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Eightco (OCTO) - 2024 Q3 - Quarterly Report
OCTOEightco (OCTO)2024-11-14 22:00

Financial Performance - For the three months ended September 30, 2024, revenues decreased by 15,662,193or67.1215,662,193 or 67.12% compared to the same period in 2023, primarily due to reduced sales from the inventory management solutions business[205]. - For the nine months ended September 30, 2024, revenues decreased by 35,462,228 or 59.33% compared to the same period in 2023, largely attributed to decreased sales from the inventory management solutions business[212]. - Gross profit for the three months ended September 30, 2024, decreased by 700,433or25.50700,433 or 25.50% compared to the same period in 2023, due to lower margin sales in the inventory management solutions business[208]. - Net loss for the three months ended September 30, 2024, was 3,453,150, a decrease of 276,060or7.99276,060 or 7.99% compared to the same period in 2023[204]. - Net income for the nine months ended September 30, 2024, was 3,212,482, a significant improvement compared to a net loss of 62,157,538forthesameperiodin2023[224].−Selling,generalandadministrativeexpensesforthethreemonthsendedSeptember30,2024,increasedby62,157,538 for the same period in 2023[224]. - Selling, general and administrative expenses for the three months ended September 30, 2024, increased by 475,630 or 14.65% compared to the same period in 2023, primarily due to higher professional fees for investor relations[209]. - Interest expense for the three months ended September 30, 2024, decreased to 2,795,169from2,795,169 from 4,047,639 in the same period in 2023, largely due to the repayment of convertible notes[210]. - Gain on extinguishment of liabilities was 7,427,193fortheninemonthsendedSeptember30,2024,comparedto7,427,193 for the nine months ended September 30, 2024, compared to 0 for the same period in 2023, attributed to the reduction in liability under the Vinco Amendment[219]. Cash Flow and Financing - The company had stockholders' equity of 12.6millionandapproximately12.6 million and approximately 2.4 million in cash and cash equivalents as of September 30, 2024, down from 5.2millionatDecember31,2023[225].−Thecompanyexpectsitscurrentcashandcashequivalentsareinsufficienttosupportprojectedoperatingrequirementsforatleastthenext12months,raisingsubstantialdoubtaboutitsabilitytocontinueasagoingconcern[225].−TheCompanyexpectstoneedadditionalcapitaltomaintainrevenuesatcurrentlevels,withpotentialequityfinancingbeingsignificantlydilutivetocurrentstockholders[227].−Netcashusedinoperatingactivitieswas5.2 million at December 31, 2023[225]. - The company expects its current cash and cash equivalents are insufficient to support projected operating requirements for at least the next 12 months, raising substantial doubt about its ability to continue as a going concern[225]. - The Company expects to need additional capital to maintain revenues at current levels, with potential equity financing being significantly dilutive to current stockholders[227]. - Net cash used in operating activities was (1,085,865) for the nine months ended September 30, 2024, compared to (6,698,006)forthesameperiodin2023[229].−Netcashusedininvestingactivitiesdecreasedto(6,698,006) for the same period in 2023[229]. - Net cash used in investing activities decreased to (47,685) for the nine months ended September 30, 2024, from (182,871)in2023,duetoreducedpurchasesofpropertyandequipment[230].−Netcashusedinfinancingactivitieswas(182,871) in 2023, due to reduced purchases of property and equipment[230]. - Net cash used in financing activities was (1,707,834) for the nine months ended September 30, 2024, compared to 4,959,110in2023,primarilyduetorepaymentsofconvertiblenotespayable[231].−TheCompanyhasnooff−balancesheetarrangementsasofSeptember30,2024[232].BusinessOperations−TheCompanyhasthreemainbusinesses:Forever8InventoryCashFlowSolution,Web3Business,andPackagingBusiness[139].−TheCompanynolongerintendstogeneraterevenuefromitsWeb3Business[139].