Eightco (US:OCTO)2025-05-15 21:00Business Operations - Eightco Holdings Inc. operates three main businesses: Forever 8 Inventory Cash Flow Solution, Web3 Business (BTC mining hardware), and Packaging Business [147]. - The company generates the majority of its revenues from inventory financing through its subsidiary, Forever 8, and from the sale of corrugated custom packaging [197]. Corporate Structure and Changes - The Company separated from Vinco Ventures Inc. on June 29, 2022, distributing one share of Eightco common stock for every ten shares of Vinco common stock held [148]. - Kevin O'Donnell was appointed as Interim Chief Executive Officer effective February 22, 2024, until a successor is chosen [169]. - Kevin O'Donnell resigned as Executive Chairman and Interim CEO effective March 17, 2024, without any disagreement regarding company operations [170]. Executive Compensation - The Vassilakos Employment Agreement provides for a base salary of $300,000 per year, with an annual cash bonus opportunity of up to 75% of the base salary [152]. - Mr. McFadden's severance payment totals $422,500, payable in four quarterly installments of $105,625 each, with the first installment consisting of 128,811 fully-vested restricted shares at $0.82 per share [157]. - Mr. Vroman's base salary is set at $292,000 per year, with an annual cash bonus opportunity equal to 100% of the base salary [162]. - Mr. Vroman is eligible for a maximum total of 990,000 shares based on corporate growth achievements, reflecting an increase from the previous agreement [163]. - The Company will reimburse Mr. Vroman for health insurance premiums through December 31, 2024, and provide a car allowance of up to $10,000 per year [164]. - The Vroman Severance Agreement includes back pay wages of $151,615.46 and severance of 24 months of Mr. Vroman's base salary [167]. Financial Performance - Revenues for the three months ended March 31, 2025, increased by $1,955,290 or 24.57% compared to the same period in 2024, driven by higher sales from the inventory management solutions business [205]. - Cost of revenues rose by $2,531,041 or 38.53% for the three months ended March 31, 2025, primarily due to increased sales and a shift towards lower-margin products [206]. - Gross profit decreased by $575,751 or 41.45% for the three months ended March 31, 2025, attributed to lower-margin product sales [207]. - Selling, general and administrative expenses decreased by $898,518 or 28.73% for the three months ended March 31, 2025, due to reductions in professional fees and payroll costs [208]. - The company reported an operating loss of $1,416,166 for the three months ended March 31, 2025, an improvement of $1,737,605 or 55.10% compared to the prior year [204]. - Interest expense increased to $1,288,803 for the three months ended March 31, 2025, compared to $1,198,771 in the same period in 2024, due to additional borrowings [210]. - Net income (loss) was $(2,654,279) for the three months ended March 31, 2025, a decrease of $4,428,414 or 249.61% compared to the prior year, largely due to the absence of a prior gain on forgiveness of earnout [213]. - The company had stockholders' equity of $9.3 million and approximately $0.4 million in cash and cash equivalents as of March 31, 2025, indicating liquidity concerns for the next 12 months [223]. - Net cash provided by operating activities was $999,824 for the three months ended March 31, 2025, primarily offsetting a net loss of $2,548,725 [226]. - The company expects to need additional capital to maintain current revenue levels, with potential equity financing likely to be dilutive to existing shareholders [224]. Financing Agreements - The company entered into a Securities Purchase Agreement on February 26, 2024, selling 865,856 shares at $0.82 per share, raising approximately $0.71 million [173]. - As of the filing date, $2,375,000 has been committed by lenders under the Series A financing agreement [179]. - The Series B financing agreement has commitments totaling $175,000 as of the filing date [184]. - The Series C financing agreement has commitments totaling $7,225,000 as of the filing date [189]. - The company entered into a Series D Loan and Security Agreement on March 15, 2024, for an amount of up to $5,000,000 [190]. - The principal of the New Notes issued under the Debt Exchange Agreement is $1,650,000 [192]. - The company issued a Senior Secured Convertible Note with an initial principal amount of $5,555,000 in March 2023, which was paid in full on February 26, 2024 [193][195]. Estimates and Assumptions - The Company reported amounts of revenue and expenses during the reported periods [234]. - Estimates are based on historical experience and various assumptions deemed reasonable [234]. - Actual results may differ from estimates under different assumptions or conditions [234].