses and fees, for contracted labor, recorded against general and administrative expenses.

 

During the three-months ended March 31, 2024, PatentVest, a 100% entity owned by MDB Capital Holdings, LLC, engaged in transactions with ENDRA Life Sciences Inc, a company for which two of our executive officers serve as board members, being Anthony DiGiandomenico, our Chief of Transactions, and Lou Basenese, President of Public Ventures. For the year ended December 31, 2023, there were no revenue recognized between MDB Capital entities and ENDRA. However, costs incurred amounting to $80,995 related to transactions with ENDRA have been deferred.

 

8. Commitments and Contingencies

 

Legal Claims

 

The Company may be subject to legal claims and actions from time to time as part of its business activities. As of March 31, 2024 and 2023, the Company was not subject to any pending or threatened legal claims or actions.

 

External Risks Associated with the Company’s Business Activities

 

Net Capital Requirement (Public Ventures)

 

Public Ventures is subject to the uniform net capital rule (SEC Rule 15c3-1) of the Securities and Exchange Commission (the “SEC”), which requires both the maintenance of minimum net capital and the maintenance of maximum ratio of aggregate indebtedness to net capital. At March 31, 2024 and 2023, Public Ventures had net capital of $6,285,959 and $2,534,695, respectively, which was $6,035,959 and $2,284,695 in excess of the minimum $250,000, as required by the Securities and Exchange Commission Rule 15c3-1.

 

At March 31, 2024, the Company’s ratio of aggregate indebtedness of $6,175,623 to net capital was 0.98 to 1, as compared to the maximum of a 15 to 1 allowable ratio of a broker dealer. Minimum net capital is based upon the greater of the statutory minimum net capital of $250,000 or 2% of customer debts, which was calculated as $0 at March 31, 2024.

 

The requirement to comply with the Uniform Net Capital Rule 15c3-1 may limit Public Ventures’ ability to issue dividends to its parent company.

 

Indemnification Provisions

 

Public Ventures has agreed to indemnify its clearing broker for losses that the clearing broker may sustain from the accounts of customers. Should a customer not fulfill its obligation on a transaction, Public Ventures may be required to buy or sell securities at prevailing market prices in the future on behalf of its customer. The indemnification obligations of Public Ventures to its clearing broker have no maximum amount. All unsettled trades at March 31, 2024 and 2023 have subsequently settled with no resulting material liability to Public Ventures, LLC. For the three-months ended March 31, 2024 and 2023, Public Ventures had no material loss due to counterparty failure and had no obligations outstanding under the indemnification arrangement as of March 31, 2024 and 2023.

 

23
 

 

Invizyne Funding Requirements

 

The Company entered into a funding agreement (the “Funding Agreement”) on April 17, 2019 to purchase shares in Invizyne up to a maximum of $5,000,000 at a pre-determined purchase price, subject to continuing financial covenants being met. The Funding Agreement was completed in July 2022. Under the Funding Agreement the Company was issued warrants to purchase 197,628 shares of Invizyne common stock, which are fully vested These warrants are eliminated in consolidation.

 

9. Employee Benefit Plans

 

MDB Management and Invizyne both sponsored individual 401(k) defined contribution plans for the benefit of each company’s eligible employees. The plans allow eligible employees to contribute a portion of their annual compensation, not to exceed annual limits established by the Department of Treasury. Invizyne makes matching contributions for participating employees up to a certain percentage of the employee contributions; matching contributions were funded for the three-months ended March 31, 2024 and 2023. Benefits under the Invizyne plan were available to all employees, and employees become fully vested in the employer contribution upon receipt. For the three-months ended March 31, 2024 and 2023, a total of $189,365 and $163,027, respectively, was contributed to the plans. The majority of the expense was included in general and administrative cost, however for any research and development employees their portion of the expense is recorded in research and development costs.

 

MDB Management and Invizyne also provide health and related benefit plans for eligible employees.

 

10. Exclusive License Agreement (Invizyne)

 

On April 19, 2019, Invizyne entered into a license agreement (the “License Agreement”) with The Regents of the University of California (“The Regents”) for patent rights and associated technology relating to the biosynthetic platform being developed by the Company. Certain individuals named as inventors of the Patent are also the founding stockholders of Invizyne. One of the founders of Invizyne was the head of the laboratory which was used in the research development of the patents and associated technology subject to the agreement with The Regents.

 

Under the License Agreement, Invizyne holds an exclusive license of the patent rights and a non-exclusive license for the associated technology to make, have made, use, have used, sell, have sold, offer for sale, and import licensed products in the field of use. Under the License Agreement, Invizyne paid an initial license fee and is to pay an annual license fee and royalties on net sales, a minimum annual royalty that is credited against the royalties on net sales, and a percentage of any sublicensing income. The net income royalty commences after the first commercial sale of a licensed product. At March 31, 2024 and 2023, there were no accrued royalties recorded.

 

Under the License Agreement, Invizyne is required to achieve certain development milestones. Invizyne is obligated to make payments upon achievement of certain sales thresholds, as defined in the License Agreement.

 

As of March 31, 2024 and 2023, the development milestones have been met.

 

The following net sales milestone payments have not yet been incurred. The net sales milestones do not have a deadline and are listed below as of March 31, 2024.

 

  ● A payment of $250,000 when a licensed product reaches $1,000,000 in cumulative net sales.
  ● A payment of $350,000 when a second licensed product reaches $ 2,000,000 in cumulative net sales.

  

If Invizyne breaches the terms of the License Agreement, The Regents may terminate the License Agreement.

 

Invizyne may terminate the License Agreement, in whole or in part as to a particular patent right, at any time by providing notice of termination to The Regents as defined in the License Agreement.

 

Under the License Agreement, the Company issued 499,377 shares of common stock equity representing four percent of its shares as initial consideration. The Company agreed to issue additional shares of common stock to The Regents so that The Regents own no less than four percent of all outstanding common shares of the Company until the Company has received an aggregate amount of $5,000,000 from the sale of equity securities. The Company received equity funding of $5,000,000 as of June 2022. As such, the non-dilution provision of the License Agreement was fulfilled and no additional common shares will be issued.

 

24
 

 

11. Leases

 

For operating leases, the Company records a right-of-use assets and corresponding lease liabilities in the unaudited condensed consolidated balance sheets for all leases with terms longer than twelve months. The Company has three operating leases, with no variable lease costs, and no finance leases as of March 31, 2024. The Company has three operating leases, with no variable lease costs, and no finance leases and December 31, 2023.

 

In October 2023, Invizyne made changes to an existing lease agreement that was originally entered into in August 2021, which resulted in an extension of the lease term by an additional 14 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in August 2021, with a term of 60 months beginning on August 24, 2021 and ending on September 30, 2026, with an option to extend for 60 additional months and was further modified on April 3, 2023 for an additional 21 months with the lease ending date of April 30, 2028. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $14,371 per month. The lease provides for annual increases. The base rent for the lease in the final year is $16,747 per month. Additionally, Invizyne is responsible for annual operating cost increases of 2.5%, which are included in the rent.

 

Furthermore, in October 2023, Invizyne made changes to a second existing lease agreement that was originally entered into in April 2023, which resulted in an extension of the lease term by an additional 12 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in April 2023, with a term of 60 months beginning on July 1, 2023 and ending on June 30, 2028, with an option to extend for 60 additional months. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $13,277per month. The lease provides for annual increases. The base rent for the lease in the final year is $15,391per month. Additionally, Invizyne is responsible for annual operating cost increases of 3.0%, which are included in the rent.

 

On July 1, 2022 the Company executed a lease for new office space in the Dallas, Texas metropolitan area, the expected occupancy of the space is December 20, 2022. The lease with a term of 91 months set to begin once we take control of the space, which is estimated for December 16, 2022 and ending on July 20, 2030, without an option to extend. The initial base rent was $12,556 per month, after 7 months of free rent. The lease provides for annual increases. The base rent for the lease in the final year is $13,937 per month.

 

25
 

 

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.

  

  

March 31, 2024

  

December 31, 2023

 
         
Operating leases:          
Right-of-use assets  $2,235,559   $2,320,119 
Operating lease liabilities  $2,339,955   $2,415,889 
           
Weighted average remaining lease term in years   5.27    5.33 
Weighted average discount rate   7.66%   7.40%
           
Cash paid for amounts included in the measurement of lease liabilities  $121,688   $206,837 
Right-of-use assets obtained in exchange for lease liabilities  $-   $1,018,002 
           
Operating lease cost  $45,754   $146,836 
Short-term lease costs   84,560    275,589 
Total operating lease costs  $130,314   $422,425 

 

Future payments due under operating leases as of March 31, 2024 are as follows:

  

Year  Amount 
Remainder of 2024  $369,936 
2025   503,684 
2026   516,001 
2027   528,586 
2028   541,674 
Thereafter   451,600 
Total  $2,911,481 
Less effects of discounting   (571,526)
Total operating lease liabilities  $2,339,955 

 

12. Income Taxes

 

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest, and Invizyne are Subchapter C-corporations subject to federal and state income taxes.

 

Amounts recognized as income taxes are included in “income tax expense” on the statements of operations. The Company recognized no income tax expense for the three months ended March 31, 2024, and March 31, 2023, because of a full valuation allowance recorded against the Company’s net deferred tax assets.

 

The Company’s federal and state statutory tax rate net of the federal tax benefit was approximately 27% for the three months ended March 31, 2024, and March 31 2023.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At the end of 2023, the Company’s corporate earnings were in a cumulative loss position. Based on the cumulative losses and projections of future taxable income for the periods in which the deferred tax assets are deductible, the Company recorded a valuation allowance against all its net deferred tax assets as of March 31, 2024, and March 31, 2023. The Company intends to maintain a full valuation allowance on its net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The amount of deferred tax assets considered realizable could materially increase in the future, and the amount of valuation allowance recorded could materially decrease if estimates of future taxable income are increased.

 

13. Subsequent Events

 

There were no subsequent events for the three months ended March 31, 2024

 

26
 

 

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

 

Overview

 

MDB Capital Holdings, LLC (the “Company” or “MDB”), a Delaware limited liability company, is a holding company that has three wholly-owned subsidiaries: MDB CG Management Company (“MDB Management”); Public Ventures, LLC (“Public Ventures”); and PatentVest, Inc. (“PatentVest”), and has a majority-owned partner company, Invizyne Technologies, Inc. (“Invizyne”).

 

MDB Management is principally an “administrative” entity whose purpose is to conduct, and wherever possible, to consolidate shared services/resources, for our US-based operations.

 

Public Ventures is a U.S. registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority (“FINRA”), the Depository Trust Company (“DTC”), and the National Securities Clearing Corporation (“NSCC”). Public Ventures is dual clearing, operating as a self-clearing firm and carrying accounts for its customers, and on a fully disclosed basis with a nonrelated FINRA member firm, Interactive Brokers, LLC (“Interactive Brokers”). Interactive Brokers serves as custodian of certain investments maintained by Public Ventures.

 

PatentVest is a wholly-owned subsidiary that performs intellectual property validation services for Public Ventures’ due diligence functions on the intellectual property of partner and prospective partner companies and creates an intellectual property roadmap for such partner companies.

 

Invizyne was formed with the objective of taking nature’s building blocks to make molecules of interest, effectively simplifying nature. Invizyne is a biology technology development company that is a majority-owned subsidiary. Invizyne’s technology is a differentiated and unique synthetic biology platform which is designed to enable the scalable exploration of a large number of molecules and properties found in nature.

 

Prior to January 14, 2022, Public Ventures owned majority interests in PatentVest and Invizyne. On January 14, 2022, Public Ventures distributed 100% of its equity interests in PatentVest and Invizyne to its members in proportion to their respective interests. On January 15, 2022, Public Ventures filed with the Internal Revenue Service to be treated as a corporation for federal income tax purposes. On January 16, 2022, the members of Public Ventures contributed their entire interests in the equity of Public Ventures, Invizyne and PatentVest to MDB, as result of which MDB became the new parent holding company. There was no effective change in the beneficial ownership of Public Ventures as a result of this transaction. On the same day as part of the reorganization, MDB established a management company subsidiary, MDB Management. These reorganization steps are collectively referred to as the “reorganization. In connection with the reorganization, 5,000,000 Class B Common Shares were issued in exchange for the members’ equity.

 

The reorganization was completed between entities that were under common control, and the assets contributed and liabilities assumed are recorded based on their historical carrying values. These financial statements retroactively reflect the financial statements of the Company and Public Ventures on an unaudited condensed consolidated basis for the periods presented.

 

On June 8, 2022, MDB completed the first closing of a private placement, consisting of the sale of 2,517,966 shares of Class A Common Shares at $10.00 per share, for gross proceeds of $25,179,660. On June 15, 2022, the Company completed the second closing of the private placement, consisting of the sale of an additional 11,000 shares of Class A Common Shares, for gross proceeds of $110,000. Accordingly, the Company received total gross proceeds of $25,289,660 from the sale of 2,528,966 shares of Class A Common Shares, or $24,746,142 net of $343,518 of offering expenses, which will be used for development of the current partner companies, identifying and developing new partner companies, and general corporate and working capital requirements. In conjunction with the private placement, the Company issued warrants to the placement agent to purchase 18,477 shares of Class A Common Shares, exercisable upon issuance for a period of 10 years at $13.00 per share, for a cash consideration of $0.001/share. The placement agent’s warrants had a fair value of $106,940, as calculated pursuant to the Black-Scholes option-pricing model and were accounted for as issuance costs that were recorded against paid in capital and paid in capital for the warrants issued.

 

27
 

 

Results of Operations

 

The Company has determined its reporting units in accordance with ASC (Accounting Standards Codification) 280, Segment Reporting. The Company currently operates in two reportable segments: (i) the broker dealer and intellectual property service segment and (ii) the technology development segment.

 

The Company’s unaudited condensed consolidated statements of operations as discussed herein are presented below.

 

Unaudited Condensed Consolidated Results of Operations for the Three Months Ended March 31, 2024 and 2023

 

   2024   2023   $ Change   % Change       
Operating income (loss):                    
Unrealized gain (loss) on investment securities, net (from our licensed broker dealer)  $(747,268)  $54,779   $(802,047)   (1,464.2)%
Other operating income   86,879    62,212    24,667    39.6%
Total operating income (loss), net   (660,389)   116,991    (777,380)   (664.5)%
                     
Operating costs:                    
General and administrative costs:                    
Compensation   4,892,675    872,027    4,020,648    461.1%
Operating expense, related party   320,292    301,702    18,590    6.2%
Professional fees   919,089    604,662    314,427    52.0%
Information technology   205,991    147,407    58,854    39.7%
Clearing and other charges   2,036    10,754    (8,718)   (81.1)%
General and administrative-other   669,126    304,079    365,047    120.1%
Total general and administrative costs   7,009,209    2,240,631    4,768,578    212.8%
Research and development costs, net of grants amounting to $708,700 and $793,540   277,582    31,592    245,990    778.6%
Total operating costs   7,286,791    2,272,223    5,014,568    220.7%
Net operating loss   (7,947,180)   (2,155,232)   (5,791,948)   268.7%
Other income:                    
Interest income   337,852    187,291    150,561,    80.4%
Loss before income taxes   (7,609,328)   (1,967,941)   (5,641,387)   (268.7)%
Income taxes   -    -    -    0.0%
Net loss   (7,609,328)   (1,967,941)   (5,641,387)   (286.7)%
Less net loss attributable to non-controlling interests   (393,903)   (94,193)   (299,710)   (318.2)%
Net loss attributable to MDB Capital Holdings, LLC  $(7,215,425)  $(1,873,748)  $(5,341,677)   (285.1)%

 

Operating Income. For the three-month periods ending March 31, 2024, and 2023, the Company incurred operating losses primarily due to unrealized losses in the broker-dealer and intellectual property service segments. These losses were partially offset by other income generated from operational fees within the same segments.

 

28
 

 

General and Administrative Costs. During the three-month period ended March 31, 2024, and 2023, respectively, several factors contributed to changes in various expense categories:

 

  ● Compensation Expense: The majority of the increase in compensation expense was due to the recognition of restricted stock options, as well as the ongoing recruitment of additional employees in the latter half of 2023, specifically within the technology segment, to support expected operational growth.
  ● Related Party Operating Expenses: There was a slight rise in related party operating expenses due to outsourcing support services in anticipation of upcoming self-clearing operations within the broker-dealer and intellectual property service segments for 2024.
  ● Professional Fees: For the three-month period ending March 31, 2024, professional fees saw an increase from previous periods, driven by higher costs in legal, tax, audit, and consulting services. This rise in expenses was primarily linked to the audit fees, tax return preparations, and K-1s associated with fiscal year 2023 reporting, along with initiation of the self-clearing operations.
  ● Information Technology Costs: For the three-month period ending March 31, 2024, information technology costs saw an increase from previous periods, driven by higher costs in with initiation of the self-clearing operations.
  ● Clearing and Other Charges: The reduction in costs for the three-month period ending March 31, 2024, was negligible compared to the same period in the previous year.
  ● Other General and Administrative Costs: The primary driver of the increase in other general and administrative costs were the issuance of restricted stock options to the board of directors, as well as higher rent expenses in the technology segment compared to the previous period.

 

Research and Development Costs. The research and development costs were derived from the Company’s technology development segment. For the three-month period ended March 31, 2024 there was an increase in research and development costs that was due to a decrease of grant funding. It is important to note that the upswing in grant funding was not linked to any specific event and is expected to fluctuate throughout the year.

 

Other Income. For the three-month period ended March 31, 2024, the increase in other income was the result of interest generated on U.S. Treasury Bill interest from capital raised from the initial public offering.

 

Broker Dealer and Intellectual Property Service Segment (Public Ventures and PatentVest) Results of Operations for the Three Months Ended March 31, 2024 and 2023

 

   2024   2023   $ Change   % Change      
Operating income (loss):                    
Unrealized gain (loss) on investment securities, net (from our licensed broker dealer)  $(747,268)  $54,779   $(802,047)   (1,464.2)%
Other operating income   86,879    3,053    83,826    2,745.7%
Total operating income (loss), net   (660,389)   57,832    (718,221)   (1,241.9)%
                     
Operating costs:                    
General and administrative costs:                    
Compensation   679,907    546,801    133,106    24.3%
Operating expense, related party   243,876    258,453    (14,577)   (5.6)%
Professional fees   145,907    165,812    (19,905)   (12.0)%
Information technology   180,914    121,876    59,038    48.4%
Clearing and other charges   2,036    10,754    (8,718)   (81.1)%
General and administrative-other   218,936    108,993    109,943    100.9%
Total General and administrative costs   1,471,576    1,212,689    258,887    21.3%
Research and development costs   -    -    -    - 
Total operating costs   1,471,576    1,212,689    258,887    21.3%
Net operating loss   (2,131,965)   (1,154,857)   (977,108)   (84.6)%
Other income:                    
Less: interest expense   110,625    -    110,625    100.0%
Interest income   52,459    28,362    24,097    85.0%
Loss before income taxes   (2,190,131)   (1,126,495)   (1,063,636)   (94.4)%
Income taxes   -    -    -    0.0%
Net income (loss)  $(22,190,131)  $(1,126,495)  $(1,063,636)   (94.4)%

 

29
 

 

Operating Income. For the three-month periods ending March 31, 2024, and 2023, the Company incurred operating losses primarily due to unrealized losses in the broker-dealer and intellectual property service segments. These losses were partially offset by other income generated from operational fees within the same segments.

