DEF: BEN Inc. Seeks Reverse Stock Split to Maintain Nasdaq Listing

Brand Engagement Network Inc. will hold its 2025 Annual Meeting to vote on director elections, auditor ratification, and a reverse stock split aimed at regaining Nasdaq compliance.

Summary

• The 2025 Annual Meeting of Stockholders of Brand Engagement Network Inc. (BEN) will be held virtually on November 26, 2025, at 10:00 a.m. Pacific Time.
• Stockholders will vote on three key proposals: the election of two Class I directors, the ratification of L.J. Soldinger Associates, LLC as the independent registered public accounting firm for 2025, and the approval of an amendment to the Certificate of Incorporation to effect a reverse stock split.
• The proposed reverse stock split would combine outstanding shares of common stock by a ratio ranging from 1-for-2 to 1-for-10, with the exact ratio to be determined by the Board.
• The primary purpose of the reverse stock split is to increase the per-share price of common stock to regain compliance with Nasdaq's $1.00 minimum bid price requirement, following a notice of non-compliance on December 30, 2024, with an extended compliance period ending December 29, 2025.
• As of September 30, 2025, the Company had 44,880,795 shares of common stock issued and outstanding.
• Audit fees for L.J. Soldinger Associates, LLC were $405,000 in 2024 and $276,000 in 2023, with additional tax fees of $16,000 in 2024.
• The Board of Directors recommends a vote FOR all three proposals.

Sentiment

Score: 4

Explanation: The filing highlights significant corporate governance actions and a critical need for a reverse stock split to maintain Nasdaq listing, indicating underlying operational or market challenges. While there are positive steps in governance and new executive appointments, the necessity of a reverse split and ongoing litigation point to considerable headwinds and uncertainty. The executive turnover also adds to the cautious sentiment.

Positives

• The Company is committed to strong corporate governance practices, including an independent Chairperson of the Board (Bernard Puckett) and a Lead Independent Director structure.
• The 2025 Annual Meeting will be held in a virtual-only format, leveraging technology to enhance shareholder access and participation from any location globally.
• A Special Litigation Committee (SLC) was formed in August 2025, composed of independent directors, to objectively investigate, evaluate, and manage significant litigation matters, including the ongoing lawsuit against AFG Companies Inc.
• The Board has adopted comprehensive corporate governance policies, including director stock ownership guidelines, an insider trading policy prohibiting hedging and pledging, and a compensation recovery policy.
• Walid Khiari was appointed Chief Financial Officer and Chief Operating Officer in November 2024, bringing over two decades of experience in finance, technology banking, capital raising, and mergers and acquisitions.

Negatives

• The Company received a notice of non-compliance with Nasdaq's $1.00 minimum bid price requirement on December 30, 2024, necessitating a proposed reverse stock split to avoid delisting.
• There has been significant executive turnover, including Paul Chang (former CEO) not standing for re-election, Michael Zacharski (former CEO) resigning, Bill Williams (former CFO) resigning, and James Richard Howard (Chief Information and Data Officer) transitioning to an advisory role.
• The Company is engaged in ongoing litigation against AFG Companies Inc. and its CEO, alleging fraudulent misrepresentation, breach of contract, and concealment of a ransomware attack, with uncertainty regarding AFG's fulfillment of obligations under a Subscription Agreement.
• The composition of the Audit Committee currently does not meet the applicable independence requirements under Nasdaq and SEC rules, although the Board is in the process of appointing a third independent director to rectify this.
• The Nominating and Corporate Governance Committee held zero meetings during 2024, which could indicate a lack of formal oversight in these areas during that period.

Risks

• Delisting from NASDAQ: Failure to regain compliance with the $1.00 minimum bid price requirement could lead to the Company's securities being delisted, resulting in reduced liquidity, 'penny stock' status, limited financing options, and potential loss of investor confidence.
• Reverse Stock Split Effectiveness: There is no assurance that the reverse stock split will increase the market price of the Common Stock proportionally to the reduction in shares or result in a permanent increase, and the total market capitalization may be lower post-split.
• Negative Investor Perception: Some investors may view a reverse stock split negatively, which could lead to a decrease in the Company's market capitalization.
• Odd Lots: The reverse stock split may result in some stockholders owning 'odd lots' (less than 100 shares), which can be more difficult to sell or incur higher transaction costs per share.
• Dilution from Future Issuances: The reverse stock split will significantly increase the number of authorized but unissued shares, which could be used for future financings, acquisitions, or equity incentive awards, potentially diluting existing stockholders' earnings per share and voting power.
• Ongoing Litigation: The lawsuit against AFG Companies Inc. may result in prolonged proceedings, significant legal expenses, and uncertainty regarding the recovery of damages or fulfillment of contractual obligations, potentially impacting the Company's financial and strategic objectives.
• Related Party Transactions: The Company has engaged in various loan agreements and other transactions with entities and individuals connected to its directors and officers, which, despite a new policy, could present potential conflicts of interest or raise governance concerns.