−TheCompanyseparatedfromVincoVenturesInc.onJune29,2022,andisnowanindependentpubliclytradedcompany[140].ManagementChanges−KevinO′DonnellresignedasExecutiveChairmanandInterimCEO,andPaulVassilakoswasappointedasthenewExecutiveChairmanandCEO[142][146].−TheVassilakosEmploymentAgreementprovidesforabasesalaryof4,959,110 in 2023, primarily due to repayments of convertible notes payable[231]. - The Company has no off-balance sheet arrangements as of September 30, 2024[232]. Business Operations - The Company has three main businesses: Forever 8 Inventory Cash Flow Solution, Web3 Business, and Packaging Business[139]. - The Company no longer intends to generate revenue from its Web3 Business[139]. - The Company separated from Vinco Ventures Inc. on June 29, 2022, and is now an independent publicly traded company[140]. Management Changes - Kevin O'Donnell resigned as Executive Chairman and Interim CEO, and Paul Vassilakos was appointed as the new Executive Chairman and CEO[142][146]. - The Vassilakos Employment Agreement provides for a base salary of 300,000 per year and an annual cash bonus opportunity of up to 75% of the base salary[148]. - The McFadden Severance Agreement includes a severance payment of 422,500,payableinfourquarterlyinstallments[157].−TheCompanywillreimburseMr.McFaddenforhealthinsurancepremiumsthroughDecember31,2024[159].−TheCompanywillprovideMr.Vromanwithseveranceof24monthsofhisbasesalaryaspartoftheVromanSeveranceAgreement[165].FinancingAgreements−TheCompanyenteredintoaSeriesDLoanandSecurityAgreementforanamountofupto422,500, payable in four quarterly installments[157]. - The Company will reimburse Mr. McFadden for health insurance premiums through December 31, 2024[159]. - The Company will provide Mr. Vroman with severance of 24 months of his base salary as part of the Vroman Severance Agreement[165]. Financing Agreements - The Company entered into a Series D Loan and Security Agreement for an amount of up to 5,000,000[154]. - As of the date of this filing, 3,425,000hasbeencommittedbylendersundertheSeriesAfinancingagreement[175].−TheCompanyhascommitted3,425,000 has been committed by lenders under the Series A financing agreement[175]. - The Company has committed 2,900,000 under the Series C financing agreement as of the date of this filing[184]. - The Company has committed 250,000undertheSeriesDfinancingagreementasofthedateofthisfiling[186].−TheCompanyenteredintoaSecuritiesPurchaseAgreementonFebruary26,2024,selling865,856sharesat250,000 under the Series D financing agreement as of the date of this filing[186]. - The Company entered into a Securities Purchase Agreement on February 26, 2024, selling 865,856 shares at 0.82 per share, raising approximately 0.71million[170].−TheCompanyenteredintoanAt−The−MarketIssuanceSalesAgreementwithUnivestSecurities,allowingforthesaleofupto0.71 million[170]. - The Company entered into an At-The-Market Issuance Sales Agreement with Univest Securities, allowing for the sale of up to 2,000,000 in common stock[167]. - A total of 692,890 shares have been sold under the At-The-Market Issuance Sales Agreement as of the date of this filing[169]. - The Company will pay a 3% commission on the aggregate gross sales prices of shares sold under the At-The-Market Issuance Sales Agreement[168]. Compliance and Regulatory Matters - The Company received a Nasdaq deficiency notice on September 29, 2023, for not meeting the minimum bid price requirement of $1.00 per share[188]. - The Company was granted an appeal for continued listing on Nasdaq on June 27, 2024, subject to certain conditions[191]. - There are no debt covenants that require certain financial information to be met[235]. - The Company faces uncertainties from general economic conditions, including inflation, rising interest rates, and geopolitical conflicts affecting the global economy[233]. - The Company’s financial statements are prepared in accordance with U.S. GAAP, requiring estimates and assumptions that may differ from actual results[236].