 

General and Administrative Costs. During the three-month periods ended March 31, 2024, and 2023, respectively, several factors contributed to changes in various expense categories:

 

  ● Compensation Expense: The increase in compensation expense was driven by an increase in salaries in the in the latter half of 2023.
  ● Related Party Operating Expenses: There was a decrease in related party operating expenses as outsourcing support was reallocated to other areas within the broker-dealer and intellectual property service segment.
  ● Professional Fees: For the three-month period ending March 31, 2024, there was a decrease in professional fees compared to the previous period, primarily due to reduced legal, tax, and audit fees. However, this reduction was offset by an increase in consulting fees associated with the implementation of self-clearing operations.
  ● Information Technology Costs: For the three-month period ending March 31, 2024, information technology costs saw an increase from previous periods, driven by higher costs with the initiation of the self-clearing operations.
  ● Clearing and Other Charges: The reduction in costs for the three-month period ending March 31, 2024, was negligible compared to the same period in the previous year.
  ● Other General and Administrative Costs: The rise in other general and administrative costs was due to higher expenses in advertising and promotions, along with increased spending on travel and conferences.

 

Other Income. The rise in other income for the three-month periods ending March 31, 2024, can be attributed to the growth in bank interest income, stemming from an increase in the cash balance.

 

Technology Development Segment (Invizyne) Results of Operations for the Three Months Ended March 31, 2024 and 2023

 

   2024   2023   $ Change   % Change       
Total operating income  $-   $59,159   $(59,159)   (100.0)%
                     
Operating costs:                    
General and administrative costs:                    
Compensation   390,043    31,536    358,507    1,136.8%
Professional fees   256,563    181,707    74,856    41.2%
Information technology   3,891    9,826    (5,935)   (60.4)%
General and administrative-other   80,378    45,734    34,644    75.8%
Total general and administrative costs   730,875    268,803    462,072    171.9%
Research and development costs, net of grants amounting to $708,700 and $793,540   277,582    31,592    245,990    778.6%
Total operating costs   1,008,457    300,395    708,062    235.7%
Net operating loss   (1,008,457)   (241,236)   (767,211)   (318.0)%
Other income:                    
Interest income   -    86    (86)   (100.0)%
Loss before income taxes   (1,008,457)   (241,150)   (767,307)   (318.2)%
Income taxes   -    -    -    - 
Net loss   (1,008,457)   (241,150)   (767,307)   (318.2)%
Less net loss attributable to non-controlling interests   (393,903)   (94,193)   (299,710)   (318.2)%
Net loss attributable to controlling interests  $(614,554)  $(146,957)  $(467,597)   (318.2)%

 

Operating Income. For the three-month period ending March 31, 2024, the decline in operating income was primarily due to a feasibility study conducted in the previous period.

 

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General and Administrative Costs. During the three-month periods ended March 31, 2024, and 2023, respectively, several factors contributed to changes in various expense categories:

 

  ● Compensation Expense: The increase in compensation expense during the three-month period ending March 31, 2024, stemmed from the recruitment of additional administrative staff, who are not covered by grants, in the latter half of 2023.
  ● Professional Fees: The increase in professional fees compared to previous periods was due to higher legal, tax, audit, and consulting costs associated with completing year-end financial audits and preparing for the initial public offering.
  ● Information Technology Costs: The reduction in costs for the three-month period ending March 31, 2024, was negligible compared to the same period in the previous year.
  ● Other General and Administrative Costs: The increase in other general and administrative costs was due to the acquisition of new leased laboratory space in the third quarter of 2023.

 

Research and Development Costs. The research and development costs were derived from the Company’s technology development segment. For the three-month period ended March 31, 2024 there was an increase in research and development costs that was due to a decrease of grant funding. It is important to note that the upswing in grant funding was not linked to any specific event and is expected to fluctuate throughout the year.

 

Condensed Consolidated Balance Sheets March 31, 2024 and December 31, 2023

 

  

March 31,
2024

(unaudited)

   December 31,
2023		   $ Change   % Change       
ASSETS                    
Cash and cash equivalents  $5,492,612   $6,109,806   $(617,194)   (10.1)%
Cash segregated in compliance with regulations   2,959,994    1,247,881    1,712,113    137.2%
Grants receivable   1,111,611    882,319    229,292    26.0%
Clearing deposits   703,740    260,000    443,740    170.7%
Prepaid expenses and other current assets   494,463    523,788    (29,325)   (5.6)%
Investment securities, at amortized cost (U.S. Treasury Bills)   21,381,362    24,658,611    (3,277,249)   (13.3)%
Investment securities, at fair value (held by our licensed broker dealer)   4,999,237    5,771,634    (772,397)   (13.4)%
Investment securities, at cost less impairment   200,000    200,000    -    0.0%
Deferred offering cost   266,945    69,303    197,642    285.2%
Deferred costs related to deferred revenue   147,503    75,328    72,175    95.8%
Property and equipment, net   946,850    866,490    80,360    9.3%
Operating lease right-of-use assets, net   2,235,559    2,320,119    (84,560)   (3.6)%
Total assets  $40,939,876   $42,985,279   $(2,045,403)   (4.8)%
                     
LIABILITIES AND EQUITY                    
Accounts payable  $916,782   $578,214   $338,568    58.6%
Accrued expenses   515,853    1,105,078    (589,225)   (53.3)%
Payables to non-customers   2,277,200    1,405,293    871,907    62.0%
Payables to customers   1,212,595    -    1,212,595    100.0%
Deferred grant reimbursement   133,909    140,703    (6,794)   (4.8)%
Deferred revenue   20,000    20,000    -    0.0%
Operating lease liabilities   2,339,955    2,415,889    (75,934)   (3.1)%
Total liabilities   7,416,294    5,665,177    1,751,117    30.9%
Equity:                    
Paid-in-capital   53,075,777    49,405,779    3,669,998    7.4%
Accumulated deficit   (19,308,352)   (12,092,927)   (7,215,425)   (59.7)%
Total MDB Capital Holdings, LLC Members’ equity   33,767,425    37,312,852    (3,545,427)   (9.5)%
Non-controlling interest   (243,843)   7,250    (251,093)   (3,463.4)%
Total equity   33,523,582    37,320,102    (3,796,520)   (10.2)%
Total liabilities and equity  $40,939,876   $42,985,279   $(2,045,403)   (4.8)%

 

31
 

 

Financial Condition: Overall, the reduction in assets was primarily attributed to their utilization for operational activities during the period. The rise in cash segregated in compliance with regulations stemmed from customer deposits. The decline in investment securities at amortized cost occurred because U.S. Treasury bills were sold to provide liquidity for operating expenses. Similarly, the drop in investment securities at fair value was due to a decrease in the value of common stock and warrants over the period. Prepaid expenses remained stable compared to the previous period. There was an increase in grants receivable, which was influenced by the timing of the collection of grant funds from the previous period. The growth in deferred offering costs was associated with expenses related to Invizyne’s IPO. Finally, the reduction in the right-of-use asset was due to its regular utilization.

 

The increase in accounts payable was primarily driven by payments for audit and legal services associated with audits and legal matters related to the IPO of Invizyne. The decrease in accrued expenses resulted from the settlement of bonus liabilities that were accrued in the fourth quarter of 2023. Additionally, the rise in payables to customers and non-customers stemmed from increased activity in the self-clearing operations of the broker-dealer. Deferred grant reimbursements remained consistent with the previous period. Finally, the reduction in lease liability was due to its routine utilization.

 

The increase in equity was primarily due to the Company’s IPO, which closed on September 20, 2023. This increase was partly offset by net losses from previous periods.

 

The decrease in non-controlling interest resulted from the net loss experienced by Invizyne.

 

Liquidity and Capital Resources – March 31, 2024 and 2023

 

The Company’s unaudited condensed consolidated statements of cash flows as discussed herein are presented below.

 

   Three Months Ended March 31, 
   2024   2023 
         
Net cash used in operating activities  $(2,259,097)  $(1,154,192)
Net cash provided by (used in) investing activities   3,445,523    (55,317)
Net cash provided by financing activities   (91,507)   (272,322)
Net increase in cash and cash equivalents  $1,094,919   $(1,481,831)

 

At March 31, 2024, the Company had $27,284,367 of working capital. This is an increase of $7,511,642, from the working capital of $19,772,725 that the Company had at March 31, 2023. The increase in working capital is primarily attributed to the funds received from the initial public offering in 2023, which was offset by the use of cash to fund operations for the three months ended on March 31, 2024. Additionally, as of March 31, 2024 and 2023, respectively, the Company had $21,381,362 of cash and $16,347,720 of short-term U.S. Treasury bills available to fund its operations.

 

Operating Activities. For the three months ending on March 31, 2024, there was an increase in the net loss compared to Q1 2023. Additionally, there was accretion of investments at amortized costs (U.S. Treasury Bills) and the acquisition of investment securities. However, this decrease in cash was partly offset by an increase in accounts payable, grants receivable for the technology segment. Furthermore, clearing deposits, payables to customers, and payables were non-customers all increased due to the implementation of the self-clearing operations. There was a decrease in the accrued expenses due to bonuses being paid in Q1 of 2024.

 

For the three months ended March 31, 2023, operating activities use of cash represented a combination of increased activity in Invizyne, increased professional and consulting fees related to year end audits and issuance of the tax preparation fees related to the publicly traded partnership.

 

32
 

 

Investing Activities. For the three months ended March 31, 2024, investing activities consisted of the proceeds from the sale and the maturing of U.S. Treasury Bills and purchases of investment securities, which was offset by the reinvestment of the proceeds into new U.S. Treasury Bills and the transfer of cash for operating activities.

 

For three months ended March 31, 2023 investing activities was minimal during this period.

 

Financing Activities. For the three months ended March 31, 2024, financing activities consisted of costs related to the deferred costs of the IPO of Invizyne.

 

For the three months ended March 31, 2023 financing costs were for the preparation of the initial public offering incurred during the period.

 

Recently Issued Accounting Pronouncements

 

See Note 2 in the unaudited condensed consolidated financial statements for the discussion on recently accounting pronouncements.

 

Critical Accounting Estimates

 

The preparation of financial statements in conformity with general accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have identified certain accounting policies as being critical because they require us to make difficult, subjective, or complex judgments about matters that are uncertain. We believe that the judgment, estimates, and assumptions used in the preparation of our unaudited condensed consolidated financial statements and unaudited condensed consolidated financial statements are appropriate given the factual circumstances at the time. However, actual results could differ, and the use of other assumptions or estimates could result in material differences in our results of operations or financial condition. Our critical accounting estimates are:

 

Revenue recognition – Investment Banking and Warrants Valuation

 

The Company receives income from equity underwriting fees. As an underwriter, the Company helps clients raise capital via the private placement of various types of equity instruments. Underwriting fees are primarily based on the issuance price and quantity of the underlying instruments and are recognized as revenue typically upon execution of the client’s transaction. The Company generally does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions. If the Company did have any contract assets or liabilities related to these revenues it would be recorded on the unaudited condensed consolidated balance sheets.

 

Revenue recognition may involve the bundling of investment banking services with other financial instruments. In such cases, we estimate the fair value of the services provided and allocate the revenue accordingly. This estimation process involves significant judgment and sensitivity to market conditions. Additionally, our investment banking activities may include the compensation for our services in warrants granted to us. The valuation of these warrants requires significant estimates, including the use of option pricing models like the Black-Scholes model. The key assumptions in this valuation process include the stock price on the date of valuation, the exercise price of the warrant, the term to expiry, risk-free interest rate, and the expected volatility of the underlying stock.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

 

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

 

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

33
 

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

The fair value of U.S. Treasury Bills and public equity securities are based on quoted market prices and are classified as level 1 of the fair value hierarchy. The fair value of public equity securities that are not actively traded is based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data and are classified as level 2 of the fair value hierarchy. The fair value of warrants is based on a Black-Scholes model, which considers the stock price at the date of the valuation, the warrant strike price, the term to expiry, the risk-free rate of return, and the expected volatility of the underlying stock. The level in the fair value hierarchy for warrants depends primarily on whether the stock price is determinable from active trades, and whether the expected volatility of the underlying stock is observable and are either classified as level 2 or level 3. The fair value of non-public equity securities and simple agreements for future equity is based on the initial investment, less impairment, and they are classified as level 3 in the fair value hierarchy. For the significant unobservable inputs and assumptions used in level 3 fair value measurements, see Fair Value of Financial Instruments section of Note 2: Summary of Significant Accounting Policies.

 

Accounting for Research Grants

 

Invizyne receives grant reimbursements, which are netted against research and development expenses in the unaudited condensed consolidated statement of operations. Grant reimbursements for capitalized assets are recognized over the useful life of the assets, with the unrecognized portion considered a deferred liability and are included in accounts payable and accrued expenses in the unaudited condensed consolidated balance sheet.

 

Grants that operate on a reimbursement basis are recognized on the accrual basis are revenues to extent of disbursements and commitments that are allowable for reimbursement of allowable expenses incurred as of March 31, 2024 and 2023 and expected to be received from funding sources in the subsequent year. Management considers such receivables at March 31, 2024 and 2023 to be fully collectable, due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for grants receivable was recorded in the accompanying unaudited condensed consolidated financial statements.

 

Research grants received from organizations are subject to the contract agreement as to how Invizyne conducts its research activities, and Invizyne is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. Invizyne is permitted to draw down (a process of submitting expenses for reimbursement) the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the Company’s unaudited condensed consolidated statement of operations.

 

Summary of Business Activities and Plans

 

On September 20, 2023, the Company completed an initial public offering (IPO), which consisted of the sale of 1,666,666 shares of Class A common shares at $12.00 per share, for gross proceeds of $19,999,992 that will be used for the development of Invizyne, identifying and developing new partner companies, and general corporate and working capital requirements.

 

On June 15, 2022, the Company completed the first closing of a private placement, consisting of total gross proceeds of $25,289,660 from the sale of 2,528,966 shares of Class A common shares, which have been and will continue to be used for the development of Invizyne, identifying and developing new partner companies, and general corporate and working capital requirements.

 

34
 

 

External Risks Associated with the Company’s Business Activities

 

Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.

 

Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities.

 

Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Although unclear at this time an economic recession would likely impact the general business environment and the capital markets, which could, in turn, if there is a recession, such an event could affect the Company.

 

The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.

 

Technology. Our partner companies’ endeavors to create and bring new technologies to the market may never come to fruition or might not reach a level of development sufficient for commercial viability. Even if they do achieve a commercial level of development, the acceptance of these technologies within the marketplace is uncertain. There’s a possibility that the technologies they develop may not gain widespread or timely acceptance, leading to the necessity for further funding to support the partner companies, or potentially even prompting the difficult choice of discontinuing the business at a financial loss. Moreover, technologies from our partner companies that undergo regulatory scrutiny, testing, and approval may ultimately fail to receive the necessary approvals from relevant regulatory bodies.

 

Principal Commitments

 

Net Capital Requirement (Public Ventures)

 

Public Ventures is subject to the uniform net capital rule (SEC Rule 15c3-1) of the Securities and Exchange Commission (the “SEC”), which requires both the maintenance of minimum net capital and the maintenance of maximum ratio of aggregate indebtedness to net capital. At March 31, 2024 and 2023, Public Ventures had net capital of $6,285,959 and $2,534,695, respectively, which was $6,035,959 and $2,284,695 in excess of the minimum $250,000, as required by the Securities and Exchange Commission Rule 15c3-1.

 

At March 31, 2024, the Company’s ratio of aggregate indebtedness of $6,175,623 to net capital was 0.98 to 1, as compared to the maximum of a 15 to 1 allowable ratio of a broker dealer. Minimum net capital is based upon the greater of the statutory minimum net capital of $250,000 or 2% of customer debits, which was calculated as $0 at March 31, 2024.

 

The requirement to comply with the Uniform Net Capital Rule 15c3-1 may limit Public Ventures’ ability to issue dividends to its parent company.

 

Indemnification Provisions

 

Public Ventures has agreed to indemnify its clearing broker for losses that the clearing broker may sustain from the accounts of customers. Should a customer not fulfill its obligation on a transaction, Public Ventures may be required to buy or sell securities at prevailing market prices in the future on behalf of its customer. The indemnification obligations of Public Ventures to its clearing broker have no maximum amount. All unsettled trades at March 31, 2024 and 2023 have subsequently settled with no resulting material liability to Public Ventures. For the three months ended March 31, 2024 and 2023 Public Ventures, had no material loss due to counterparty failure and had no obligations outstanding under the indemnification arrangement as of March 31, 2024 and 2023.

 

35
 

 

Trends, Events and Uncertainties

 

Other than as discussed above, we are not currently aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on our financial condition.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to provide this information.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

The Company, with the participation of the Chief Executive Officer and Chief Accounting Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on that evaluation, and as a result of the material weaknesses in internal control over financial reporting described below, the Chief Executive Officer and Chief Accounting Officer concluded that, as of March 31, 2024, the disclosure controls and procedures were not effective at the reasonable assurance level. In light of this fact, the Company has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in the internal control over financial reporting, the unaudited condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly state, in all material respects, the financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

 

Ongoing Remediation of Previously Identified Material Weakness

 

The Company is implementing measures designed to ensure that control deficiencies contributing to the previously disclosed material weakness are remediated, such that these controls are designed, implemented, and operating effectively. These remediation actions are ongoing, and they include our expansion of our controls or control designs based on updated enhanced risk assessments. We have redesigned the financial reporting process, to remediate the previously identified material weakness. We expect these changes to materially improve our internal controls.

 

The weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Changes in Internal Control Over Financial Reporting

 

Other than the material weakness remediation efforts underway, there were no changes in the internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

 

Inherent Limitations on Effectiveness of Controls and Procedures

 

The Company’s management, including the Chief Executive Officer and Chief Accounting Officer, believes that disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that the disclosure controls and procedures or the internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

36
 

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. We believe that from time to time we will have commercial disputes arising in the ordinary course of our business.

 

Item 1A. Risk Factors

 

In addition to the information set forth in this Form 10-Q, you should also carefully review and consider the risk factors contained in our other registration statements, reports and periodic filings with the SEC that could materially and adversely affect our business, financial condition, and results of operations. The risk factors we have identified and discussed, however, do not identify all risks that we face because our business operations could also be affected by additional factors that are not known to us or that we currently consider to be immaterial to our operations.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not applicable.

 

Item 6. Exhibits

 

The documents listed in the Exhibit Index of this Form 10-Q are incorporated by reference or are filed with this Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

 

37
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MDB CAPITAL HOLDINGS, LLC
  (the “Registrant”)
     
Dated: May 13, 2024 By: /s/ Christopher A. Marlett
    Christopher A. Marlett
    Chief Executive Officer
    (Principal Executive Officer)
     
Dated: May 13, 2024 By: /s/ Jeremy W. James
    Jeremy W. James
    Chief Accounting Officer
    (Principal Financial and Accounting Officer)

 

38
 

 

EXHIBIT INDEX

 

Exhibit    
Number   Description of Exhibit
     
31.1 *   Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2 *   Certification of Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1**   Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2**   Certification of Principal Financial and Accounting, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS*   Inline XBRL Instance Document
     
101.SCH*   Inline XBRL Taxonomy Schema
     
101.CAL*   Inline XBRL Taxonomy Calculation Linkbase
     
101.DEF*   Inline XBRL Taxonomy Definition Linkbase
     
101.LAB*   Inline XBRL Taxonomy Label Linkbase
     
101.PRE*   Inline XBRL Taxonomy Presentation Linkbase
     
104*   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

* Filed herewith.
** Furnished herewith.