Future Outlook

The Company aims to maintain its Nasdaq listing by implementing a reverse stock split and is exploring strategic alternatives. Management anticipates the need to raise additional capital in the ordinary course of business and may issue shares to acquire other companies or assets or engage in business combination transactions. The Board is committed to enforcing contractual rights in ongoing litigation to safeguard shareholder value.

Management Comments

• "We remain focused on executing our strategy, strengthening our foundation, and positioning the Company for long-term success."
• "We value your trust and engagement as we continue to advance BENs mission on behalf of all stockholders."
• "We are committed to ensuring, to the extent possible, that stockholders will be afforded the ability to participate at the virtual meeting like they would at an in-person meeting."
• "The Board believes that this is the appropriate leadership structure for our company at this time because it allows our Chief Executive Officer to focus on executing our companys strategic plan and managing our companys operations and performance as the company explores its strategic alternatives."
• "The ongoing litigation with AFG may result in prolonged proceedings, but the Board remains committed to enforcing our contractual rights to safeguard shareholder value."

Industry Context

The Company operates in an environment where maintaining public listing standards, such as Nasdaq's minimum bid price, is crucial for investor confidence and access to capital markets. The proposed reverse stock split reflects a common strategy for companies facing delisting risks due to low share prices. The focus on corporate governance, risk oversight, and strategic alternatives suggests a company navigating post-merger integration and seeking to stabilize its market position amidst competitive pressures and regulatory requirements.

Comparison to Industry Standards

• The proposed reverse stock split to regain Nasdaq compliance is a common measure taken by companies whose stock price has fallen below the minimum bid requirement. Many small-cap and emerging growth companies, similar to BEN, face this challenge. For example, companies like Sundial Growers (SNDL) or Ideanomics (IDEX) have executed reverse stock splits to maintain exchange listings.
• The virtual-only annual meeting format aligns with a growing trend among public companies, especially post-pandemic, to enhance shareholder accessibility and reduce logistical costs, a practice seen across various industries.
• The adoption of robust corporate governance guidelines, including an independent Board Chair, specialized committees (Audit, Compensation, Nominating & Corporate Governance, Special Litigation), and policies on insider trading and compensation recovery, generally meets or exceeds best practices for public companies, particularly for an emerging growth company.
• The significant executive turnover (former CEO, CFO, CIO) and ongoing litigation, while not uncommon in dynamic industries, could be viewed as a deviation from stability compared to more mature, stable industry peers.
• The related party transactions, particularly the loans from entities managed by a current director (Thomas Morgan Jr.), while disclosed and subject to review, could be scrutinized more heavily than in companies with more diversified financing sources, potentially raising governance concerns compared to industry leaders with stricter related-party policies.

Management Changes

Corporate Governance

Legal Proceedings

• On January 16, 2025, the Company filed a lawsuit against AFG Companies Inc. and its CEO, Ralph Wright Brewer III, in the Northern District of Texas, Dallas Division.
• The lawsuit alleges fraudulent misrepresentation, breach of contract, and concealment of a ransomware attack on AFG's network shortly before the Reseller Agreement was executed.
• On January 17, 2025, the Company delivered a notice of termination to AFG, terminating the Reseller Agreement.
• On March 26, 2025, the Company filed a First Amended Complaint against AFG in the Southern District of New York, alleging breach of contract regarding AFG's failure to fund a $6,500,000 payment due March 13, 2025, under the Subscription Agreement.
• The Company is uncertain whether AFG will fulfill its obligations under the Subscription Agreement due to the lawsuit and termination notice.

