Eightco (OCTO) - 2023 Q4 - Annual Report

Financing Activities - Eightco Holdings Inc. completed a reverse stock split at a ratio of 1-for-50, effective April 3, 2023, and changed its trading symbol to "OCTO" on the Nasdaq Capital Market[172]. - The Company raised approximately $0.71 million from a private placement of 865,856 shares at a price of$0.82 per share on February 26, 2024[173]. - As of the date of filing, $3,425,000 has been committed by lenders under the Series A financing agreement[178]. - The Company entered into a Series B financing agreement on October 6, 2023, with$275,000 committed by lenders as of the filing date[183]. - Under the Series C financing agreement dated October 19, 2023, $2,900,000 has been committed by lenders as of the filing date[188]. - The Series D financing agreement allows for up to$5,000,000, with $600,000 committed by lenders as of the filing date[191]. - The Company entered into a Securities Purchase Agreement for a Senior Secured Convertible Note with an initial principal amount of$5,555,000 at a conversion price of $6.245 per share[193]. - The Note is due and payable in full on January 15, 2024, and does not bear interest unless an event of default occurs, triggering an 18$6.245 per share[210]. - The Company is obligated to file a registration statement covering 250% of the maximum number of shares underlying the Note and 150% of the shares underlying the Warrant within 45 days of closing[216]. - The Company redeemed all Warrants related to the Investor for $660,000 on October 23, 2023[215]. - The principal of the New Notes issued under the Debt Exchange Agreement is$1,650,000[192]. - The Note contains anti-dilution provisions that adjust the conversion price if the Company issues securities at a price lower than the then applicable conversion price[202]. - The Company must indemnify the Investor for certain losses resulting from misrepresentations or breaches of the Securities Purchase Agreement[196]. - The Note prohibits the Company from entering into certain transactions involving a change of control without the successor entity assuming all obligations[206]. - The Company must maintain a reserve of 250% of the shares issuable upon conversion of the Note[204]. 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[236]. - The Company has until March 27, 2024, to regain compliance with Nasdaq Listing Rule 5550(a)(2) by achieving a closing bid price of at least$1.00 for a minimum of 10 consecutive business days[238]. - As of March 28, 2024, the Company has not regained compliance and is not eligible for a second 180-day period[239]. - The Company intends to appeal the determination to a Hearings Panel, which will stay the suspension of its securities pending the Panel's decision[241]. - The Company has been provided 180 days to regain compliance with Nasdaq rules, with the possibility of delisting if compliance is not achieved[240]. Business Operations and Strategy - Eightco's business includes the Forever 8 Inventory Cash Flow Solution and a Packaging Business, focusing on e-commerce retailers and custom packaging[168]. - The Company no longer intends to generate revenue from its Web 3 Business following its strategic shift[168]. - Eightco separated from Vinco Ventures Inc. on June 29, 2022, and is now an independent publicly traded company[169]. - The Company has established a framework for its relationship with Vinco post-separation through various agreements, including a Tax Matters Agreement[170]. - The Company entered into a Membership Interest Purchase Agreement to acquire 100% of Forever 8 on October 1, 2022[221]. - The Sellers received $4.6 million in cash as part of the acquisition consideration[222]. - The Purchase Agreement includes potential earnout payments based on cumulative collected revenues, with a total potential of up to$15 million for the first earnout target[224]. Financial Performance - For the year ended December 31, 2023, total revenues increased by $43,476,705 or 136.63$67,568,353 compared to $23,785,070 in 2022[259][261]. - Cost of revenues for the year ended December 31, 2023, increased by$37,178,154 or 125.49%, largely due to increased sales and associated costs in the inventory management solutions business[262]. - Gross profit for the year ended December 31, 2023, rose by $6,298,551 or 287.09$65,763 or 0.40%, totaling $16,335,561 for the year ended December 31, 2023[264]. - Restructuring and severance expenses increased by$833,982 or 64.15%, amounting to $2,133,982 for the year ended December 31, 2023, due to headcount reductions[265]. - Interest expense for the year ended December 31, 2023, was$11,553,589, an increase of $4,586,983 or 65.84$58,343,242) for the year ended December 31, 2023, compared to ($32,111,553) in 2022, largely due to losses on warrant issuance[267]. - Net loss for the year ended December 31, 2023, was ($68,320,414), an increase of $20,874,354 or 44.00$47,446,060) in 2022[269]. Cash Flow and Capital Needs - The company has approximately $500,000 in cash and expects to need additional capital to fund operations and increase revenues[270]. - Net cash used in operating activities was ($6,399,079) for the year ended December 31, 2023, compared to ($16,719,389) in 2022, reflecting a significant reduction in cash outflow[272]. - Net cash provided by financing activities decreased to$6,361,634 in 2023 from $20,920,207 in 2022, primarily due to lower proceeds from common stock issuance and convertible notes[274]. - The company has an accumulated deficit of$113,278,588 as of December 31, 2023, with further losses anticipated in business development[276]. - Current cash and cash equivalents are approximately $5.2 million, down from$5.6 million in 2022, and are insufficient to support projected operating requirements for the next 12 months[277]. - The company expects to need additional capital to increase revenues, with potential equity financing likely to be significantly dilutive to current stockholders[278]. - In 2023, the company began reducing headcount to lower corporate overhead and plans to continue cost reduction efforts in 2024[279].