 

39

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Christopher A. Marlett, the Chief Executive Officer of MDB Capital Holdings, LLC, hereby certifies that:

 

1. I have reviewed this quarterly report on Form 10-Q of MDB Capital Holdings, LLC for the quarterly period ended March 31. 2024;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated May 13, 2024

 

By: /s/ Christopher A. Marlett  
 

Christopher A. Marlett

Chief Executive Officer

  

 

 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

I, Jeremy W. James, the Chief Accounting Officer of MDB Capital Holdings, LLC, hereby certifies that:

 

1. I have reviewed this quarterly report on Form 10-Q of MDB Capital Holdings, LLC for the quarterly period ended March 31, 2024;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated May 13, 2024

 

By: /s/ Jeremy W. James  
 

Jeremy W. James

Chief Accounting Officer

  

 

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “Report”) of MDB Capital Holdings, LLC (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Christopher A. Marlett, the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

    /s/ Christopher A. Marlett
  Name: Christopher A. Marlett,
    Chief Executive Officer
  Date: May 13, 2024

 

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

 

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “Report”) of MDB Capital Holdings, LLC (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Jeremy W. James, the Chief Accounting Officer of the Registrant, hereby certify, to the best of my knowledge, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

    /s/ Jeremy W. James
  Name: Jeremy W. James,
    Chief Accounting Officer
  Date: May 13, 2024

 

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

 

 

 

v3.24.1.1.u2
Cover - shares
 3 Months Ended
Mar. 31, 2024
May 13, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 2024  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-41751  
Entity Registrant Name MDB CAPITAL HOLDINGS, LLC  
Entity Central Index Key 0001934642  
Entity Tax Identification Number 87-4366624  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 14135 Midway Road  
Entity Address, Address Line Two Suite G-150  
Entity Address, City or Town Addison  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75001  
City Area Code (945)  
Local Phone Number 262-9010  
Title of 12(b) Security Class A Common Shares, representing Limited Liability Interests  
Trading Symbol MDBH  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period true  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   4,295,632
v3.24.1.1.u2
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2024
Dec. 31, 2023
 Assets    
Cash and cash equivalents $ 5,492,612 $ 6,109,806
Cash segregated in compliance with regulations 2,959,994 1,247,881
Grants receivable, includes unbilled receivables of $503,777 and $783,520 1,111,611 882,319
Clearing deposits 703,740 260,000
Prepaid expenses and other current assets 494,463 523,788
Investment securities, at amortized cost (U.S. Treasury Bills) 21,381,362 24,658,611
Investment securities, at fair value (held by our licensed broker dealer) (Note 2) 4,999,237 5,771,634
Investment securities, at cost less impairment 200,000 200,000
Deferred offering cost 266,945 69,303
Deferred costs related to deferred revenue 147,503 75,328
Property and equipment, net 946,850 866,490
Operating lease right-of-use assets, net 2,235,559 2,320,119
Total assets 40,939,876 42,985,279
LIABILITIES AND EQUITY    
Accounts payable 916,782 578,214
Accrued expenses 515,853 1,105,078
Payables to non-customers 2,374,132 1,405,293
Payables to customers 1,115,663
Deferred grant reimbursement 133,909 140,703
Deferred revenue 20,000 20,000
Operating lease liabilities 2,339,955 2,415,889
Total liabilities 7,416,294 5,665,177
Commitments and Contingencies (Note 9)
Equity:    
Preferred shares, 10,000,000 authorized shares at no par value; 0 issued and outstanding
Paid-in-capital 53,075,777 49,405,779
Accumulated deficit (19,308,352) (12,092,927)
Total MDB Capital Holdings, LLC Members’ equity 33,767,425 37,312,852
Non-controlling interest (243,843) 7,250
Total equity 33,523,582 37,320,102
Total liabilities and equity 40,939,876 42,985,279
Common Class A [Member]    
Equity:    
Common stock, value
Common Class B [Member]    
Equity:    
Common stock, value
v3.24.1.1.u2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Unbilled receivables $ 503,777 $ 783,520
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, no par value $ 0 $ 0
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common Class A [Member]    
Common stock, shares authorized 95,000,000 95,000,000
Common stock, no par value $ 0 $ 0
Common stock, shares, issued 4,295,632 4,295,632
Common stock, shares outstanding 4,295,632 4,295,632
Common Class B [Member]    
Common stock, shares authorized 5,000,000 5,000,000
Common stock, no par value $ 0 $ 0
Common stock, shares, issued 5,000,000 5,000,000
Common stock, shares outstanding 5,000,000 5,000,000
v3.24.1.1.u2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Operating income (loss):    
Unrealized gain (loss) on investment securities, net (from our licensed broker dealer) (Notes 1 and 2) $ (747,268) $ 54,779
Other operating income 86,879 62,212
Total operating income (loss), net (660,389) 116,991
General and administrative costs:    
Compensation 4,892,675 872,027
Operating expense, related party 320,292 301,702
Professional fees 919,089 604,662
Information technology 205,991 147,407
Clearing and other charges 2,036 10,754
General and administrative-other 669,126 304,079
Total general and administrative costs 7,009,209 2,240,631
Research and development costs, net of grants amounting to $708,700 and $793,540 277,582 31,592
Total operating costs 7,286,791 2,272,223
Net operating loss (7,947,180) (2,155,232)
Other income:    
Interest income 337,852 187,291
Net loss before income taxes (7,609,328) (1,967,941)
Income taxes
Net loss (7,609,328) (1,967,941)
Less net loss attributable to non-controlling interests (393,903) (94,193)
Net loss attributable to MDB Capital Holdings, LLC $ (7,215,425) $ (1,873,748)
Common Class A [Member]    
Loss per share attributable to MDB Capital Holdings, LLC:    
Net loss per common share - basic $ (0.78) $ (0.25)
Net loss per common share - diluted $ (0.78) $ (0.25)
Weighted average of common shares outstanding - basic 4,295,632 2,628,966
Weighted average of common shares outstanding - diluted 4,295,632 2,628,966
Common Class B [Member]    
Loss per share attributable to MDB Capital Holdings, LLC:    
Net loss per common share - basic $ (0.78) $ (0.25)
Net loss per common share - diluted $ (0.78) $ (0.25)
Weighted average of common shares outstanding - basic 5,000,000 5,000,000
Weighted average of common shares outstanding - diluted 5,000,000 5,000,000
v3.24.1.1.u2
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Income Statement [Abstract]    
Research and development, Grants $ 708,700 $ 793,540
v3.24.1.1.u2
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($)
Common Stock [Member]
Common Class A [Member]
Common Stock [Member]
Common Class B [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Noncontrolling Interest [Member]
Total
Balance at Dec. 31, 2022 $ 27,764,453 $ (5,124,110) $ 468,665 $ 23,109,008
Balance, shares at Dec. 31, 2022 2,628,966 5,000,000        
Stock-based compensation 54,126 54,126
Net loss (1,873,748) (94,193) (1,967,941)
Balance at Mar. 31, 2023 27,764,453 (6,997,858) 428,598 21,195,193
Balance, shares at Mar. 31, 2023 2,628,966 5,000,000        
Balance at Dec. 31, 2023 49,405,779 (12,092,927) 7,250 37,320,102
Balance, shares at Dec. 31, 2023 4,295,632 5,000,000        
Stock-based compensation 3,699,998 142,810 3,812,808
Net loss (7,215,425) (393,903) (7,609,328)
Balance at Mar. 31, 2024 $ 53,075,777 $ (19,308,352) $ (243,843) $ 33,523,582
Balance, shares at Mar. 31, 2024 4,295,632 5,000,000        
v3.24.1.1.u2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (7,609,328) $ (1,967,941)
Adjustments to reconcile net loss to net cash used in operating activities:    
Unrealized (gain) loss on investment securities, net 747,268 (54,779)
Stock-based compensation 3,812,809 54,126
Accretion of investments at amortized cost (U.S Treasury Bills) (305,047) (187,291)
Proceeds from sale of investment securities, at fair value (made by our licensed broker dealer) 25,129 776,281
Depreciation of property and equipment 62,792 44,124
Deferred costs related to revenue (72,175)  
Accretion of deferred grant reimbursement (13,173) 12,960
Deferred revenue
Change in ROU Asset 84,560 57,070
Change in lease liability (75,934) (19,286)
(Increase) decrease in -    
Grants receivable (229,292) (203,122)
Prepaid expenses and other current assets (76,810) 39,788
Clearing deposits (443,740)
Increase (decrease) in -    
Accounts payable 338,567 399,405
Payables to non-customers 1,212,595
Payables to customers 871,907  
Accrued expenses (589,225) (105,527)
Net cash used in operating activities (2,259,097) (1,154,192)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Proceeds of investments securities, at amortized cost (U.S Treasury Bills) 12,066,207
Purchases of investments securities, at amortized cost (U.S Treasury Bills) (8,483,911)
Deferred grant reimbursement 6,379 (48,375)
Purchases of property and equipment (143,152) (6,942)
Net cash provided by (used in) investing activities 3,445,523 (55,317)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Deferred costs of initial public offering (91,507) (272,322)
Net cash used in financing activities (91,507) (272,322)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 1,094,919 (1,481,831)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - BEGINNING OF PERIOD 7,357,687 4,952,624
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - END OF PERIOD 8,452,606 3,470,793
Supplemental disclosures of cash flow information:    
Interest
Income taxes
Non-cash investing and financing activities:    
Ownership change of non-controlling interest 153,044
Deferred costs of initial public offering $ 106,135
v3.24.1.1.u2
Consolidated Statements of Cash Flows, Supplemental Disclosures - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Mar. 31, 2023
Dec. 31, 2022
Statement of Cash Flows [Abstract]        
Cash and cash equivalents $ 5,492,612 $ 6,109,806    
Cash segregated in compliance with regulations 2,959,994 1,247,881    
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows $ 8,452,606 $ 7,357,687 $ 3,470,793 $ 4,952,624
v3.24.1.1.u2
Organization and Description of Business
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Organization and Description of Business

1. Organization and Description of Business

 

MDB Capital Holdings, LLC (“the Company” or “MDB”), a Delaware limited liability company, is a holding company that has three wholly-owned subsidiaries: MDB CG Management Company (“MDB Management”); Public Ventures, LLC (“Public Ventures”); and PatentVest, Inc. (“PatentVest”), and has a majority-owned partner company, Invizyne Technologies, Inc. (“Invizyne”).

 

MDB Management is an “administrative” entity whose purpose is to conduct, and to consolidate wherever possible, to consolidate shared services and other resources, for our US-based operations.

 

Public Ventures is a U.S. registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority (“FINRA”), the Depository Trust Company (“DTC”), and the National Securities Clearing Corporation (“NSCC”). Public Ventures is dual clearing, operating as a self-clearing firm and carrying accounts for its customers, and on a fully disclosed basis with a nonrelated FINRA member firm, Interactive Brokers, LLC (“Interactive Brokers”). Interactive Brokers serves as custodian of certain investments maintained by Public Ventures.

 

PatentVest is a wholly-owned subsidiary that performs intellectual property validation services for Public Ventures’, due diligence functions on the intellectual property of clients and prospective client companies, creates an intellectual property roadmap for client companies, and is also a law firm specializing in patent matters,

 

Invizyne was formed with the business objective of taking nature’s building blocks to make molecules of interest, effectively simplifying nature. Invizyne is a biology technology development company that is a majority-owned subsidiary. Invizyne’s technology is a differentiated and unique synthetic biology platform which is designed to enable the scalable exploration of a large number of molecules and properties found in nature.

 

Prior to January 14, 2022, Public Ventures owned the majority of interests in PatentVest and Invizyne. On January 14, 2022, Public Ventures distributed 100% of its equity interests in PatentVest and Invizyne to its members in proportion to their respective interests. On January 15, 2022, Public Ventures filed with the Internal Revenue Service to be treated as a corporation for federal income tax purposes. On January 16, 2022, the members of Public Ventures contributed their entire interests in the equity of Public Ventures, Invizyne and PatentVest to MDB, as result of which MDB became the new parent holding company. There was no effective change in the beneficial ownership of Public Ventures as a result of this transaction. On the same day as part of the reorganization, MDB established a management company subsidiary, MDB Management. These reorganization steps are collectively referred to as the “reorganization”. In connection with the reorganization, 5,000,000 Class B common shares were issued in exchange for the members’ equity.

 

The reorganization was completed between entities that were under common control, and the assets contributed and liabilities assumed are recorded based on their historical carrying values. These unaudited condensed consolidated financial statements retroactively reflect the financial statements of the Company and Public Ventures on an unaudited condensed consolidated basis for the periods presented.

 

On January 16, 2022, the Company issued 100,000 shares of Class A common shares for all the then non-controlling interests in PatentVest. PatentVest is now wholly owned by the Company.

 

On July 1, 2022, the Company made a cash distribution for $2,723,700 to the former members of Public Ventures in accordance with its private offering memorandum. This cash distribution was declared on January 16, 2022.

 

 

On June 8, 2022, MDB completed the first closing of a private placement, consisting of the sale of 2,517,966 shares of Class A common shares at $10.00 per share, for gross proceeds of $25,179,660. On June 15, 2022, the Company completed the second closing of the private placement, consisting of the sale of an additional 11,000 shares of Class A common shares, for gross proceeds of $110,000. Accordingly, the Company received total gross proceeds of $25,289,660 from the sale of 2,528,966 shares of Class A common shares, or $24,746,142 net of $543,518 of offering expenses in conjunction with the private placement, the Company issued warrants to the placement agent to purchase 18,477 shares of Class A common shares, exercisable upon issuance for a period of 10 years at $13.00 per share, for a cash consideration of $0.001/share. The placement agent’s warrants had a fair value of $106,940, as calculated pursuant to the Black-Scholes option-pricing model and were accounted for as issuance costs that were recorded against paid in capital. The warrants issued are accounted for as equity and recorded under paid in capital.

 

On September 20, 2023, MDB completed an initial public offering (IPO), consisting of the sale of 1,666,666 shares of Class A common shares at $12.00 per share, for gross proceeds of $19,999,992. Accordingly, the Company received total gross proceeds of $19,999,992 from the sale of 1,666,666 shares of Class A common shares, or $17,444,659 net of $2,555,333 of offering expenses. In conjunction with the IPO, the Company issued warrants to the placement agent to purchase 16,667 shares of Class A common shares, exercisable upon issuance for a period of 5 years at $15.00 per share, for a cash consideration of $0.001/share. The placement agent’s warrants had a fair value of $65,411, as calculated pursuant to the Black-Scholes option-pricing model and accounted for as issuance costs that were accounted for as equity instruments and recorded against paid in capital.

 
v3.24.1.1.u2
Summary of Significant Accounting Policies
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and wholly-owned and majority owned subsidiaries. The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of December 31, 2023, and related notes were derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year or any future period. The unaudited condensed consolidated financial information should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests at March 31, 2024 and 2023, relate to the interests of third parties in the majority owned subsidiaries.

 

The managing members of the Company have a controlling interest in PatentVest, S.A., a company organized and based in Nicaragua (which was renamed MDB Capital, S.A in 2022). As the Company does not have a controlling financial interest in this entity, and management has determined PatentVest, S.A. is not a variable interest entity and as such should not be consolidated as it has no ownership interests nor is a variable interest, so has excluded this entity from the Company’s unaudited condensed consolidated financial statements. It is the Company’s policy to reevaluate this conclusion on an annual basis or if there are significant changes in ownership.

 

Income Taxes

 

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest and Invizyne are Subchapter C-corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity, it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company.

 

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the valuation of investment securities, valuing equity instruments issued for services, stock-based compensation and the realization of any deferred tax assets.

 

Emerging Growth Company

 

The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents.

 

The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively.

 

The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company did not experience any credit risk losses during the three-months ended March 31, 2024 and 2023.

 

Segregated Cash and Deposits

 

From time to time the Company provides deposits or enters into agreements that would require funds to be held in a segregated cash account. At March 31, 2024, the Company had $2,959,994 of segregated cash consisting of funds held in reserve for non-customers and customers. At December 31, 2023, the Company had $1,247,881 of segregated cash consisting of funds held in reserve for non-customers.

 

Clearing Deposits

 

The Company is obligated to maintain security deposits with the DTC and NSCC. At March 31, 2024, these deposits totaled $703,740.

 

 

Prepaid Expenses and Other Current Assets

 

The Company has prepaid and other expenses totaling $494,463 at March 31, 2024 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $50,000, security deposits totaling $47,380, various prepaid expense of $312,531, and other current assets of $41,052. Prepaid expenses and other assets totaling $523,788 at December 31, 2023 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $95,000, security deposits totaling $47,380, various prepaid expense of $325,777, and other assets of $12,131.

 

Leases

 

Leases of the Company consist primarily of contracts for the right to use and direct use of an individual property. Leases were analyzed for evidence of significant additional components and to determine if these components were separately identifiable within the context of the contract. As an accounting policy, to account for these components, the Company has elected the practical expedient for property leases that have both lease and non-lease components for them to be combined into a single component and account for as a lease. This policy is effective for all current and future property operating leases and applied uniformly and will be disclosed as such within the financial statements. Operating lease assets are included within right-of-use assets and the corresponding operating lease liabilities are included within liabilities on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023.

 

The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Because the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

 

Stock-based Compensation

 

Stock-based compensation primarily consists of restricted stock units with service or market/performance conditions and stock options. The MDB and Invizyne issues restricted stock units are measured at the fair market value of the underlying stock at the grant date. The Company recognize stock compensation expense using the straight-line attribution method over the requisite service period for the restricted stock units. The Company’s subsidiary issued stock-option and the fair value is determined utilizing Black-Scholes options-pricing model. The Company account for forfeitures as they occur, rather than applying an estimated forfeiture rate. For performance-based restricted stock units, the compensation cost is recognized based on the number of units expected to vest upon the achievement of the performance conditions. Shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued to the employee than the number of awards outstanding. The Company record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

 

Investment Securities

 

The Company strategically invests funds in U.S. Treasury Bills, early-stage technology companies, and equity securities and options of publicly traded and privately held companies. The Company classifies investment securities as investment securities, at amortized cost, investment securities, at fair value, or investment securities, at cost less impairment.

 

Investment securities, at amortized cost – This is comprised of debt securities held by MDB and are classified as investment securities held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. These securities were originally recorded at fair value and are subsequently measured at amortized cost, adjusted for unamortized purchase premiums and discounts, and an allowance for credit losses. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the interest income in the statements of operations. Interest income is recognized when earned. The Company recognizes estimated expected credit losses over the life of the investment security through the allowance for credit losses account. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the investment security to present the net amount expected to be collected. In determining expected credit losses, the Company considers relevant qualitative factors including, but not limited to, term and structure of the instrument, credit rating by rating agencies and historic credit losses adjusted for current conditions and reasonable and supportable forecasts. The Company currently only holds investments securities, at amortized cost in U.S. Treasury Bills, so there are no expected credit losses. Declines in fair value of these securities is due to changes in market interest rates, and because we expect to hold these securities until maturity, we do not expect to realize any losses.