Related Party Transactions

• Howard Consulting Services Agreement: Prior to his executive role, James Richard Howard (Chief Information and Data Officer) was a consultant through RG Data Insights, LLC, receiving a $0.15 million success fee upon a successful capital raise over $5.0 million and a Compensatory Warrant for up to 300,000 shares of Prior BEN Class B common stock.
• Transactions with October 3rd Holdings, LLC: This entity, co-owned by Tyler Luck (Acting CEO) and Michael Lucas (Co-Founder/Promoter), converted $0.42 million of indebtedness owed by a subsidiary into 93,333 shares of Common Stock at $4.50 per share. October 3rd Holdings, LLC also has shared voting and dispositive power over 8,765,568 shares.
• AFG Interim Financing: AFG purchased $1.0 million in Prior BEN Common Stock, and Genuine Lifetime LLC (partially owned by October 3rd Holdings, LLC) purchased $4.0 million in Prior BEN Common Stock.
• Transactions with Genuine Lifetime, LLC: The Company had a Marketing & Interface Agreement with Genuine Lifetime, LLC (partially owned by October 3rd Holdings, LLC), involving a monthly fee, conversion of unpaid balances into shares, and later a Debt Conversion Agreement allowing conversion of up to $0.2 million of indebtedness into 2,000,000 Prior BEN Common Stock.
• Lucas Consulting Agreement: Michael Lucas (Co-Founder/Promoter and Tyler Luck's spouse) received a warrant to purchase 1,500,000 shares of Prior BEN Common Stock (adjusted to 405,150 options at $3.71 post-merger) for past services and began receiving a monthly consulting fee of $10,000.00 from July 1, 2024.
• Director Loans: Thomas Morgan Jr. (current director) is the Managing Member of Corps Cap Diversified Income Fund, Corps Capital BDC LLC, and Corps Cap Advisors LLC, which provided loans to the Company totaling $375,000 in May and July 2025, with some loans including warrants for BEN Common Stock as additional consideration.

Stakeholder Impact

• Shareholders: Will vote on critical proposals including director elections, auditor ratification, and a reverse stock split. The reverse stock split could impact share price, liquidity, and ownership percentages (due to fractional share cash-outs). Ongoing litigation and potential capital raises could affect long-term value.
• Employees: Executive compensation and equity incentive plans are in place, but significant executive turnover could impact morale and stability.
• Customers/Partners: The termination of the Reseller Agreement with AFG and ongoing litigation could impact business relationships and operational continuity related to that partnership.
• Creditors: The Company has taken on loans from related parties, which could affect its financial structure and repayment obligations.
• Regulatory Bodies (NASDAQ, SEC): The Company is actively working to regain and maintain compliance with Nasdaq listing rules, which is critical for its public status.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on November 26, 2025, to vote on proposals.
• Elect two Class I directors for a three-year term expiring in 2028.
• Ratify the appointment of L.J. Soldinger Associates, LLC as the independent registered public accounting firm for 2025.
• Approve an amendment to the Certificate of Incorporation to effect a reverse stock split (ratio 1-for-2 to 1-for-10).
• The Board will determine the exact ratio and effective date of the reverse stock split, anticipated to be prior to December 29, 2025.
• The Audit Committee is in the process of appointing Ruy Carrasco as a third independent director to meet Nasdaq and SEC independence requirements.
• The Company is in the process of engaging Payscale as its compensation consultant for 2025.
• The Special Litigation Committee will continue investigating, evaluating, and managing claims related to the AFG lawsuit.
• File voting results with the SEC in a current report on Form 8-K within four business days of the meeting.
• Continue to explore strategic alternatives and potentially raise additional capital.

Key Dates

Recommendation

The Company is at a critical juncture, addressing Nasdaq listing compliance through a proposed reverse stock split, which carries inherent risks and uncertainties regarding its long-term market impact. While the Company is taking steps to strengthen corporate governance and has brought in experienced executives, the significant executive turnover and ongoing, material litigation against a key partner introduce considerable operational and financial risks. Investors should monitor the outcome of the reverse stock split, the litigation, and the Company's ability to execute its strategic alternatives and raise capital before making further investment decisions. The current situation suggests a 'hold' position, awaiting clearer signs of stabilization and successful execution of its strategic initiatives.

Keywords

Reverse Stock Split, Nasdaq Compliance, Corporate Governance, SEC Filing, Proxy Statement, Director Election, Auditor Ratification, Litigation, Executive Compensation, Shareholder Meeting, Brand Engagement Network Inc., BNAI