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Eightco (OCTO) - 2024 Q2 - Quarterly Report
OCTOEightco (OCTO)2024-08-14 21:29

Corporate Actions - The Company announced a 1-for-5 reverse stock split effective August 16, 2024[103]. - Paul Vassilakos was appointed as Executive Chairman and CEO with a base salary of 300,000peryearandanannualcashbonusopportunityofupto75300,000 per year and an annual cash bonus opportunity of up to 75% of his base salary[112]. - The Company entered into a Series D Loan and Security Agreement for an amount of up to 5,000,000 on March 15, 2024[118]. - The Company granted fully vested stock options totaling 1,099,670 shares of Common Stock to certain officers, employees, and consultants on March 17, 2024[116]. - The Company entered into a Vroman Severance Agreement, providing Mr. Vroman with back pay of 151,615.46and24monthsofseverancebasedonhisbasesalary[124].−TheCompanyhasagreedtocompensateMr.Vroman151,615.46 and 24 months of severance based on his base salary[124]. - The Company has agreed to compensate Mr. Vroman 10,000 per month under a Consulting Agreement, effective January 1, 2024[125]. - The Company has committed 3,425,000fromlendersunderaSeriesALoanandSecurityAgreement,witha153,425,000 from lenders under a Series A Loan and Security Agreement, with a 15% annual interest rate[131]. - The Company has committed 2,900,000 from lenders under a Series C Loan and Security Agreement, with an 18% annual interest rate[139]. - The Company entered into a Series D Loan and Security Agreement for an amount of up to 5,000,000[140].FinancialPerformance−ForthethreemonthsendedJune30,2024,revenuesdecreasedby5,000,000[140]. Financial Performance - For the three months ended June 30, 2024, revenues decreased by 13,530,140 or 65.85% compared to the same period in 2023, primarily due to reduced sales from the inventory management solutions business[152]. - Cost of revenues for the three months ended June 30, 2024, decreased by 12,778,057or70.9212,778,057 or 70.92%, attributed to the decline in total revenues from the inventory management solutions business[153]. - Gross profit for the three months ended June 30, 2024, decreased by 752,083 or 29.73%, mainly due to lower margin sales in the inventory management solutions business[154]. - Selling, general and administrative expenses decreased by 1,256,335or26.631,256,335 or 26.63% for the three months ended June 30, 2024, largely due to reductions in professional fees and payroll costs[155]. - Interest expense decreased to 1,323,594 for the three months ended June 30, 2024, from 2,736,333inthesameperiodof2023,primarilyduetotherepaymentofconvertiblenotes[156].−Gainonextinguishmentofliabilitieswas2,736,333 in the same period of 2023, primarily due to the repayment of convertible notes[156]. - Gain on extinguishment of liabilities was 7,427,193 for the three months ended June 30, 2024, compared to 0forthesameperiodin2023,resultingfromthesettlementofliabilitieswiththeformerparentcompany[158].−ForthesixmonthsendedJune30,2024,revenuesdecreasedby0 for the same period in 2023, resulting from the settlement of liabilities with the former parent company[158]. - For the six months ended June 30, 2024, revenues decreased by 19,800,035 or 54.34% compared to the same period in 2023, primarily due to decreased sales from the inventory management solutions business[162]. - Cost of revenues for the six months ended June 30, 2024, decreased by 19,114,622or59.5719,114,622 or 59.57%, reflecting the decline in total revenues from the inventory management solutions business[163]. - Net income for the three months ended June 30, 2024, was 4,448,892, a significant improvement from a net loss of (8,853,248)inthesameperiodof2023,largelyduetootherincomeof8,853,248) in the same period of 2023, largely due to other income of 6,132,302[159]. - Gain on forgiveness of earnout was 6,100,000forthesixmonthsendedJune30,2024,comparedto6,100,000 for the six months ended June 30, 2024, compared to 0 for the same period in 2023, related to the forfeiture of earnout shares by the sellers of Forever 8[168]. - Net income for the six months ended June 30, 2024, was 6,389,855,asignificantincreasefromanetlossof(6,389,855, a significant increase from a net loss of (58,704,388) for the same period in 2023[173]. - Total other income for the six months ended June 30, 2024, was 11,064,300,comparedtoatotalotherlossof11,064,300, compared to a total other loss of (52,409,953) for the six months ended June 30, 2023[173]. Cash Flow and Equity - The company had stockholders' equity of 13.4millionandapproximately13.4 million and approximately 0.3 million in cash and cash equivalents as of June 30, 2024, compared to 5.2millionatDecember31,2023[174].−Netcashusedinoperatingactivitieswas(5.2 million at December 31, 2023[174]. - Net cash used in operating activities was (1,163,566) for the six months ended June 30, 2024, an improvement from (5,672,358)forthesameperiodin2023[176].−Netcashusedininvestingactivitieswas(5,672,358) for the same period in 2023[176]. - Net cash used in investing activities was (5,881) for the six months ended June 30, 2024, compared to (92,278)forthesameperiodin2023[177].−Netcashusedinfinancingactivitieswas(92,278) for the same period in 2023[177]. - Net cash used in financing activities was (3,715,313) for the six months ended June 30, 2024, compared to cash provided of 4,559,110forthesameperiodin2023[179].BusinessStrategyandMarketConditions−TheCompanyhasceasedrevenuegenerationfromitsWeb3Business,focusinginsteadonitsInventorySolutionandPackagingBusiness[104].−TheCompanyhasaplanformarketexpansionthroughitsForever8InventoryCashFlowSolutionandPackagingBusiness[104].−TheCompanyseparatedfromVincoVenturesInc.onJune29,2022,andisnowanindependentpubliclytradedentity[105].−TheCompanyhasenteredintovariousagreementswithVincotogoverntherelationshippost−separation,includingaTaxMattersAgreement[106].−Thecompanyexpectstoneedadditionalcapitaltomaintainrevenuesatcurrentlevels,withpotentialequityfinancinglikelytobedilutivetocurrentstockholders[175].−Thecompanyreportedasubstantialdoubtaboutitsabilitytocontinueasagoingconcernwithinoneyearfromthedatethefinancialstatementsareissued[174].−Theimpactofgeneraleconomicconditions,includinginflationandrisinginterestrates,mayaffectfutureoperations[180].ComplianceandRegulatoryMatters−TheCompanyreceivedaNasdaqdeficiencynoticefornotmeetingtheminimumbidpricerequirementof4,559,110 for the same period in 2023[179]. Business Strategy and Market Conditions - The Company has ceased revenue generation from its Web3 Business, focusing instead on its Inventory Solution and Packaging Business[104]. - The Company has a plan for market expansion through its Forever 8 Inventory Cash Flow Solution and Packaging Business[104]. - The Company separated from Vinco Ventures Inc. on June 29, 2022, and is now an independent publicly traded entity[105]. - The Company has entered into various agreements with Vinco to govern the relationship post-separation, including a Tax Matters Agreement[106]. - The company expects to need additional capital to maintain revenues at current levels, with potential equity financing likely to be dilutive to current stockholders[175]. - The company reported a substantial doubt about its ability to continue as a going concern within one year from the date the financial statements are issued[174]. - The impact of general economic conditions, including inflation and rising interest rates, may affect future operations[180]. Compliance and Regulatory Matters - The Company received a Nasdaq deficiency notice for not meeting the minimum bid price requirement of 1.00 per share[143]. - The Company was granted an appeal for continued listing on Nasdaq after not meeting the minimum equity requirement of $2,500,000[144]. - The company has no debt covenants that require certain financial information to be met[181].