 

 

Investment securities, at fair value – This is comprised of equity investments held by the broker dealer subsidiary and are reported at fair value with changes in fair value recognized in the statements of operations. Purchases and sales of equity securities, consisting of common stock and warrants to purchase common stock, are recorded based on the respective market price quotations on the trade date. Realized gains and losses on investments represent the net gains and losses on investments sold during the period based on the average cost method. Changes in fair value of investments are recorded on the unaudited condensed consolidated statements of operations as unrealized gains and losses.

 

Investment securities, at cost less impairment – This is comprised of equity securities and a simple agreement on future equities without a readily determinable fair value held by the broker dealer subsidiary, the Company has elected to apply the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company will reassess whether such an investment qualifies for the measurement alternative at each reporting period. In evaluating an investment for impairment or observable price changes, we will use inputs including recent financing events, as well as other available information regarding the investee’s historical and forecasted performance. The Company has assessed this investment and no impairment is warranted.

 

Investment securities are as follows:

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at amortized cost:          
U.S Treasury Bills  $21,381,362   $24,658,611 
Investment securities, at amortized cost  $21,381,362   $24,658,611 

 

Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at fair value:          
Common stock of publicly traded companies  $2,389,011   $2,603,579 
Warrants of publicly traded companies   2,610,226    3,168,055 
Investment securities, at fair value  $4,999,237   $5,771,634 

 

Non-Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at cost less impairment          
Simple agreement on future equities (not market listed)  $200,000   $200,000 
Investment securities, at cost less impairment  $200,000   $200,000 

 

For investment securities at fair value, net unrealized loss of $747,268 and net unrealized gain of $54,779 were recognized in the statements of operations for three-months ended March 31, 2024 and 2023, respectively.

 

 

The amortized cost, excluding gross unrealized holding loss and fair value of held to maturity securities on March 31, 2024 and December 31, 2023 are as follows:

 

  

Amortized

Cost as of

March 31, 2024

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

March 31, 2024

 
U.S Treasury Bills maturing 04/04/24, 04/18/24, 04/23/24 and 6/11/24  $21,381,362   $1,035   $        -   $21,382,397 
Total assets  $21,381,362   $1,035   $-   $21,382,397 

 

  

Amortized

Cost as of

December 31, 2023

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

December 31, 2023

 
U.S Treasury Bills maturing 02/13/24, 04/04/24, 04/18/24 and 04/23/24  $24,658,611   $6,031   $-   $24,664,642 
Total assets  $24,658,611   $6,031   $-   $24,664,642 

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There is no significant concentration of credit risk, due to the majority of assets being invested in U.S. Treasury Bills.

 

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

 

Level 1–- Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.

 

Level 2–- Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

 

Level 3–- Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.

 

The Company’s financial instruments primarily consist of cash and investment securities. As of the unaudited condensed consolidated balance sheets date, certain investment securities are required to be recorded at fair value with the change in fair value during the period being recorded as an unrealized gain or loss. As of March 31, 2024 and December 31, 2023, the estimated fair values of investment securities, at amortized cost were not materially different from their carrying values as presented on the unaudited condensed consolidated balance sheets. This is primarily attributed to the short-term maturities of these instruments.

 

 

Investment securities, at amortized cost: The fair value of U.S. Treasury Bills classified as held-to-maturity investment securities is based on the market price and is classified as level 1 of the fair value hierarchy.

 

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:

 

Investment securities: Public equity securities are assessed for valuation at the close of each month. Warrants are valued using the Black-Scholes model, which considers the stock price at the date of the valuation, the warrants strike price, the term to expiry, the risk-free rate of return, and the expected volatility of the underlying stock.

 

Investment securities, at cost less impairment: Non-public equity securities and simple agreements for future equity are valued based on the initial investment, less impairment. The Company determined that no impairment was warranted. Since these securities are not actively traded, we will apply valuation adjustments when they become available, and they are categorized in level 3 of the fair value hierarchy.

 

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities–- common stock  $2,389,011   $-   $-   $2,389,011 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    17,680    2,592,546    2,610,226 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,389,011   $17,680   $2,592,546   $4,999,237 

 

During the three months ended March 31, 2024, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

 

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2023  $3,133,458 
      
Receipt from investment banking fees   - 
Realized gains   - 
Unrealized losses   (540,912)
Sales or distribution     
Purchases   - 
March 31, 2024  $2,592,546 

 

The following table presents information about significant unobservable inputs related to material components of Level 3 warrants as of March 31, 2024.

 

Assets  Fair Value   Valuation Techniques  Significant Unobservable Inputs  Range of Inputs   Weighted-Average 
                      
Warrants  $2,592,546   Black Scholes  Volatility   96.26 -106.28%   99.60%

 

 

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities -
common stock		  $2,603,579   $-   $-   $2,603,579 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    34,597    3,133,458    3,168,055 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,603,579   $34,597   $3,133,458   $5,771,634 

 

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2022  $- 
Receipt from investment banking fees   2,645,620 
Realized gains   - 
Unrealized gains   652,925 
Sales or distribution   (165,087)
Purchases   - 
December 31, 2023  $3,133,458 

 

During the year ended December 31, 2023, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

 

Secured Debt–- Revolving Credit Facility

 

The Company entered into a revolving credit facility with a bank, (the “Lender”) on July 26, 2023 for a commitment of up to $2,000,000 and which matures July 26, 2024. The loan has a variable interest rate equal to a defined index, currently the Lender’s rate on the sale of Federal Funds, plus 2.25%. The loan commenced with a calculated interest rate of 7.75%. If the Lender determines, in its sole discretion, that the index becomes unavailable or unreliable, either temporary, indefinitely, or permanently, during the term of this loan, the Lender may amend this loan by designating a substantially similar substitute index. The agreement provides for a quarterly payment of the greater of accrued interest or a non-usage fee of $5,000. The Company has not made any draw downs on the credit facility.

 

The Company granted the Lender a security interest in a cash checking account held at the bank as collateral. The Lender has a right of setoff available from this cash account when the line of credit is accessed. As of March 31, 2024, there is $2,037,845 deposited in this account.

 

The Company is responsible for the payment of all of the Lender’s legal and other fees incurred in connection with administering the loan. The Company has incurred no such costs or debt issue costs.

 

As of March 31, 2024, there is no outstanding indebtedness under the credit facility and interest expense totaled $0. The Company is in compliance with all covenants under the agreement.

 

 

Property and Equipment

 

Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statements of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:

 

Laboratory equipment   5 years
Furniture and fixtures   7 years
Leasehold improvements   Lesser of the lease duration or the life of the improvements

 

Property and equipment consist of the following as of March 31, 2024 and December 31, 2023, respectively:

 

  

March 31, 2024

  

December 31, 2023

 
         
Laboratory equipment  $1,030,004   $885,696 
Furniture and fixtures   54,338    49,838 
Developed software   107,458    113,114 
Leasehold improvements   279,161    279,161 
Total property and equipment   1,470,961    1,327,809 
Less: Accumulated depreciation   (524,111)   (461,319)
Property and equipment, net  $946,850   $866,490 

 

Revenue

 

The Company generates revenue primarily from providing brokerage services and investment banking services through Public Ventures. PatentVest and Invizyne have had limited financial activity during the three-months ended March 31, 2024 and 2023, respectively.

 

Brokerage revenues consist of (a) trade-based commission income from executed trade orders, (ii) net realized gains and losses from proprietary trades, and (iii) other income consisting primarily of stock loan income earned on customer accounts. Public Ventures recognizes revenue from trade-based commissions and other income when performance obligations are satisfied through the transfer of control, as specified in the contract, of promised services to the customers of Public Ventures. Commissions are recognized on a trade date basis. Public Ventures believes that each executed trade order represents a single performance obligation that is fulfilled on the trade date because that is when the underlying financial instrument is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer. When another party is involved in transferring a good or service to a customer, Public Ventures assesses whether revenue is presented based on the gross consideration received from customers (principal) or net of amounts paid to a third party (agent). Public Ventures has determined that it is acting as the principal as the provider of the brokerage services and therefore records this revenue on a gross basis. Clearing, custody and trade administration fees incurred are recorded effective as of the trade date. The costs are treated as fulfillment costs and are recorded in operating expenses in the unaudited condensed consolidated statements of operations.

 

Brokerage revenue is measured by the transaction price, which is defined as the amount of consideration that Public Ventures expects to receive in exchange for services to customers. The transaction price is adjusted for estimates of known or expected variable consideration based upon the individual contract terms. Variable consideration is recorded as a reduction to revenue based on amounts that Public Ventures expects to refund back to the customer. There were no variable considerations for the three-months ended March 31, 2024, and 2023, respectively.

 

Investment banking revenues consist of private placement fees. Public Ventures does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions, and therefore, as of March 31, 2024, the Company did not have any contract assets or liabilities related to these revenues on its unaudited condensed consolidated balance sheets.

 

 

Private placement fees are related to non-underwritten transactions such as private placements of equity securities, private investments in public equity, and Rule 144A private offerings and are recorded on the closing date of the transaction. Client reimbursements for costs associated for private placement fees are recorded gross within investment banking and various expense captions, excluding compensation. The Company typically receives payments on private placements transactions at the completion of the contract. The Company views the majority of placement fees as a single performance obligation that is satisfied when the transaction is complete, and the revenue is recognized at that point in time.

 

Taxes and regulatory fees assessed by a government authority or agency that are both imposed on and concurrent with a specified revenue-producing transaction, which are collected by Public Ventures from a customer, are excluded from revenue and recorded against general and administrative expenses.

 

PatentVest recognize revenue when performance obligations are satisfied by transferring promised goods and services to customers in an amount the Company expects to receive in exchange for those goods or services. PatentVest enters into contracts that can include various combinations of its offerings which are generally capable of being distinct and accounted for as a separate performance obligation for the entre contract or a portion of the contract. When performance obligations are combined into a single contract, PatentVest utilize stand-alone selling price to allocate the transaction price among the performance obligations.

 

Certain contracts or portions of contracts are duration-based which, in the event of customer cancellation, provide PatentVest with an enforceable right to a proportional payment for the portion of the services provided. Accordingly, revenue from duration-based is recognized using a time-based measure of progress, which PatentVest believes best depicts how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from certain contracts is recognized over the expected period of performance using a single measure of progress, typically based on hours incurred. Payments received in advance of services being rendered are recorded as a component of contract liabilities.

 

Patent Vest’s contract liabilities which is presented as deferred revenue, consist of advance payments. The table below shows changes in deferred revenue:

 

Balance as of December 31, 2022  $- 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2023   - 
Amounts billed but not recognized   100,000 
Revenue recognized   80,000 
Balance as of December 31, 2023   20,000 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2024  $20,000 

 

During the three-months ended March 31, 2023, the Company’s technology development segment revenue, which was derived from a single feasibility study, which is not a typical service offered by the Company. The revenue generated from this study represents a direct reimbursement of costs incurred in completing the study.

 

 

Research Grants

 

Invizyne receives grant reimbursements, which are offset against research and development expenses in the unaudited condensed consolidated statements of operations. In addition to actual reimbursements, Invizyne also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs, resulting in a negative impact. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the unaudited condensed consolidated balance sheet.

 

Grants that operate on a reimbursement basis are recognized on the accrual basis and are offsets to expenses to the extent of disbursements and commitments that are reimbursable for allowable expenses incurred as of March 31, 2024 and 2023, and respectively, expected to be received from funding sources in the subsequent year. Management considers such receivables at March 31, 2024 and 2023, respectively, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying unaudited condensed consolidated financial statements.

 

Summary of grants receivable activity for the three-months ended March 31, 2024 and 2023, is presented below:

 

Summary of Grants Receivable Activity

   2024   2023 
         
Balance at beginning of period  $882,319   $809,532 
Grant costs expensed   674,158    766,867 
Grants for equipment purchased   6,379    - 
Grant fees   28,163    26,673 
Grant funds received   (479,408)   (590,418)
Balance at end of period  $1,111,611   $1,012,654 

 

Invizyne has received five grants provided by National Institute of Health and the Department of Energy. The first grant was awarded on October 1, 2019 and the latest grant is set to expire on August 31, 2024, however grants can be extended or new phases can be granted, extending the expiration of the grant. None of the grants has commitments made by the parties, provisions for recapture, or any other contingencies, beyond the complying with the normal terms of each research and development grant. Research grants received from organizations are subject to the contract agreement as to how Invizyne conducts its research activities, and Invizyne is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. Invizyne is permitted to draw down the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the unaudited condensed consolidated statements of operations. For the three-months ended March 31, 2024 and 2023, respectively, grants amounting to $674,158 and $766,867 were offset against the research and development costs. Grant drawdowns, which includes grants costs expensed, grants for equipment purchased, and grant fees, for the three-months ended March 31, 2024 and 2023, respectively, totaled $708,700 and $793,540.

 

Research and Development Costs

 

Research and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to consultants, and other expenses relating to the development of Invizyne’s technology. For the three-months ended March 31, 2024 and 2023, research and development costs prior to offset of the grants amounted to $986,282, and $825,132, respectively, which includes grant costs expensed, grants fees, and research and development costs, net of the grant received.

 

Patent and Licensing Legal and Filing Fees and Costs

 

Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.

 

 

Patent and licensing legal and filing fees and costs were $73,297 and $34,420 for the three-months ended March 31, 2024 and 2023, respectively. Patent and licensing legal and filing fees and costs are included in general and administrative costs in the unaudited condensed consolidated statements of operations.

 
v3.24.1.1.u2
Segment Reporting
 3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
Segment Reporting

3. Segment Reporting

 

In its operation of the business, management, including the Company’s chief operating decision maker, who is also the Company’s Chief Executive Officer, reviews certain financial information, including segmented statements of operations and the balance sheets.

 

The Company currently operates in two reportable segments: in the broker dealer and intellectual property service segment as well as in the technology development segment.

 

The broker dealer and intellectual property service segment currently has two subsidiaries, Public Ventures and PatentVest. Public Ventures is a full-service broker dealer firm focusing on conducting private and public securities offerings. PatentVest offers in-depth patent research used for investment banking due diligence.

 

The technology development segment currently has one subsidiary, Invizyne. Invizyne is a research and development stage company synthetic biology company.

 

Non-income generating subsidiaries for management of the business, including MDB CG Management Company, Inc. are reported as other.

 

The segments are based on the discrete financial information reviewed by the Chief Executive Officer to make resource allocation decisions and to evaluate performance. The reportable segments are each managed separately because they will provide a distinct product or provide services with different processes. All reported segment revenues are derived from external customers.

 

The accounting policies of the Company’s reportable segments are in consideration of ASC 280 and the same as those described in the summary of significant accounting policies (see Note 2).

 

The following sets forth the long-lived assets and total assets by segment at March 31, 2024:

 

ASSETS  Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Eliminations   Consolidated 
Long-lived assets  $107,458   $2,367,496   $707,455   $          -   $3,182,409 
Total assets  $16,301,072   $4,005,204   $20,633,600   $-   $40,939,876 

 

 

The following sets forth statements of operations by segment for the three-months March 31, 2024:

 

   Broker
Dealer &
Intellectual
Property
Service		   Technology Development   Other   Eliminations     Consolidated 
Operating income:                            
Unrealized gain on investment securities, net (from our licensed broker dealer)  $(747,268)  $-   $-   $             -     $(747,268)
Other operating income   86,879    -    -     -      86,879 
Total operating income, net   (660,389)    -    -     -      (660,389) 
                             
Operating costs:                            
General and administrative costs:                            
Compensation   679,907    390,043    3,822,725     -      4,892,675 
Operating expense, related party   243,876    -    76,416     -      320,292 
Professional fees   145,907    256,563    516,619     -      919,089 
Information technology   180,914    3,891    21,186     -      205,991 
Clearing and other charges   2,036    -    -     -      2,036 
General and administrative-other   218,936    80,378    369,812     -      669,126 

General and administrative costs

   1,471,576    730,875    4,806,758     -      7,009,209 
Research and development costs   -    277,582    -     -      277,582 
Total operating costs   1,471,576    1,008,457    4,806,758     -      7,286,791 
Net operating income (loss)   (2,131,965)   (1,008,457)   (4,806,758)    -      (7,947,180)
Other income and expense:                            
Less: interest expense   110,625    -    -     110,625      - 
Interest income   52,459    -    285,393     -      337,852 

Income (loss) before income taxes

   (2,190,131)   (1,008,457)   (4,521,365)    110,625      (7,609,328)

Income tax expense

   -    -    -     -      - 

Net income (loss)

   (2,190,131)   (1,008,457)   (4,521,365)    110,625      (7,609,328)
Less net loss attributable to non-controlling interests   -    (393,903)   -     -      (393,903)
Net loss attributable to MDB Capital Holdings, LLC  $(2,190,131)  $(614,554)  $(4,521,365)  $ 110,625     $(7,215,425)

 

The following sets forth the long-lived assets and total assets by segment at December 31, 2023:

 

ASSETS  Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Consolidated 
Long-lived assets  $113,114   $2,344,895   $728,600   $3,186,609 
Total assets  $15,038,602   $3,558,509   $24,388,168   $42,985,279 

 

 

The following sets forth statements of operations by segment for the three-months ended March 31, 2023:

 

   Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Consolidated 
Operating income:                    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2)  $54,779   $-   $-   $54,779 
Other operating income   3,053    59,159    -    62,212 
Total operating income, net   57,832    59,159    -    116,991 
                     
Operating costs:                    
General and administrative costs:                    
Compensation   546,801    31,536    293,690    872,027 
Operating expense, related party   258,453    -    43,249    301,702 
Professional fees   165,812    181,707    257,143    604,662 
Information technology   121,876    9,826    15,705    147,407 
Clearing and other charges   10,754    -    -    10,754 
General and administrative-other   108,993    45,734    149,352    304,079 
General and administrative costs   1,212,689    268,803    759,139    2,240,631 
Research and development costs   -    31,592    -    31,592 
Total operating costs   1,212,689    300,395    759,139    2,272,223 
Net operating loss   (1,154,857)   (241,236)   (759,139)   (2,155,232)
Other income:                    
Interest income   28,362    86    158,843    187,291 
Loss before income taxes   (1,126,495)   (241,150)   (600,296)   (1,967,941)
Income tax expense   -    -    -    - 
Net loss   (1,126,495)   (241,150)   (600,296)   (1,967,941)
Less net loss attributable to non-controlling interests   -    (94,193)   -    (94,193)
Net loss attributable to MDB Capital Holdings, LLC  $(1,126,495)  $(146,957)  $(600,296)  $(1,873,748)

 
v3.24.1.1.u2
Equity and Non-Controlling Interests
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Equity and Non-Controlling Interests

4. Equity and Non-Controlling Interests

 

Equity

 

Preferred shares – 10,000,000 shares authorized, no shares issued and outstanding. The board of directors may designate preferred shares to be issued, and may rank preferred shares as junior to, on parity with or senior to other preferred shares (in each case, with respect to distributions or other payments in respect of shares). Since the board of directors may set all the terms of any class of preferred shares, these are considered “blank check” preferred shares. Currently the board has not defined dividend and liquidation preference, participation rights, call prices and dates, sinking-fund requirements, or terms that may change the conversion or exercise price.

 

Class A common shares – 95,000,000 shares authorized, 4,295,632 shares issued and outstanding. These shares are common shares and have one vote per share. Currently there is not a defined dividend or liquidation preference.

