Eightco (OCTO) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements, management's discussion, market risk disclosures, and controls and procedures for Eightco Holdings Inc Financial Statements This section presents Eightco Holdings Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, with explanatory notes Condensed Consolidated Financial Statements The company's financial statements show a significant increase in revenue and total assets, primarily due to the acquisition of Forever 8, accompanied by a substantial increase in net loss driven by non-cash expenses Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $17,389,914 | $14,082,131 | | Total Assets | $60,420,615 | $58,600,599 | | Total Current Liabilities | $20,928,076 | $13,919,202 | | Total Liabilities | $53,964,589 | $52,789,375 | | Total Stockholders' Equity | $6,456,026 | $5,811,224 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $20,547,153 | $7,345,959 | $36,436,868 | $11,065,606 | | Gross Profit | $2,529,894 | $799,084 | $4,348,986 | $1,344,348 | | Operating Loss | ($2,764,096) | ($3,493,224) | ($6,294,435) | ($4,869,755) | | Net Loss | ($8,853,248) | ($3,456,757) | ($58,704,388) | ($4,593,901) | | Loss per share – basic and diluted | ($3.54) | ($7.71) | ($31.35) | ($10.03) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,672,358) | ($5,894,179) | | Net cash used in investing activities | ($92,278) | ($52,599) | | Net cash provided by financing activities | $4,559,110 | $45,001,510 | | Net (decrease) increase in cash | ($1,205,526) | $39,054,732 | Notes to Condensed Consolidated Financial Statements These notes detail the company's operations, including the Forever 8 acquisition, a reverse stock split, and segment reporting, excluding the Web3 business - The company operates the Forever 8 Inventory Cash Flow Solution and a Packaging Business, discontinuing its Web3 Business[28] - On April 3, 2023, the company completed a 1-for-50 reverse stock split and changed its name to Eightco Holdings Inc[37] - Forever 8 was acquired on October 1, 2022, for a total purchase price of $37.9 million, including preferred units and convertible notes[75][76] - In March 2023, a Senior Secured Convertible Note with an initial principal of $5,555,000 was issued, alongside a warrant for 889,512 shares of Common Stock[97] Segment Revenues (Six Months Ended June 30, 2023) | Segment | Revenue | Gross Profit | | :--- | :--- | :--- | | Inventory Management Solutions | $32,813,244 | $3,354,594 | | Corrugated | $3,623,624 | $994,392 | | Total | $36,436,868 | $4,348,986 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes significant revenue growth to the Forever 8 acquisition, despite a widened net loss primarily due to a non-cash loss on warrant issuance, with sufficient cash for the next 12 months - The company's business focuses on the Forever 8 Inventory Cash Flow Solution and Packaging Business, with no further Web3 revenue generation planned[176] Results of Operations Comparison (Three Months Ended June 30) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues, net | $20,547,153 | $7,345,959 | 179.71% | | Gross Profit | $2,529,894 | $799,084 | 216.60% | | Operating Loss | ($2,764,096) | ($3,493,224) | -20.87% | | Net Loss | ($8,853,248) | ($3,456,757) | 156.11% | Results of Operations Comparison (Six Months Ended June 30) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues, net | $36,436,868 | $11,065,606 | 229.28% | | Gross Profit | $4,348,986 | $1,344,348 | 223.50% | | Operating Loss | ($6,294,435) | ($4,869,755) | 29.26% | | Net Loss | ($58,704,388) | ($4,593,901) | 1,177.88% | - The net loss for the six months ended June 30, 2023, significantly increased due to a non-cash loss of $46,928,815 from warrant issuance[212] - As of June 30, 2023, the company held approximately $4.3 million in cash, anticipating sufficient funds for the next 12 months[213] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable - This section is not applicable[223] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective due to a material weakness from limited accounting personnel and lack of segregation of duties - Management concluded that disclosure controls and procedures were not effective as of the reporting period end[224] - A material weakness exists due to limited accounting personnel, hindering segregation of duties and increasing error risk[225] - The company plans to engage outside consultants in 2023 to strengthen capabilities and remediate control deficiencies[226] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other information Legal Proceedings The company is involved in routine legal actions incidental to its business but does not anticipate any material adverse impact from their ultimate disposition - Management does not anticipate any material adverse effect on assets, business, or operations from current legal actions[229] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors were reported during the three months ended June 30, 2023, from the Form 10-K filed April 17, 2023[230] Unregistered Sales of Equity Securities and Use of Proceeds In January 2023, the company issued unregistered shares of common stock to employees for services rendered and to directors for compensation - On January 26, 2023, the company issued 20,550 shares of common stock to employees and 2,700 shares to three directors for compensation[231][232] Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[233] Mine Safety Disclosures This section is not applicable to the company - This section is not applicable[234] Other Information No information was provided under this item Exhibits This section lists the exhibits filed with the quarterly report, which include Sarbanes-Oxley Act certifications by the CEO and CFO, as well as Inline XBRL data files - Exhibits include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[237]