 

Class B common shares – 5,000,000 shares authorized, 5,000,000 issued and outstanding. These shares are common shares and have five votes per share. Currently there is not a defined dividend or liquidation preference. These shares may be converted one to one for a Class A common shares at any time and from time to time, at the election of the holder.

 

 

Non-Controlling Interests

 

During the three-months ended March 31, 2024, the ownership interest in Invizyne was 60.94% and the non-controlling interest was 39.06%. During the three-months ended March 31, 2023, the ownership interest in Invizyne was 60.94%, the non-controlling interest was 39.06%. Invizyne is accounted for the three-months ended March 31, 2024 and 2023, respectively, under the consolidation method.

 

The NCI ownership will be equal to the NCI percentage as of the reporting period. Therefore, there will be a redistribution of equity between MDB and the Non-controlling interest owner. As of March 31, 2024 and 2023, the Company’s equity interest in Invizyne was 60.94% and 60.94% respectively, and the remaining equity interest was owned by the non-controlling interests as presented below:

 

  

For the Three Months Ended

March 31,

 
   2024   2023 
         
Invizyne net loss  $(1,008,457)  $(241,150)
Weighted average non-controlling percentage   39.06%   39.06%
Net loss non-controlling interest  $(393,903)  $(94,193)
Prior period balance   7,250    468,665 
Stock-based compensation   142,810    54,126 
Ending period balance  $(243,843)  $428,598 

 

If a change in the parent ownership in a subsidiary from an additional investment or from the issuance of stock-based compensation, a change of the non-controlling ownership is recognized based on the amount invested and the carrying amount of the non-controlling interest is adjusted to reflect the change in the non-controlling ownership in the subsidiary’s net assets.

 
v3.24.1.1.u2
Stock-Based Compensation
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation

5. Stock-Based Compensation

 

MDB stock-based compensation

 

Between April 19, 2022 and September 21, 2022, the Company granted 3,675,000 restricted stock units (“RSUs”). These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange, then at a rate of 10% of one-half the number of RSUs each six months after the date of the initial vesting, until the last vesting on the fifth year anniversary of the Date of Grant, at which any previously unvested will fully vest. These RSUs were granted to officers, directors, employees, and contractors. As these RSUs do not begin to vest until the completion of an initial public offering by the Company, which occurred on September 20, 2023, $1,107,521 of stock-based compensation expense related to these RSUs was recorded for the three-months ended March 31, 2024. The total unrecognized compensation expense based on the shares price sold in the private placement is $34,302,984.

 

On April 19, 2022 the Company granted 2,000,000 restricted stock units (“RSUs”). These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange. Class A Share have traded in the market since September 20, 2023. The RSUs will vest once the Class A Shares are listed for any 90 consecutive calendar days at an average price of $20.00 or more during the period commencing from the Date of Grant and prior to the five year anniversary of the Date of Grant, with an average monthly trading volume of 2,000,000 Class A Shares or more during the 90 consecutive calendar day period, or the Class A Shares are listed for any 90 consecutive calendar days at an average price of $25.00 or more during the period commencing the Date of Grant and prior to the five year anniversary of the Date of Grant; provided further, that if there is a distribution of cash, stock or other property by the Company on the Class A Shares, then the foregoing average amounts of $20.00 or $25.00 will be reduced, from time to time, by the value of any one or more per share distributions after the Date of Grant until vested. As these RSUs do not begin to vest until the completion of an initial public offering by the Company, which occurred on September 20, 2023, $1,107,521 of stock-based compensation expense related to these RSUs was recorded for the three-months ended March 31, 2024. The estimated unrecognized compensation expense for performance/market vesting RSUs is $13,465,761.

 

A summary of restricted stock unit activity during the three-months ended March 31, 2024 and 2023 is presented below:

 

   Time-Based   Performance-Based 
   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Restricted stock units outstanding at March 31, 2023   3,675,000   $10.00    2,000,000   $7.91 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Restricted stock units outstanding at December 31, 2023   3,675,000   $10.00    2,000,000   $7.91 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Restricted stock units outstanding at March 31, 2024   3,675,000   $10.00    2,000,000   $7.91 
                     
Restricted stock units at March 31, 2023   -   $-    -   $- 
Restricted stock units at March 31, 2024   -   $-    -   $- 

 

Invizyne stock-based compensation

 

Invizyne’s 2020 Equity Incentive Plan (the “2020 Plan”), which was approved by the Invizyne shareholders, permits grants to its officers, directors, and employees for up to 1,877,664 shares of Invizyne’s Common Stock. On May 1st, 2023 the board approved an increase of 3,116,351. The 2020 Plan authorizes the use of stock options, shares of restricted stock, and restricted stock units, among other forms of equity based awards.

 

On May 1, 2023, stock options to purchase 103,880 shares of Common Stock were granted at an exercise price of $1.66 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $1.66, option exercise price of $1.66, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 3.64%, expected annual volatility of 121.70%, and annual rate of dividends of $0.

 

On November 1, 2023, stock options to purchase 914,129 shares of Common Stock were granted at an exercise price of $1.66 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $1.66, option exercise price of $1.66, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.67%, expected annual volatility of 144.94%, and annual rate of dividends of $0.

 

 

On February 1, 2024, stock options to purchase 311,636 shares of Common Stock were granted at an exercise price of $1.66 per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of 7 years. The stock options vest ratably over a period of 5 years. The inputs used to determine the fair value was Common Stock price of $1.66, option exercise price of $1.66, expected life in years of 5 years, with a contract life of 7 years, risk-free rate of 4.20%, expected annual volatility of 95.85%, and annual rate of dividends of $0.

 

As of March 31, 2024 stock options to purchase 695,035 shares of Common Stock were vested, the weighted average exercise price is $1.46, the aggregate intrinsic value is $0.00, and the weighted average remaining contractual term is 5.55 years. Invizyne stock-based compensation were $142,810 and $54,126 for the years ended March 31, 2024 and 2023. As of March 31, 2024, the unrecognized stock-based compensation is $2,145,319.

 

A summary of stock option activity during the three months ended March 31, 2024 and 2023 is presented below:

 

   Number of Shares  

Weighted Average

Exercise Price

   Weighted
Average
Remaining
Contractual Life
(in Years)		 
Stock options outstanding at January 1, 2023   1,067,356   $1.22    4.83 
Granted   -    -    - 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at March 31, 2023   1,067,356   $1.22    4.83 
Granted   1,018,012    1.66    7.00 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at December 31, 2023   2,085,368   $1.43    5.47 
Granted   311,636    1.66    7.00 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at March 31, 2024   2,397,004    1.46    5.55 
                
Stock options exercisable at March 31, 2023   462,518   $1.22    4.83 
Stock options exercisable at March 31, 2024   695,035   $1.46    5.55 

 

On March 28, 2022, Invizyne granted 232,689 restricted stock units (“RSUs”) at a value of $1.22 per share. These RSUs were issued in 2021 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up subsequent to an initial public offering of the Company, or upon the change of control of the Company by Invizyne, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period subsequent to an initial public offering, or upon the change of control of Invizyne. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $788,705.

 

On May 1, 2023, Invizyne granted 97,050 restricted stock units (“RSUs”) at a value of $1.66 per share. These RSUs were issued in 2023 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up subsequent to an initial public offering of the Company, or upon the change of control of the Company by Invizyne, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period subsequent to an initial public offering, or upon the change of control of Invizyne. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $333,852.

 

 
v3.24.1.1.u2
Earnings Per Share
 3 Months Ended
Mar. 31, 2024
Loss per share attributable to MDB Capital Holdings, LLC:  
Earnings Per Share

6. Earnings Per Share

 

The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because warrants outstanding were anti-dilutive, for a total of 35,144 shares.

 

Earnings (loss) per share is presented below for the three months ended March 31, 2024 and 2023, respectively.

 

Basic and fully diluted earnings (loss) per share is calculated at follows for the three-months ended March 31, 2024 and 2023:

 

                     
   For the Three Months Ended 
   March 31, 2024   March 31, 2023 
   Class A common shares   Class B common shares   Class A common shares   Class B common shares 
Net loss attributable to MDB Capital Holdings, LLC  $(3,334,431)  $(3,881,084)  $(645,700)  $(1,228,048)
                     
Weighted average shares outstanding – basic and diluted   4,295,632    5,000,000    2,628,966    5,000,000 
                     
Net loss per share – basic and diluted  $(0.78)  $(0.78)  $(0.25)  $(0.25)

 

Class A common shares and Class B common stock are equal for ownership, Class B shares have five times the voting rights of Class A shares and Class B shares can be exchanged on a one-to-one basis for purposes of sale.

 

 
v3.24.1.1.u2
Related Party Transactions
 3 Months Ended
Mar. 31, 2024
Related Party Transactions [Abstract]  
Related Party Transactions

7. Related Party Transactions

 

The principal members of the Company have a controlling interest in MDB Capital, S.A., a company organized and based in Nicaragua that provides outsourced services to the Company and other non-related entities. During the three months ended March 31, 2024 and 2023, the Company paid $320,792 and $301,702, respectively, which is inclusive of expenses and fees, for contracted labor, recorded against general and administrative expenses.

 

During the three-months ended March 31, 2024, PatentVest, a 100% entity owned by MDB Capital Holdings, LLC, engaged in transactions with ENDRA Life Sciences Inc, a company for which two of our executive officers serve as board members, being Anthony DiGiandomenico, our Chief of Transactions, and Lou Basenese, President of Public Ventures. For the year ended December 31, 2023, there were no revenue recognized between MDB Capital entities and ENDRA. However, costs incurred amounting to $80,995 related to transactions with ENDRA have been deferred.

 
v3.24.1.1.u2
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

 

Legal Claims

 

The Company may be subject to legal claims and actions from time to time as part of its business activities. As of March 31, 2024 and 2023, the Company was not subject to any pending or threatened legal claims or actions.

 

External Risks Associated with the Company’s Business Activities

 

Net Capital Requirement (Public Ventures)

 

Public Ventures is subject to the uniform net capital rule (SEC Rule 15c3-1) of the Securities and Exchange Commission (the “SEC”), which requires both the maintenance of minimum net capital and the maintenance of maximum ratio of aggregate indebtedness to net capital. At March 31, 2024 and 2023, Public Ventures had net capital of $6,285,959 and $2,534,695, respectively, which was $6,035,959 and $2,284,695 in excess of the minimum $250,000, as required by the Securities and Exchange Commission Rule 15c3-1.

 

At March 31, 2024, the Company’s ratio of aggregate indebtedness of $6,175,623 to net capital was 0.98 to 1, as compared to the maximum of a 15 to 1 allowable ratio of a broker dealer. Minimum net capital is based upon the greater of the statutory minimum net capital of $250,000 or 2% of customer debts, which was calculated as $0 at March 31, 2024.

 

The requirement to comply with the Uniform Net Capital Rule 15c3-1 may limit Public Ventures’ ability to issue dividends to its parent company.

 

Indemnification Provisions

 

Public Ventures has agreed to indemnify its clearing broker for losses that the clearing broker may sustain from the accounts of customers. Should a customer not fulfill its obligation on a transaction, Public Ventures may be required to buy or sell securities at prevailing market prices in the future on behalf of its customer. The indemnification obligations of Public Ventures to its clearing broker have no maximum amount. All unsettled trades at March 31, 2024 and 2023 have subsequently settled with no resulting material liability to Public Ventures, LLC. For the three-months ended March 31, 2024 and 2023, Public Ventures had no material loss due to counterparty failure and had no obligations outstanding under the indemnification arrangement as of March 31, 2024 and 2023.

 

 

Invizyne Funding Requirements

 

The Company entered into a funding agreement (the “Funding Agreement”) on April 17, 2019 to purchase shares in Invizyne up to a maximum of $5,000,000 at a pre-determined purchase price, subject to continuing financial covenants being met. The Funding Agreement was completed in July 2022. Under the Funding Agreement the Company was issued warrants to purchase 197,628 shares of Invizyne common stock, which are fully vested These warrants are eliminated in consolidation.

 
v3.24.1.1.u2
Employee Benefit Plans
 3 Months Ended
Mar. 31, 2024
Retirement Benefits [Abstract]  
Employee Benefit Plans

9. Employee Benefit Plans

 

MDB Management and Invizyne both sponsored individual 401(k) defined contribution plans for the benefit of each company’s eligible employees. The plans allow eligible employees to contribute a portion of their annual compensation, not to exceed annual limits established by the Department of Treasury. Invizyne makes matching contributions for participating employees up to a certain percentage of the employee contributions; matching contributions were funded for the three-months ended March 31, 2024 and 2023. Benefits under the Invizyne plan were available to all employees, and employees become fully vested in the employer contribution upon receipt. For the three-months ended March 31, 2024 and 2023, a total of $189,365 and $163,027, respectively, was contributed to the plans. The majority of the expense was included in general and administrative cost, however for any research and development employees their portion of the expense is recorded in research and development costs.

 

MDB Management and Invizyne also provide health and related benefit plans for eligible employees.

 
v3.24.1.1.u2
Exclusive License Agreement
 3 Months Ended
Mar. 31, 2024
Exclusive License Agreement  
Exclusive License Agreement

10. Exclusive License Agreement (Invizyne)

 

On April 19, 2019, Invizyne entered into a license agreement (the “License Agreement”) with The Regents of the University of California (“The Regents”) for patent rights and associated technology relating to the biosynthetic platform being developed by the Company. Certain individuals named as inventors of the Patent are also the founding stockholders of Invizyne. One of the founders of Invizyne was the head of the laboratory which was used in the research development of the patents and associated technology subject to the agreement with The Regents.

 

Under the License Agreement, Invizyne holds an exclusive license of the patent rights and a non-exclusive license for the associated technology to make, have made, use, have used, sell, have sold, offer for sale, and import licensed products in the field of use. Under the License Agreement, Invizyne paid an initial license fee and is to pay an annual license fee and royalties on net sales, a minimum annual royalty that is credited against the royalties on net sales, and a percentage of any sublicensing income. The net income royalty commences after the first commercial sale of a licensed product. At March 31, 2024 and 2023, there were no accrued royalties recorded.

 

Under the License Agreement, Invizyne is required to achieve certain development milestones. Invizyne is obligated to make payments upon achievement of certain sales thresholds, as defined in the License Agreement.

 

As of March 31, 2024 and 2023, the development milestones have been met.

 

The following net sales milestone payments have not yet been incurred. The net sales milestones do not have a deadline and are listed below as of March 31, 2024.

 

  ● A payment of $250,000 when a licensed product reaches $1,000,000 in cumulative net sales.
  ● A payment of $350,000 when a second licensed product reaches $ 2,000,000 in cumulative net sales.

  

If Invizyne breaches the terms of the License Agreement, The Regents may terminate the License Agreement.

 

Invizyne may terminate the License Agreement, in whole or in part as to a particular patent right, at any time by providing notice of termination to The Regents as defined in the License Agreement.

 

Under the License Agreement, the Company issued 499,377 shares of common stock equity representing four percent of its shares as initial consideration. The Company agreed to issue additional shares of common stock to The Regents so that The Regents own no less than four percent of all outstanding common shares of the Company until the Company has received an aggregate amount of $5,000,000 from the sale of equity securities. The Company received equity funding of $5,000,000 as of June 2022. As such, the non-dilution provision of the License Agreement was fulfilled and no additional common shares will be issued.

 

 
v3.24.1.1.u2
Leases
 3 Months Ended
Mar. 31, 2024
Leases  
Leases

11. Leases

 

For operating leases, the Company records a right-of-use assets and corresponding lease liabilities in the unaudited condensed consolidated balance sheets for all leases with terms longer than twelve months. The Company has three operating leases, with no variable lease costs, and no finance leases as of March 31, 2024. The Company has three operating leases, with no variable lease costs, and no finance leases and December 31, 2023.

 

In October 2023, Invizyne made changes to an existing lease agreement that was originally entered into in August 2021, which resulted in an extension of the lease term by an additional 14 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in August 2021, with a term of 60 months beginning on August 24, 2021 and ending on September 30, 2026, with an option to extend for 60 additional months and was further modified on April 3, 2023 for an additional 21 months with the lease ending date of April 30, 2028. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $14,371 per month. The lease provides for annual increases. The base rent for the lease in the final year is $16,747 per month. Additionally, Invizyne is responsible for annual operating cost increases of 2.5%, which are included in the rent.

 

Furthermore, in October 2023, Invizyne made changes to a second existing lease agreement that was originally entered into in April 2023, which resulted in an extension of the lease term by an additional 12 months. The revised lease maintained the same escalation rate for lease payments as the previous arrangement. To account for this modification, the Company reevaluated the remaining lease term at the time of execution. As the Company was actively utilizing the premises, adjustments were made to reflect the revaluation of both the right-to-use asset and the corresponding lease liability in line with the updated lease term. This was originally entered into in April 2023, with a term of 60 months beginning on July 1, 2023 and ending on June 30, 2028, with an option to extend for 60 additional months. At the time the lease commenced, it was not probable the Company would exercise the one five-year option to extend the facility lease; therefore, this extension option is not included in the lease analysis. The initial base rent is $13,277per month. The lease provides for annual increases. The base rent for the lease in the final year is $15,391per month. Additionally, Invizyne is responsible for annual operating cost increases of 3.0%, which are included in the rent.

 

On July 1, 2022 the Company executed a lease for new office space in the Dallas, Texas metropolitan area, the expected occupancy of the space is December 20, 2022. The lease with a term of 91 months set to begin once we take control of the space, which is estimated for December 16, 2022 and ending on July 20, 2030, without an option to extend. The initial base rent was $12,556 per month, after 7 months of free rent. The lease provides for annual increases. The base rent for the lease in the final year is $13,937 per month.

 

 

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.

  

  

March 31, 2024

  

December 31, 2023

 
         
Operating leases:          
Right-of-use assets  $2,235,559   $2,320,119 
Operating lease liabilities  $2,339,955   $2,415,889 
           
Weighted average remaining lease term in years   5.27    5.33 
Weighted average discount rate   7.66%   7.40%
           
Cash paid for amounts included in the measurement of lease liabilities  $121,688   $206,837 
Right-of-use assets obtained in exchange for lease liabilities  $-   $1,018,002 
           
Operating lease cost  $45,754   $146,836 
Short-term lease costs   84,560    275,589 
Total operating lease costs  $130,314   $422,425 

 

Future payments due under operating leases as of March 31, 2024 are as follows:

  

Year  Amount 
Remainder of 2024  $369,936 
2025   503,684 
2026   516,001 
2027   528,586 
2028   541,674 
Thereafter   451,600 
Total  $2,911,481 
Less effects of discounting   (571,526)
Total operating lease liabilities  $2,339,955 

 
v3.24.1.1.u2
Income Taxes
 3 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

12. Income Taxes

 

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest, and Invizyne are Subchapter C-corporations subject to federal and state income taxes.

 

Amounts recognized as income taxes are included in “income tax expense” on the statements of operations. The Company recognized no income tax expense for the three months ended March 31, 2024, and March 31, 2023, because of a full valuation allowance recorded against the Company’s net deferred tax assets.

 

The Company’s federal and state statutory tax rate net of the federal tax benefit was approximately 27% for the three months ended March 31, 2024, and March 31 2023.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At the end of 2023, the Company’s corporate earnings were in a cumulative loss position. Based on the cumulative losses and projections of future taxable income for the periods in which the deferred tax assets are deductible, the Company recorded a valuation allowance against all its net deferred tax assets as of March 31, 2024, and March 31, 2023. The Company intends to maintain a full valuation allowance on its net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The amount of deferred tax assets considered realizable could materially increase in the future, and the amount of valuation allowance recorded could materially decrease if estimates of future taxable income are increased.

 
v3.24.1.1.u2
Subsequent Events
 3 Months Ended
Mar. 31, 2024
Subsequent Events [Abstract]  
Subsequent Events

13. Subsequent Events

 

There were no subsequent events for the three months ended March 31, 2024
v3.24.1.1.u2
Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and wholly-owned and majority owned subsidiaries. The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of December 31, 2023, and related notes were derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year or any future period. The unaudited condensed consolidated financial information should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests at March 31, 2024 and 2023, relate to the interests of third parties in the majority owned subsidiaries.

 

The managing members of the Company have a controlling interest in PatentVest, S.A., a company organized and based in Nicaragua (which was renamed MDB Capital, S.A in 2022). As the Company does not have a controlling financial interest in this entity, and management has determined PatentVest, S.A. is not a variable interest entity and as such should not be consolidated as it has no ownership interests nor is a variable interest, so has excluded this entity from the Company’s unaudited condensed consolidated financial statements. It is the Company’s policy to reevaluate this conclusion on an annual basis or if there are significant changes in ownership.

 
Income Taxes

Income Taxes

 

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits of the Company are passed through to its unitholders. Limited liability companies are subject to Texas margin tax. Additionally, the Company’s subsidiaries Public Ventures, MDB Management, PatentVest and Invizyne are Subchapter C-corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity, it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company.

 

 
Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the valuation of investment securities, valuing equity instruments issued for services, stock-based compensation and the realization of any deferred tax assets.

 
Emerging Growth Company

Emerging Growth Company

 

The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.

 
Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents.

 

The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively.

 

The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company did not experience any credit risk losses during the three-months ended March 31, 2024 and 2023.

 
Segregated Cash and Deposits

Segregated Cash and Deposits

 

From time to time the Company provides deposits or enters into agreements that would require funds to be held in a segregated cash account. At March 31, 2024, the Company had $2,959,994 of segregated cash consisting of funds held in reserve for non-customers and customers. At December 31, 2023, the Company had $1,247,881 of segregated cash consisting of funds held in reserve for non-customers.

 
Clearing Deposits

Clearing Deposits

 

The Company is obligated to maintain security deposits with the DTC and NSCC. At March 31, 2024, these deposits totaled $703,740.

 

 
Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

 

The Company has prepaid and other expenses totaling $494,463 at March 31, 2024 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $50,000, security deposits totaling $47,380, various prepaid expense of $312,531, and other current assets of $41,052. Prepaid expenses and other assets totaling $523,788 at December 31, 2023 consisting of acquired intangible assets totaling $43,500, prepaid professional fees totaling $95,000, security deposits totaling $47,380, various prepaid expense of $325,777, and other assets of $12,131.

 
Leases

Leases

 

Leases of the Company consist primarily of contracts for the right to use and direct use of an individual property. Leases were analyzed for evidence of significant additional components and to determine if these components were separately identifiable within the context of the contract. As an accounting policy, to account for these components, the Company has elected the practical expedient for property leases that have both lease and non-lease components for them to be combined into a single component and account for as a lease. This policy is effective for all current and future property operating leases and applied uniformly and will be disclosed as such within the financial statements. Operating lease assets are included within right-of-use assets and the corresponding operating lease liabilities are included within liabilities on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023.

 

The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Because the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

 
Stock-based Compensation

Stock-based Compensation

 

Stock-based compensation primarily consists of restricted stock units with service or market/performance conditions and stock options. The MDB and Invizyne issues restricted stock units are measured at the fair market value of the underlying stock at the grant date. The Company recognize stock compensation expense using the straight-line attribution method over the requisite service period for the restricted stock units. The Company’s subsidiary issued stock-option and the fair value is determined utilizing Black-Scholes options-pricing model. The Company account for forfeitures as they occur, rather than applying an estimated forfeiture rate. For performance-based restricted stock units, the compensation cost is recognized based on the number of units expected to vest upon the achievement of the performance conditions. Shares are issued on the vesting dates net of the applicable statutory tax withholding to be paid by us on behalf of our employees. As a result, fewer shares are issued to the employee than the number of awards outstanding. The Company record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

 
Investment Securities

Investment Securities

 

The Company strategically invests funds in U.S. Treasury Bills, early-stage technology companies, and equity securities and options of publicly traded and privately held companies. The Company classifies investment securities as investment securities, at amortized cost, investment securities, at fair value, or investment securities, at cost less impairment.

 

Investment securities, at amortized cost – This is comprised of debt securities held by MDB and are classified as investment securities held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. These securities were originally recorded at fair value and are subsequently measured at amortized cost, adjusted for unamortized purchase premiums and discounts, and an allowance for credit losses. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the interest income in the statements of operations. Interest income is recognized when earned. The Company recognizes estimated expected credit losses over the life of the investment security through the allowance for credit losses account. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the investment security to present the net amount expected to be collected. In determining expected credit losses, the Company considers relevant qualitative factors including, but not limited to, term and structure of the instrument, credit rating by rating agencies and historic credit losses adjusted for current conditions and reasonable and supportable forecasts. The Company currently only holds investments securities, at amortized cost in U.S. Treasury Bills, so there are no expected credit losses. Declines in fair value of these securities is due to changes in market interest rates, and because we expect to hold these securities until maturity, we do not expect to realize any losses.

 

 

Investment securities, at fair value – This is comprised of equity investments held by the broker dealer subsidiary and are reported at fair value with changes in fair value recognized in the statements of operations. Purchases and sales of equity securities, consisting of common stock and warrants to purchase common stock, are recorded based on the respective market price quotations on the trade date. Realized gains and losses on investments represent the net gains and losses on investments sold during the period based on the average cost method. Changes in fair value of investments are recorded on the unaudited condensed consolidated statements of operations as unrealized gains and losses.

 

Investment securities, at cost less impairment – This is comprised of equity securities and a simple agreement on future equities without a readily determinable fair value held by the broker dealer subsidiary, the Company has elected to apply the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company will reassess whether such an investment qualifies for the measurement alternative at each reporting period. In evaluating an investment for impairment or observable price changes, we will use inputs including recent financing events, as well as other available information regarding the investee’s historical and forecasted performance. The Company has assessed this investment and no impairment is warranted.

 

Investment securities are as follows:

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at amortized cost:          
U.S Treasury Bills  $21,381,362   $24,658,611 
Investment securities, at amortized cost  $21,381,362   $24,658,611 

 

Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at fair value:          
Common stock of publicly traded companies  $2,389,011   $2,603,579 
Warrants of publicly traded companies   2,610,226    3,168,055 
Investment securities, at fair value  $4,999,237   $5,771,634 

 

Non-Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at cost less impairment          
Simple agreement on future equities (not market listed)  $200,000   $200,000 
Investment securities, at cost less impairment  $200,000   $200,000 

 

For investment securities at fair value, net unrealized loss of $747,268 and net unrealized gain of $54,779 were recognized in the statements of operations for three-months ended March 31, 2024 and 2023, respectively.

 

 

The amortized cost, excluding gross unrealized holding loss and fair value of held to maturity securities on March 31, 2024 and December 31, 2023 are as follows:

 

  

Amortized

Cost as of

March 31, 2024

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

March 31, 2024

 
U.S Treasury Bills maturing 04/04/24, 04/18/24, 04/23/24 and 6/11/24  $21,381,362   $1,035   $        -   $21,382,397 
Total assets  $21,381,362   $1,035   $-   $21,382,397 

 

  

Amortized

Cost as of

December 31, 2023

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

December 31, 2023

 
U.S Treasury Bills maturing 02/13/24, 04/04/24, 04/18/24 and 04/23/24  $24,658,611   $6,031   $-   $24,664,642 
Total assets  $24,658,611   $6,031   $-   $24,664,642 

 
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There is no significant concentration of credit risk, due to the majority of assets being invested in U.S. Treasury Bills.

 

The Company determines the fair value of its financial instruments based on a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

 

Level 1–- Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date.

 

Level 2–- Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

 

Level 3–- Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions.

 

The Company’s financial instruments primarily consist of cash and investment securities. As of the unaudited condensed consolidated balance sheets date, certain investment securities are required to be recorded at fair value with the change in fair value during the period being recorded as an unrealized gain or loss. As of March 31, 2024 and December 31, 2023, the estimated fair values of investment securities, at amortized cost were not materially different from their carrying values as presented on the unaudited condensed consolidated balance sheets. This is primarily attributed to the short-term maturities of these instruments.

 

 

Investment securities, at amortized cost: The fair value of U.S. Treasury Bills classified as held-to-maturity investment securities is based on the market price and is classified as level 1 of the fair value hierarchy.

 

A description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis is as follows:

 

Investment securities: Public equity securities are assessed for valuation at the close of each month. Warrants are valued using the Black-Scholes model, which considers the stock price at the date of the valuation, the warrants strike price, the term to expiry, the risk-free rate of return, and the expected volatility of the underlying stock.

 

Investment securities, at cost less impairment: Non-public equity securities and simple agreements for future equity are valued based on the initial investment, less impairment. The Company determined that no impairment was warranted. Since these securities are not actively traded, we will apply valuation adjustments when they become available, and they are categorized in level 3 of the fair value hierarchy.

 

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities–- common stock  $2,389,011   $-   $-   $2,389,011 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    17,680    2,592,546    2,610,226 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,389,011   $17,680   $2,592,546   $4,999,237 

 

During the three months ended March 31, 2024, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

 

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2023  $3,133,458 
      
Receipt from investment banking fees   - 
Realized gains   - 
Unrealized losses   (540,912)
Sales or distribution     
Purchases   - 
March 31, 2024  $2,592,546 

 

The following table presents information about significant unobservable inputs related to material components of Level 3 warrants as of March 31, 2024.

 

Assets  Fair Value   Valuation Techniques  Significant Unobservable Inputs  Range of Inputs   Weighted-Average 
                      
Warrants  $2,592,546   Black Scholes  Volatility   96.26 -106.28%   99.60%

 

 

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities -
common stock		  $2,603,579   $-   $-   $2,603,579 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    34,597    3,133,458    3,168,055 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,603,579   $34,597   $3,133,458   $5,771,634 

 

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2022  $- 
Receipt from investment banking fees   2,645,620 
Realized gains   - 
Unrealized gains   652,925 
Sales or distribution   (165,087)
Purchases   - 
December 31, 2023  $3,133,458 

 

During the year ended December 31, 2023, the Company did not have any transfers between Level 1, Level 2, or Level 3 of the fair value hierarchy.

 
Secured Debt–- Revolving Credit Facility

Secured Debt–- Revolving Credit Facility

 

The Company entered into a revolving credit facility with a bank, (the “Lender”) on July 26, 2023 for a commitment of up to $2,000,000 and which matures July 26, 2024. The loan has a variable interest rate equal to a defined index, currently the Lender’s rate on the sale of Federal Funds, plus 2.25%. The loan commenced with a calculated interest rate of 7.75%. If the Lender determines, in its sole discretion, that the index becomes unavailable or unreliable, either temporary, indefinitely, or permanently, during the term of this loan, the Lender may amend this loan by designating a substantially similar substitute index. The agreement provides for a quarterly payment of the greater of accrued interest or a non-usage fee of $5,000. The Company has not made any draw downs on the credit facility.

 

The Company granted the Lender a security interest in a cash checking account held at the bank as collateral. The Lender has a right of setoff available from this cash account when the line of credit is accessed. As of March 31, 2024, there is $2,037,845 deposited in this account.

 

The Company is responsible for the payment of all of the Lender’s legal and other fees incurred in connection with administering the loan. The Company has incurred no such costs or debt issue costs.

 

As of March 31, 2024, there is no outstanding indebtedness under the credit facility and interest expense totaled $0. The Company is in compliance with all covenants under the agreement.

 

 
Property and Equipment

Property and Equipment

 

Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statements of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:

 

Laboratory equipment   5 years
Furniture and fixtures   7 years
Leasehold improvements   Lesser of the lease duration or the life of the improvements

 

Property and equipment consist of the following as of March 31, 2024 and December 31, 2023, respectively:

 

  

March 31, 2024

  

December 31, 2023

 
         
Laboratory equipment  $1,030,004   $885,696 
Furniture and fixtures   54,338    49,838 
Developed software   107,458    113,114 
Leasehold improvements   279,161    279,161 
Total property and equipment   1,470,961    1,327,809 
Less: Accumulated depreciation   (524,111)   (461,319)
Property and equipment, net  $946,850   $866,490 

 
Revenue

Revenue

 

The Company generates revenue primarily from providing brokerage services and investment banking services through Public Ventures. PatentVest and Invizyne have had limited financial activity during the three-months ended March 31, 2024 and 2023, respectively.

 

Brokerage revenues consist of (a) trade-based commission income from executed trade orders, (ii) net realized gains and losses from proprietary trades, and (iii) other income consisting primarily of stock loan income earned on customer accounts. Public Ventures recognizes revenue from trade-based commissions and other income when performance obligations are satisfied through the transfer of control, as specified in the contract, of promised services to the customers of Public Ventures. Commissions are recognized on a trade date basis. Public Ventures believes that each executed trade order represents a single performance obligation that is fulfilled on the trade date because that is when the underlying financial instrument is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer. When another party is involved in transferring a good or service to a customer, Public Ventures assesses whether revenue is presented based on the gross consideration received from customers (principal) or net of amounts paid to a third party (agent). Public Ventures has determined that it is acting as the principal as the provider of the brokerage services and therefore records this revenue on a gross basis. Clearing, custody and trade administration fees incurred are recorded effective as of the trade date. The costs are treated as fulfillment costs and are recorded in operating expenses in the unaudited condensed consolidated statements of operations.

 

Brokerage revenue is measured by the transaction price, which is defined as the amount of consideration that Public Ventures expects to receive in exchange for services to customers. The transaction price is adjusted for estimates of known or expected variable consideration based upon the individual contract terms. Variable consideration is recorded as a reduction to revenue based on amounts that Public Ventures expects to refund back to the customer. There were no variable considerations for the three-months ended March 31, 2024, and 2023, respectively.

 

Investment banking revenues consist of private placement fees. Public Ventures does not incur costs to obtain contracts with customers that are eligible for deferral or receive fees prior to recognizing revenue related to investment banking transactions, and therefore, as of March 31, 2024, the Company did not have any contract assets or liabilities related to these revenues on its unaudited condensed consolidated balance sheets.

 

 

Private placement fees are related to non-underwritten transactions such as private placements of equity securities, private investments in public equity, and Rule 144A private offerings and are recorded on the closing date of the transaction. Client reimbursements for costs associated for private placement fees are recorded gross within investment banking and various expense captions, excluding compensation. The Company typically receives payments on private placements transactions at the completion of the contract. The Company views the majority of placement fees as a single performance obligation that is satisfied when the transaction is complete, and the revenue is recognized at that point in time.

 

Taxes and regulatory fees assessed by a government authority or agency that are both imposed on and concurrent with a specified revenue-producing transaction, which are collected by Public Ventures from a customer, are excluded from revenue and recorded against general and administrative expenses.

 

PatentVest recognize revenue when performance obligations are satisfied by transferring promised goods and services to customers in an amount the Company expects to receive in exchange for those goods or services. PatentVest enters into contracts that can include various combinations of its offerings which are generally capable of being distinct and accounted for as a separate performance obligation for the entre contract or a portion of the contract. When performance obligations are combined into a single contract, PatentVest utilize stand-alone selling price to allocate the transaction price among the performance obligations.

 

Certain contracts or portions of contracts are duration-based which, in the event of customer cancellation, provide PatentVest with an enforceable right to a proportional payment for the portion of the services provided. Accordingly, revenue from duration-based is recognized using a time-based measure of progress, which PatentVest believes best depicts how it satisfies its performance obligations in these arrangements as control is continuously transferred throughout the contract period. Revenue from certain contracts is recognized over the expected period of performance using a single measure of progress, typically based on hours incurred. Payments received in advance of services being rendered are recorded as a component of contract liabilities.

 

Patent Vest’s contract liabilities which is presented as deferred revenue, consist of advance payments. The table below shows changes in deferred revenue:

 

Balance as of December 31, 2022  $- 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2023   - 
Amounts billed but not recognized   100,000 
Revenue recognized   80,000 
Balance as of December 31, 2023   20,000 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2024  $20,000 

 

During the three-months ended March 31, 2023, the Company’s technology development segment revenue, which was derived from a single feasibility study, which is not a typical service offered by the Company. The revenue generated from this study represents a direct reimbursement of costs incurred in completing the study.

 

 
Research Grants

Research Grants

 

Invizyne receives grant reimbursements, which are offset against research and development expenses in the unaudited condensed consolidated statements of operations. In addition to actual reimbursements, Invizyne also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs, resulting in a negative impact. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the unaudited condensed consolidated balance sheet.

 

Grants that operate on a reimbursement basis are recognized on the accrual basis and are offsets to expenses to the extent of disbursements and commitments that are reimbursable for allowable expenses incurred as of March 31, 2024 and 2023, and respectively, expected to be received from funding sources in the subsequent year. Management considers such receivables at March 31, 2024 and 2023, respectively, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying unaudited condensed consolidated financial statements.

 

Summary of grants receivable activity for the three-months ended March 31, 2024 and 2023, is presented below:

 

Summary of Grants Receivable Activity

   2024   2023 
         
Balance at beginning of period  $882,319   $809,532 
Grant costs expensed   674,158    766,867 
Grants for equipment purchased   6,379    - 
Grant fees   28,163    26,673 
Grant funds received   (479,408)   (590,418)
Balance at end of period  $1,111,611   $1,012,654 

 

Invizyne has received five grants provided by National Institute of Health and the Department of Energy. The first grant was awarded on October 1, 2019 and the latest grant is set to expire on August 31, 2024, however grants can be extended or new phases can be granted, extending the expiration of the grant. None of the grants has commitments made by the parties, provisions for recapture, or any other contingencies, beyond the complying with the normal terms of each research and development grant. Research grants received from organizations are subject to the contract agreement as to how Invizyne conducts its research activities, and Invizyne is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. Invizyne is permitted to draw down the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the unaudited condensed consolidated statements of operations. For the three-months ended March 31, 2024 and 2023, respectively, grants amounting to $674,158 and $766,867 were offset against the research and development costs. Grant drawdowns, which includes grants costs expensed, grants for equipment purchased, and grant fees, for the three-months ended March 31, 2024 and 2023, respectively, totaled $708,700 and $793,540.

 
Research and Development Costs

Research and Development Costs

 

Research and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to consultants, and other expenses relating to the development of Invizyne’s technology. For the three-months ended March 31, 2024 and 2023, research and development costs prior to offset of the grants amounted to $986,282, and $825,132, respectively, which includes grant costs expensed, grants fees, and research and development costs, net of the grant received.

 
Patent and Licensing Legal and Filing Fees and Costs

Patent and Licensing Legal and Filing Fees and Costs

 

Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.

 

 

Patent and licensing legal and filing fees and costs were $73,297 and $34,420 for the three-months ended March 31, 2024 and 2023, respectively. Patent and licensing legal and filing fees and costs are included in general and administrative costs in the unaudited condensed consolidated statements of operations.
v3.24.1.1.u2
Summary of Significant Accounting Policies (Tables)
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Schedule of Investment Securities

Investment securities are as follows:

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at amortized cost:          
U.S Treasury Bills  $21,381,362   $24,658,611 
Investment securities, at amortized cost  $21,381,362   $24,658,611 
Schedule of Investment Securities Broker Dealer

Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at fair value:          
Common stock of publicly traded companies  $2,389,011   $2,603,579 
Warrants of publicly traded companies   2,610,226    3,168,055 
Investment securities, at fair value  $4,999,237   $5,771,634 
Schedule of Investment Securities Non Broker Dealer

Non-Broker/Dealer Securities

 

  

March 31, 2024

  

December 31, 2023

 
Investment securities, at cost less impairment          
Simple agreement on future equities (not market listed)  $200,000   $200,000 
Investment securities, at cost less impairment  $200,000   $200,000 
Schedule of Amortized Cost, Unrealized Holding Loss and Fair Value of Held to Maturity Securities

The amortized cost, excluding gross unrealized holding loss and fair value of held to maturity securities on March 31, 2024 and December 31, 2023 are as follows:

 

  

Amortized

Cost as of

March 31, 2024

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

March 31, 2024

 
U.S Treasury Bills maturing 04/04/24, 04/18/24, 04/23/24 and 6/11/24  $21,381,362   $1,035   $        -   $21,382,397 
Total assets  $21,381,362   $1,035   $-   $21,382,397 

 

  

Amortized

Cost as of

December 31, 2023

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

  

Fair Value

(Level 1)

as of

December 31, 2023

 
U.S Treasury Bills maturing 02/13/24, 04/04/24, 04/18/24 and 04/23/24  $24,658,611   $6,031   $-   $24,664,642 
Total assets  $24,658,611   $6,031   $-   $24,664,642 
Schedule of Fair Value of Financial Assets and Liabilities Measured at Fair Value On a Recurring Basis

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities–- common stock  $2,389,011   $-   $-   $2,389,011 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    17,680    2,592,546    2,610,226 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,389,011   $17,680   $2,592,546   $4,999,237 
The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, except for the Level 3 investment that is recorded at cost:

 

Assets  Classification  Level 1   Level 2   Level 3   Total 
                    
Investment Securities (held by our licensed broker dealer)  Equity securities -
common stock		  $2,603,579   $-   $-   $2,603,579 
                        
Investment Securities (held by our licensed broker dealer)  Warrants   -    34,597    3,133,458    3,168,055 
                        
Total assets measured at fair value (held by our licensed broker dealer)     $2,603,579   $34,597   $3,133,458   $5,771,634 
 
Schedule of Reconciliation of Fair Value Measurements Within Level 3 of Fair Value Hierarchy

Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2023  $3,133,458 
      
Receipt from investment banking fees   - 
Realized gains   - 
Unrealized losses   (540,912)
Sales or distribution     
Purchases   - 
March 31, 2024  $2,592,546 
Reconciliation of fair value measurements categorized within Level 3 of the fair value hierarchy:

 

      
December 31, 2022  $- 
Receipt from investment banking fees   2,645,620 
Realized gains   - 
Unrealized gains   652,925 
Sales or distribution   (165,087)
Purchases   - 
December 31, 2023  $3,133,458 
 
Schedule of Significant Unobservable Inputs Related to Material Components of Level 3 Warrants

The following table presents information about significant unobservable inputs related to material components of Level 3 warrants as of March 31, 2024.

 

Assets  Fair Value   Valuation Techniques  Significant Unobservable Inputs  Range of Inputs   Weighted-Average 
                      
Warrants  $2,592,546   Black Scholes  Volatility   96.26 -106.28%   99.60%
Schedule of Estimated Useful Lives of Property and Equipment

Laboratory equipment   5 years
Furniture and fixtures   7 years
Leasehold improvements   Lesser of the lease duration or the life of the improvements
Schedule of Property And Equipment

Property and equipment consist of the following as of March 31, 2024 and December 31, 2023, respectively:

 

  

March 31, 2024

  

December 31, 2023

 
         
Laboratory equipment  $1,030,004   $885,696 
Furniture and fixtures   54,338    49,838 
Developed software   107,458    113,114 
Leasehold improvements   279,161    279,161 
Total property and equipment   1,470,961    1,327,809 
Less: Accumulated depreciation   (524,111)   (461,319)
Property and equipment, net  $946,850   $866,490 
Schedule of Changes in Deferred Revenue

Balance as of December 31, 2022  $- 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2023   - 
Amounts billed but not recognized   100,000 
Revenue recognized   80,000 
Balance as of December 31, 2023   20,000 
Amounts billed but not recognized   - 
Revenue recognized   - 
Balance as of March 31, 2024  $20,000 
Summary of Grants Receivable Activity

Summary of grants receivable activity for the three-months ended March 31, 2024 and 2023, is presented below:

 

Summary of Grants Receivable Activity

   2024   2023 
         
Balance at beginning of period  $882,319   $809,532 
Grant costs expensed   674,158    766,867 
Grants for equipment purchased   6,379    - 
Grant fees   28,163    26,673 
Grant funds received   (479,408)   (590,418)
Balance at end of period  $1,111,611   $1,012,654 
v3.24.1.1.u2
Segment Reporting (Tables)
 3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
Schedule of Long-lived Assets and Total Assets by Segment

The following sets forth the long-lived assets and total assets by segment at March 31, 2024:

 

ASSETS  Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Eliminations   Consolidated 
Long-lived assets  $107,458   $2,367,496   $707,455   $          -   $3,182,409 
Total assets  $16,301,072   $4,005,204   $20,633,600   $-   $40,939,876 
The following sets forth the long-lived assets and total assets by segment at December 31, 2023:

 

ASSETS  Broker
Dealer &
Intellectual
Property
Service		   Technology
Development		   Other   Consolidated 
Long-lived assets  $113,114   $2,344,895   $728,600   $3,186,609 
Total assets  $15,038,602   $3,558,509   $24,388,168   $42,985,279 
 
Schedule of Statement of Operation by Segment

   Broker
Dealer &
Intellectual
Property
Service		   Technology Development   Other   Eliminations     Consolidated 
Operating income:                            
Unrealized gain on investment securities, net (from our licensed broker dealer)  $(747,268)  $-   $-   $             -     $(747,268)
Other operating income   86,879    -    -     -      86,879 
Total operating income, net   (660,389)    -    -     -      (660,389) 
                             
Operating costs:                            
General and administrative costs:                            
Compensation   679,907    390,043    3,822,725     -      4,892,675 
Operating expense, related party   243,876    -    76,416     -      320,292 
Professional fees   145,907    256,563    516,619     -      919,089 
Information technology   180,914    3,891    21,186     -      205,991 
Clearing and other charges   2,036    -    -     -      2,036 
General and administrative-other   218,936    80,378    369,812     -      669,126 

General and administrative costs

   1,471,576    730,875    4,806,758     -      7,009,209 
Research and development costs   -    277,582    -     -      277,582 
Total operating costs   1,471,576    1,008,457    4,806,758     -      7,286,791 
Net operating income (loss)   (2,131,965)   (1,008,457)   (4,806,758)    -      (7,947,180)
Other income and expense:                            
Less: interest expense   110,625    -    -     110,625      - 
Interest income   52,459    -    285,393     -      337,852 

Income (loss) before income taxes

   (2,190,131)   (1,008,457)   (4,521,365)    110,625      (7,609,328)

Income tax expense

   -    -    -     -      - 

Net income (loss)

   (2,190,131)   (1,008,457)   (4,521,365)    110,625      (7,609,328)
Less net loss attributable to non-controlling interests   -    (393,903)   -     -      (393,903)
Net loss attributable to MDB Capital Holdings, LLC  $(2,190,131)  $(614,554)  $(4,521,365)  $ 110,625     $(7,215,425)
v3.24.1.1.u2
Equity and Non-Controlling Interests (Tables)
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Schedule of Equity and Non-Controlling Interests

  

For the Three Months Ended

March 31,

 
   2024   2023 
         
Invizyne net loss  $(1,008,457)  $(241,150)
Weighted average non-controlling percentage   39.06%   39.06%
Net loss non-controlling interest  $(393,903)  $(94,193)
Prior period balance   7,250    468,665 
Stock-based compensation   142,810    54,126 
Ending period balance  $(243,843)  $428,598 
v3.24.1.1.u2
Stock-Based Compensation (Tables)
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Summary of Restricted Stock Unit, Time-Based and Performance-Based Activity

A summary of restricted stock unit activity during the three-months ended March 31, 2024 and 2023 is presented below:

 

   Time-Based   Performance-Based 
   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value   Number of Restricted Stock Units   Weighted Average Grant Date Fair Value 
Restricted stock units outstanding at March 31, 2023   3,675,000   $10.00    2,000,000   $7.91 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Restricted stock units outstanding at December 31, 2023   3,675,000   $10.00    2,000,000   $7.91 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired   -    -    -    - 
Restricted stock units outstanding at March 31, 2024   3,675,000   $10.00    2,000,000   $7.91 
                     
Restricted stock units at March 31, 2023   -   $-    -   $- 
Restricted stock units at March 31, 2024   -   $-    -   $- 
Schedule of Stock Option Activity

A summary of stock option activity during the three months ended March 31, 2024 and 2023 is presented below:

 

   Number of Shares  

Weighted Average

Exercise Price

   Weighted
Average
Remaining
Contractual Life
(in Years)		 
Stock options outstanding at January 1, 2023   1,067,356   $1.22    4.83 
Granted   -    -    - 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at March 31, 2023   1,067,356   $1.22    4.83 
Granted   1,018,012    1.66    7.00 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at December 31, 2023   2,085,368   $1.43    5.47 
Granted   311,636    1.66    7.00 
Exercised   -    -    - 
Expired   -    -    - 
Stock options outstanding at March 31, 2024   2,397,004    1.46    5.55 
                
Stock options exercisable at March 31, 2023   462,518   $1.22    4.83 
Stock options exercisable at March 31, 2024   695,035   $1.46    5.55 
v3.24.1.1.u2
Earnings Per Share (Tables)
 3 Months Ended
Mar. 31, 2024
Loss per share attributable to MDB Capital Holdings, LLC:  
Schedule of Basic and Fully Diluted

Basic and fully diluted earnings (loss) per share is calculated at follows for the three-months ended March 31, 2024 and 2023:

 

                     
   For the Three Months Ended 
   March 31, 2024   March 31, 2023 
   Class A common shares   Class B common shares   Class A common shares   Class B common shares 
Net loss attributable to MDB Capital Holdings, LLC  $(3,334,431)  $(3,881,084)  $(645,700)  $(1,228,048)
                     
Weighted average shares outstanding – basic and diluted   4,295,632    5,000,000    2,628,966    5,000,000 
                     
Net loss per share – basic and diluted  $(0.78)  $(0.78)  $(0.25)  $(0.25)
v3.24.1.1.u2
Leases (Tables)
 3 Months Ended
Mar. 31, 2024
Leases  
Schedule of Operating Lease Cost

  

  

March 31, 2024

  

December 31, 2023

 
         
Operating leases:          
Right-of-use assets  $2,235,559   $2,320,119 
Operating lease liabilities  $2,339,955   $2,415,889 
           
Weighted average remaining lease term in years   5.27    5.33 
Weighted average discount rate   7.66%   7.40%
           
Cash paid for amounts included in the measurement of lease liabilities  $121,688   $206,837 
Right-of-use assets obtained in exchange for lease liabilities  $-   $1,018,002 
           
Operating lease cost  $45,754   $146,836 
Short-term lease costs   84,560    275,589 
Total operating lease costs  $130,314   $422,425 
Schedule of Future payments Due Under Operating Lease

Future payments due under operating leases as of March 31, 2024 are as follows:

  

Year  Amount 
Remainder of 2024  $369,936 
2025   503,684 
2026   516,001 
2027   528,586 
2028   541,674 
Thereafter   451,600 
Total  $2,911,481 
Less effects of discounting   (571,526)
Total operating lease liabilities  $2,339,955 
v3.24.1.1.u2
Organization and Description of Business (Details Narrative) - USD ($)
Sep. 20, 2023
Jul. 01, 2022
Jun. 15, 2022
Jun. 08, 2022
Jan. 16, 2022
Mar. 31, 2024
Jan. 14, 2022
Warrant [Member] | Private Placement [Member]              
Warrants to puchase common shares     18,477        
Warrants term     10 years        
Exercise price of warrants     $ 13.00        
Cash consideration per share     $ 0.001        
Warrants fair value     $ 106,940        
Warrant [Member] | IPO [Member]              
Warrants to puchase common shares 16,667            
Warrants term 5 years            
Exercise price of warrants $ 15.00            
Cash consideration per share $ 0.001            
Warrants fair value $ 65,411            
Common Class A [Member] | First Private Placement [Member]              
Sale of stock, number of shares issued in transaction       2,517,966      
Sale of stock, price per share       $ 10.00      
Gross proceeds       $ 25,179,660      
Common Class A [Member] | Second Private Placement [Member]              
Sale of stock, number of shares issued in transaction     11,000        
Gross proceeds     $ 110,000        
Common Class A [Member] | Private Placement [Member]              
Sale of stock, number of shares issued in transaction     2,528,966        
Gross proceeds     $ 25,289,660        
Net Proceeds     24,746,142        
Offering expenses     $ 543,518        
Common Class A [Member] | IPO [Member]              
Sale of stock, number of shares issued in transaction 1,666,666            
Sale of stock, price per share $ 12.00            
Net Proceeds $ 17,444,659            
Offering expenses 2,555,333            
Gross proceeds $ 19,999,992            
Common Class A [Member] | Noncontrolling Interest [Member]              
Shares issued         100,000    
Patent Vest Inc [Member]              
Equity interests percentage           100.00%  
Patent Vest Inc [Member] | Public Ventures [Member]              
Equity interests percentage             100.00%
Invizyne Technologies Inc [Member] | Public Ventures [Member]              
Equity interests percentage             100.00%
Public Ventures [Member]              
Cash distribution payable to former members   $ 2,723,700          
Public Ventures [Member] | Common Class B [Member]              
Common shares issued in reorganization         5,000,000    
v3.24.1.1.u2
Schedule of Investment Securities (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Cash and Cash Equivalents [Line Items]    
Investment securities, at amortized cost $ 21,381,362 $ 24,658,611
US Treasury Securities [Member]    
Cash and Cash Equivalents [Line Items]    
Investment securities, at amortized cost $ 21,381,362 $ 24,658,611
v3.24.1.1.u2
Schedule of Investment Securities Broker Dealer (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Investment securities, at fair value $ 4,999,237 $ 5,771,634
Common Stock [Member]    
Investment securities, at fair value 2,389,011 2,603,579
Warrant [Member]    
Investment securities, at fair value $ 2,610,226 $ 3,168,055
v3.24.1.1.u2
Schedule of Investment Securities Non Broker Dealer (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Investment securities, at cost less impairment $ 200,000 $ 200,000
Simple Agreement on Future Equities [Member]    
Investment securities, at cost less impairment $ 200,000 $ 200,000
v3.24.1.1.u2
Schedule of Amortized Cost, Unrealized Holding Loss and Fair Value of Held to Maturity Securities (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Cash and Cash Equivalents [Line Items]    
Debt Securities, Held-to-Maturity, Fair Value $ 21,381,362 $ 24,658,611
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Gain 1,035 6,031
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Loss
Debt Securities, Held-to-Maturity, Amortized Cost, before Allowance for Credit Loss 21,382,397 24,664,642
US Treasury Securities [Member]    
Cash and Cash Equivalents [Line Items]    
Debt Securities, Held-to-Maturity, Fair Value 21,381,362 24,658,611
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Gain 1,035 6,031
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Loss
Debt Securities, Held-to-Maturity, Amortized Cost, before Allowance for Credit Loss $ 21,382,397 $ 24,664,642
v3.24.1.1.u2
Schedule of Fair Value of Financial Assets and Liabilities Measured at Fair Value On a Recurring Basis (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value $ 4,999,237 $ 5,771,634
Common Stock [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 2,389,011 2,603,579
Warrant [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 2,610,226 3,168,055
Fair Value, Inputs, Level 1 [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 2,389,011 2,603,579
Fair Value, Inputs, Level 1 [Member] | Common Stock [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 2,389,011 2,603,579
Fair Value, Inputs, Level 1 [Member] | Warrant [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value
Fair Value, Inputs, Level 2 [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 17,680 34,597
Fair Value, Inputs, Level 2 [Member] | Common Stock [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value
Fair Value, Inputs, Level 2 [Member] | Warrant [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 17,680 34,597
Fair Value, Inputs, Level 3 [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value 2,592,546 3,133,458
Fair Value, Inputs, Level 3 [Member] | Common Stock [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value
Fair Value, Inputs, Level 3 [Member] | Warrant [Member]    
Platform Operator, Crypto Asset [Line Items]    
Investment securities, at fair value $ 2,592,546 $ 3,133,458
v3.24.1.1.u2
Schedule of Reconciliation of Fair Value Measurements Within Level 3 of Fair Value Hierarchy (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Accounting Policies [Abstract]    
Beginning Balance $ 3,133,458
Receipt from investment banking fees 2,645,620
Realized gains
Unrealized gains (540,912) 652,925
Sales or distribution   (165,087)
Purchases
Ending Balance $ 2,592,546 $ 3,133,458
v3.24.1.1.u2
Schedule of Significant Unobservable Inputs Related to Material Components of Level 3 Warrants (Details) - Fair Value, Inputs, Level 3 [Member]
Mar. 31, 2024
USD ($)
Property, Plant and Equipment [Line Items]  
Warrants, Fair value $ 2,592,546
Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Weighted measurement input 96.26
Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Weighted measurement input 106.28
Weighted Average [Member]  
Property, Plant and Equipment [Line Items]  
Weighted measurement input 99.60
v3.24.1.1.u2
Schedule of Estimated Useful Lives of Property and Equipment (Details)
Mar. 31, 2024
Laboratory Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 5 years
Furniture and Fixtures [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, estimated useful lives 7 years
Leasehold Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Property, Plant, and Equipment, Useful Life, Term, Description [Extensible Enumeration] us-gaap:UsefulLifeTermOfLeaseMember
v3.24.1.1.u2
Schedule of Property And Equipment (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 1,470,961 $ 1,327,809
Less: Accumulated depreciation (524,111) (461,319)
Property and equipment, net 946,850 866,490
Laboratory Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 1,030,004 885,696
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 54,338 49,838
Developed Software [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 107,458 113,114
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 279,161 $ 279,161
v3.24.1.1.u2
Schedule of Changes in Deferred Revenue (Details) - USD ($)
 3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Accounting Policies [Abstract]      
Deferred revenue, Balance $ 20,000
Revenue recognized 100,000
Revenue recognized 80,000
Deferred revenue, Balance $ 20,000 $ 20,000
v3.24.1.1.u2
Summary of Grants Receivable Activity (Details) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Accounting Policies [Abstract]    
Balance at beginning of period $ 882,319 $ 809,532
Grant costs expensed 674,158 766,867
Grants for equipment purchased 6,379
Grant fees 28,163 26,673
Grant funds received (479,408) (590,418)
Balance at end of period $ 1,111,611 $ 1,012,654
v3.24.1.1.u2
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
 3 Months Ended 12 Months Ended
Jul. 26, 2023
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Line of Credit Facility [Line Items]        
Cash, FDIC insured limits   $ 250,000    
Cash, SIPC insurance limits   500,000    
Cash and Securities Segregated under Federal and Other Regulations   2,959,994   $ 1,247,881
Cash and securities segregated   2,959,994   1,247,881
Clearing deposits   703,740   260,000
Prepaid and other expenses   494,463   523,788
Intangible assets acquired   43,500   43,500
Prepaid professional fees   50,000   95,000
Security deposit   47,380   47,380
Various prepaid expense   312,531   325,777
Other assets   41,052   $ 12,131
Unrealized gain on investments   (747,268) $ 54,779  
Grant costs expensed   674,158 766,867  
Grant drawdowns   708,700 793,540  
Net of grant received   986,282 825,132  
Patent and licensing legal and filing fees and costs   73,297 $ 34,420  
Revolving Credit Facility [Member]        
Line of Credit Facility [Line Items]        
Revolving credit, maximum borrowing capacity $ 2,000,000      
Maturity date Jul. 26, 2024      
Variable rate 2.25%      
Interest rate 7.75%      
Credit non-usage fee $ 5,000      
Deposits   2,037,845    
Outstanding indebtedness   0    
Interest payable   $ 0    
v3.24.1.1.u2
Schedule of Long-lived Assets and Total Assets by Segment (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Segment Reporting Information [Line Items]    
Long-lived assets $ 3,182,409 $ 3,186,609
Total assets 40,939,876 42,985,279
Broker Dealer & Intellectual Property Service [Member]    
Segment Reporting Information [Line Items]    
Long-lived assets 107,458 113,114
Total assets 16,301,072 15,038,602
Technology Development [Member]    
Segment Reporting Information [Line Items]    
Long-lived assets 2,367,496 2,344,895
Total assets 4,005,204 3,558,509
Other [Member]    
Segment Reporting Information [Line Items]    
Long-lived assets 707,455 728,600
Total assets 20,633,600 $ 24,388,168
Eliminations [Member]    
Segment Reporting Information [Line Items]    
Long-lived assets  
Total assets  
v3.24.1.1.u2
Schedule of Statement of Operation by Segment (Details) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Operating income:    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2) $ (747,268) $ 54,779
Other operating income 86,879 62,212
Total operating income (loss), net (660,389) 116,991
General and administrative costs:    
Compensation 4,892,675 872,027
Operating expense, related party 320,292 301,702
Professional fees 919,089 604,662
Information technology 205,991 147,407
Clearing and other charges 2,036 10,754
General and administrative-other 669,126 304,079
Total general and administrative costs 7,009,209 2,240,631
Research and development costs 277,582 31,592
Total operating costs 7,286,791 2,272,223
Net operating loss (7,947,180) (2,155,232)
Other income:    
Less: interest expense  
Interest income 337,852 187,291
Income (loss) before income taxes (7,609,328) (1,967,941)
Income tax expense
Net loss (7,609,328) (1,967,941)
Less net loss attributable to non-controlling interests (393,903) (94,193)
Net loss attributable to MDB Capital Holdings, LLC (7,215,425) (1,873,748)
Broker Dealer & Intellectual Property Service [Member]    
Operating income:    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2) (747,268) 54,779
Other operating income 86,879 3,053
Total operating income (loss), net (660,389) 57,832
General and administrative costs:    
Compensation 679,907 546,801
Operating expense, related party 243,876 258,453
Professional fees 145,907 165,812
Information technology 180,914 121,876
Clearing and other charges 2,036 10,754
General and administrative-other 218,936 108,993
Total general and administrative costs 1,471,576 1,212,689
Research and development costs
Total operating costs 1,471,576 1,212,689
Net operating loss (2,131,965) (1,154,857)
Other income:    
Less: interest expense 110,625  
Interest income 52,459 28,362
Income (loss) before income taxes (2,190,131) (1,126,495)
Income tax expense
Net loss (2,190,131) (1,126,495)
Less net loss attributable to non-controlling interests
Net loss attributable to MDB Capital Holdings, LLC (2,190,131) (1,126,495)
Technology Development [Member]    
Operating income:    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2)
Other operating income 59,159
Total operating income (loss), net 59,159
General and administrative costs:    
Compensation 390,043 31,536
Operating expense, related party
Professional fees 256,563 181,707
Information technology 3,891 9,826
Clearing and other charges
General and administrative-other 80,378 45,734
Total general and administrative costs 730,875 268,803
Research and development costs 277,582 31,592
Total operating costs 1,008,457 300,395
Net operating loss (1,008,457) (241,236)
Other income:    
Less: interest expense  
Interest income 86
Income (loss) before income taxes (1,008,457) (241,150)
Income tax expense
Net loss (1,008,457) (241,150)
Less net loss attributable to non-controlling interests (393,903) (94,193)
Net loss attributable to MDB Capital Holdings, LLC (614,554) (146,957)
Other [Member]    
Operating income:    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2)
Other operating income
Total operating income (loss), net
General and administrative costs:    
Compensation 3,822,725 293,690
Operating expense, related party 76,416 43,249
Professional fees 516,619 257,143
Information technology 21,186 15,705
Clearing and other charges
General and administrative-other 369,812 149,352
Total general and administrative costs 4,806,758 759,139
Research and development costs
Total operating costs 4,806,758 759,139
Net operating loss (4,806,758) (759,139)
Other income:    
Less: interest expense  
Interest income 285,393 158,843
Income (loss) before income taxes (4,521,365) (600,296)
Income tax expense
Net loss (4,521,365) (600,296)
Less net loss attributable to non-controlling interests
Net loss attributable to MDB Capital Holdings, LLC (4,521,365) $ (600,296)
Eliminations [Member]    
Operating income:    
Unrealized gain on investment securities, net (from our licensed broker dealer) (Notes 1 and 2)  
Other operating income  
Total operating income (loss), net  
General and administrative costs:    
Compensation  
Operating expense, related party  
Professional fees  
Information technology  
Clearing and other charges  
General and administrative-other  
Total general and administrative costs  
Research and development costs  
Total operating costs  
Net operating loss  
Other income:    
Less: interest expense 110,625  
Interest income  
Income (loss) before income taxes 110,625  
Income tax expense  
Net loss 110,625  
Less net loss attributable to non-controlling interests  
Net loss attributable to MDB Capital Holdings, LLC $ 110,625  
v3.24.1.1.u2
Schedule of Equity and Non-Controlling Interests (Details) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Invizyne net loss $ (7,215,425) $ (1,873,748)
Net loss non-controlling interest (393,903) (94,193)
Prior period balance 7,250  
Ending period balance (243,843)  
Invizyne [Member]    
Invizyne net loss $ (1,008,457) $ (241,150)
Weighted average non-controlling percentage 39.06% 39.06%
Net loss non-controlling interest $ (393,903) $ (94,193)
Prior period balance 7,250 468,665
Stock-based compensation 142,810 54,126
Ending period balance $ (243,843) $ 428,598
v3.24.1.1.u2
Equity and Non-Controlling Interests (Details Narrative) - shares
Mar. 31, 2024
Dec. 31, 2023
Mar. 31, 2023
Class of Stock [Line Items]      
Preferred stock, shares authorized 10,000,000 10,000,000  
Preferred stock, shares issued 0 0  
Preferred stock, shares outstanding 0 0  
Invizyne [Member]      
Class of Stock [Line Items]      
Equity interest rate 60.94%   60.94%
Invizyne [Member]      
Class of Stock [Line Items]      
Ownership interest rate 60.94%   60.94%
Non-controlling interest rate 39.06%   39.06%
Common Class A [Member]      
Class of Stock [Line Items]      
Common stock, shares authorized 95,000,000 95,000,000  
Common stock, shares, issued 4,295,632 4,295,632  
Common stock, shares, outstanding 4,295,632 4,295,632  
Common Class B [Member]      
Class of Stock [Line Items]      
Common stock, shares authorized 5,000,000 5,000,000  
Common stock, shares, issued 5,000,000 5,000,000  
Common stock, shares, outstanding 5,000,000 5,000,000  
v3.24.1.1.u2
Summary of Restricted Stock Unit, Time-Based and Performance-Based Activity (Details) - $ / shares
 3 Months Ended 9 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Time Based [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of Restricted Stock Units, Beginning 3,675,000   3,675,000
Weighted Average Grant Date Fair Value, Beginning $ 10.00   $ 10.00
Number of Restricted Stock Units, Granted  
Weighted Average Grant Date Fair Value, Granted  
Number of Restricted Stock Units, Exercised  
Weighted Average Grant Date Fair Value, Exercised  
Number of Restricted Stock Units, Expired  
Weighted Average Grant Date Fair Value, Expired  
Number of Restricted Stock Units, Ending 3,675,000 3,675,000 3,675,000
Weighted Average Grant Date Fair Value, Ending $ 10.00 $ 10.00 $ 10.00
Number of Restricted Stock Units, Restricted stock  
Weighted Average Grant Date Fair Value, Restricted stock  
Performance Shares [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of Restricted Stock Units, Beginning 2,000,000   2,000,000
Weighted Average Grant Date Fair Value, Beginning $ 7.91   $ 7.91
Number of Restricted Stock Units, Granted  
Weighted Average Grant Date Fair Value, Granted  
Number of Restricted Stock Units, Exercised  
Weighted Average Grant Date Fair Value, Exercised  
Number of Restricted Stock Units, Expired  
Weighted Average Grant Date Fair Value, Expired  
Number of Restricted Stock Units, Ending 2,000,000 2,000,000 2,000,000
Weighted Average Grant Date Fair Value, Ending $ 7.91 $ 7.91 $ 7.91
Number of Restricted Stock Units, Restricted stock  
Weighted Average Grant Date Fair Value, Restricted stock  
v3.24.1.1.u2
Schedule of Stock Option Activity (Details) - $ / shares
 3 Months Ended 9 Months Ended 12 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]        
Number of Share, Stock option outstanding at beginning 2,085,368 1,067,356 1,067,356  
Weighted Average Exercise Price, Stock option outstanding at beginning $ 1.43 $ 1.22 $ 1.22  
Weighted Average Remaining Contractual Life (in Years), Stock options outstanding 5 years 6 months 18 days 4 years 9 months 29 days 5 years 5 months 19 days 4 years 9 months 29 days
Number of Share, Granted 311,636 1,018,012  
Weighted Average Exercise Price, Granted $ 1.66 $ 1.66  
Number of Share, Exercised  
Weighted Average Exercise Price, Exercised  
Number of Share, Expired  
Weighted Average Exercise Price, Expired  
Weighted Average Remaining Contractual Life (in Years), Granted 7 years   7 years  
Number of Share, Stock option outstanding at ending 2,397,004 1,067,356 2,085,368 1,067,356
Weighted Average Exercise Price, Stock option outstanding at ending $ 1.46 $ 1.22 $ 1.43 $ 1.22
Number of Share, Stock option exercisable 695,035 462,518    
Weighted Average Exercise Price, Stock option exercisable $ 1.46 $ 1.22    
Weighted Average Remaining Contractual Life (in Years), Stock options exercisable 5 years 6 months 18 days 4 years 9 months 29 days    
v3.24.1.1.u2
Stock-Based Compensation (Details Narrative) - USD ($)
 3 Months Ended 5 Months Ended 9 Months Ended 12 Months Ended
Feb. 01, 2024
Nov. 01, 2023
May 01, 2023
Apr. 19, 2022
Mar. 28, 2022
Mar. 31, 2024
Mar. 31, 2023
Sep. 21, 2022
Dec. 31, 2023
Dec. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]                    
Stock-based compensation           $ 3,812,809 $ 54,126      
Stock options granted           311,636   1,018,012  
Granted exercise price           $ 1.66   $ 1.66  
Exercisable term           5 years 6 months 18 days 4 years 9 months 29 days      
2020 Equity Incentive Plan [Member]                    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]                    
Stock-based compensation           $ 142,810 $ 54,126      
Increase in grants of shares     3,116,351              
Stock options granted 311,636 914,129 103,880     695,035        
Granted exercise price $ 1.66 $ 1.66 $ 1.66     $ 1.46        
Exercisable term 7 years 7 years 7 years              
Stock options vested term 5 years 5 years 5 years              
Fair value common stock price per share $ 1.66 $ 1.66 $ 1.66              
Fair value assumptions exercise price per share $ 1.66 $ 1.66 $ 1.66              
Fair value assumptions expected term 5 years 5 years 5 years              
Fair value assumptions contractual life 7 years 7 years 7 years              
Fair value assumptions risk free interest rate 4.20% 4.67% 3.64%              
Fair value assumptions expected volatility rate 95.85% 144.94% 121.70%              
Annual dividends $ 0 $ 0 $ 0              
Aggregate intrinsic value, per share           $ 0.00        
Contractual term           5 years 6 months 18 days        
Unrecognized stock-based compensation           $ 2,145,319        
2020 Equity Incentive Plan [Member] | Maximum [Member]                    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]                    
Restricted stock units, granted                   1,877,664
Restricted Stock Units (RSUs) [Member]                    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]                    
Restricted stock units, granted     97,050 2,000,000 232,689     3,675,000    
Restricted stock units, description       These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange. Class A Share have traded in the market since September 20, 2023. The RSUs will vest once the Class A Shares are listed for any 90 consecutive calendar days at an average price of $20.00 or more during the period commencing from the Date of Grant and prior to the five year anniversary of the Date of Grant, with an average monthly trading volume of 2,000,000 Class A Shares or more during the 90 consecutive calendar day period, or the Class A Shares are listed for any 90 consecutive calendar days at an average price of $25.00 or more during the period commencing the Date of Grant and prior to the five year anniversary of the Date of Grant; provided further, that if there is a distribution of cash, stock or other property by the Company on the Class A Shares, then the foregoing average amounts of $20.00 or $25.00 will be reduced, from time to time, by the value of any one or more per share distributions after the Date of Grant until vested.       These units will vest when 20% of the one-half of the total number of RSUs, by each individual person, on the thirteenth (13) month anniversary of the listing of the Class A Shares on a United States national exchange, then at a rate of 10% of one-half the number of RSUs each six months after the date of the initial vesting, until the last vesting on the fifth year anniversary of the Date of Grant, at which any previously unvested will fully vest. These RSUs were granted to officers, directors, employees, and contractors.    
Stock-based compensation           1,107,521        
Unrecognized stock-based compensation     $ 333,852   $ 788,705          
Restricted stock units, per share     $ 1.66   $ 1.22          
Restricted Stock Units (RSUs) [Member] | Private Placement [Member]                    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]                    
Unrecognized stock-based compensation           34,302,984        
Restricted Stock Units (RSUs) [Member] | Performance Or Market Vested Restricted Stock Units RSU [Member]                    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]                    
Estimated unrecognized compensation expense           $ 13,465,761        
v3.24.1.1.u2
Schedule of Basic and Fully Diluted (Details) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Common Class A [Member]    
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]    
Net loss attributable to MDB Capital Holdings, LLC $ (3,334,431) $ (645,700)
Weighted average shares outstanding - basic 4,295,632 2,628,966
Weighted average shares outstanding - diluted 4,295,632 2,628,966
Net loss per share - basic $ (0.78) $ (0.25)
Net loss per share - diluted $ (0.78) $ (0.25)
Common Class B [Member]    
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]    
Net loss attributable to MDB Capital Holdings, LLC $ (3,881,084) $ (1,228,048)
Weighted average shares outstanding - basic 5,000,000 5,000,000
Weighted average shares outstanding - diluted 5,000,000 5,000,000
Net loss per share - basic $ (0.78) $ (0.25)
Net loss per share - diluted $ (0.78) $ (0.25)
v3.24.1.1.u2
Earnings Per Share (Details Narrative)
 3 Months Ended
Mar. 31, 2024
shares
Warrant [Member]  
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]  
Anti-dilutive shares 35,144
v3.24.1.1.u2
Related Party Transactions (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Related Party Transaction [Line Items]    
Related party expenses $ 320,792 $ 301,702
Operating expenses 7,286,791 $ 2,272,223
ENDRA [Member]    
Related Party Transaction [Line Items]    
Operating expenses $ 80,995  
Patent Vest Inc [Member]    
Related Party Transaction [Line Items]    
Investment ownership percentage 100.00%  
v3.24.1.1.u2
Commitments and Contingencies (Details Narrative)
 3 Months Ended
Apr. 17, 2019
USD ($)
shares
Mar. 31, 2024
USD ($)
Mar. 31, 2023
USD ($)
Loss Contingencies [Line Items]      
Net capital   $ 6,035,959 $ 2,284,695
Aggregate indebtedness net capital amount   $ 6,175,623  
Other commitments, description   0.98 to 1  
Percentage of aggregate indebtedness   0.02  
Aggregate indebtedness calculated amount   $ 0  
Funding Agreement [Member]      
Loss Contingencies [Line Items]      
Purchase of shares, value $ 5,000,000    
Purchase of warrants | shares 197,628    
Minimum [Member]      
Loss Contingencies [Line Items]      
Net capital   250,000  
Public Ventures [Member]      
Loss Contingencies [Line Items]      
Net capital   $ 6,285,959 $ 2,534,695
v3.24.1.1.u2
Employee Benefit Plans (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Retirement Benefits [Abstract]    
Employer contribution $ 189,365 $ 163,027
v3.24.1.1.u2
Exclusive License Agreement (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended
Jun. 30, 2022
Mar. 31, 2024
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Payments for licensed products   $ 250,000
Cumulative net sales   $ 1,000,000
License Agreement [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Stock issued during period shares   499,377
Repayment for sale of equity securities $ 5,000,000 $ 5,000,000
Second [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Payments for licensed products   350,000
Cumulative net sales   $ 2,000,000
v3.24.1.1.u2
Schedule of Operating Lease Cost (Details) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Leases    
Right-of-use assets $ 2,235,559 $ 2,320,119
Operating lease liabilities $ 2,339,955 $ 2,415,889
Weighted average remaining lease term in years 5 years 3 months 7 days 5 years 3 months 29 days
Weighted average discount rate 7.66% 7.40%
Cash paid for amounts included in the measurement of lease liabilities $ 121,688 $ 206,837
Right-of-use assets obtained in exchange for lease liabilities 1,018,002
Operating lease cost 45,754 146,836
Short-Term Lease, Cost 84,560 275,589
Total operating lease costs $ 130,314 $ 422,425
v3.24.1.1.u2
Schedule of Future payments Due Under Operating Lease (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Leases    
Remainder of 2024 $ 369,936  
2025 503,684  
2026 516,001  
2027 528,586  
2028 541,674  
Thereafter 451,600  
Total 2,911,481  
Less effects of discounting (571,526)  
Total operating lease liabilities $ 2,339,955 $ 2,415,889
v3.24.1.1.u2
Leases (Details Narrative) - USD ($)
 1 Months Ended
Apr. 03, 2023
Oct. 31, 2023
Apr. 30, 2023
Jul. 01, 2022
Leases        
Initial rent, per month $ 14,371 $ 13,277   $ 12,556
Base rent, per month $ 16,747 $ 15,391   $ 13,937
Annual operating cost increase percentage 2.50% 3.00%    
Extension term of lease   12 months    
Lease term     60 months 91 months
Option to extend   option to extend for 60 additional months    
v3.24.1.1.u2
Income Taxes (Details Narrative)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Income Tax Disclosure [Abstract]    
Federal statutory rate income taxes 27.00% 27.00%
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