10-K: Authentic Holdings Inc. Reports Significant Losses and Going Concern Uncertainty in 10-K Filing

Authentic Holdings Inc.'s 10-K filing reveals substantial losses, a working capital deficit, and significant debt, raising doubts about the company's ability to continue as a going concern.

Summary

• Authentic Holdings Inc.'s 10-K filing for the year ended December 31, 2024, reveals a net loss of $1,320,137 and an accumulated deficit of $39,358,905.
• The company has a working capital deficit of $5,269,174 and limited cash resources, raising substantial doubt about its ability to continue as a going concern.
• The company's ability to continue as a going concern depends on its ability to repay or settle its current indebtedness, generate positive cash flow, and raise capital through equity and debt financing or other means on favorable terms.
• The company has several promissory notes in default, including convertible notes with face values of $1,403,428, secured promissory notes with face values of $102,061, related party promissory notes with face values of $1,283,732 and self-liquidating promissory notes of $133,333.
• Maybacks Global Entertainment generated revenue of approximately $399,000 during 2024.
• Operating expenses increased from $660,910 in 2023 to $997,220 in 2024, primarily due to increased depreciation and amortization of intangible assets and general and administrative expenses.
• The company intends to fund operations through increased sales and debt and/or equity financing arrangements.
• The company is involved in three pending litigation matters.
• Management has identified material weaknesses in internal control over financial reporting, including insufficient resources, inadequate segregation of duties, and lack of an audit committee.

Sentiment

Score: 2

Explanation: The document paints a bleak picture of the company's financial health, with significant losses, debt, and going concern uncertainty. While there are some positive developments, they are overshadowed by the overwhelming financial challenges.

Positives

• Maybacks Global Entertainment generated revenue of approximately $399,000 during 2024, indicating some progress in revenue generation.
• The company plans to tokenize 14,000 plus full-length motion pictures and serial television shows from Goliath Motion Picture Promotions, potentially creating new revenue streams.
• Authentic Heroes has signed a license with NFL Quarterback Tommy DeVito, potentially leading to increased revenue from fan-wear collectibles.
• The company has completed building its NFT platform.

Negatives

• The company reports a net loss of $1,320,137 for the year ended December 31, 2024, and an accumulated deficit of $39,358,905.
• The company faces substantial doubt about its ability to continue as a going concern due to a working capital deficit of $5,269,174 and limited cash resources.
• The company has several promissory notes in default, including convertible notes with face values of $1,403,428, secured promissory notes with face values of $102,061, related party promissory notes with face values of $1,283,732 and self-liquidating promissory notes of $133,333.
• The company is involved in three pending litigation matters.
• Management has identified material weaknesses in internal control over financial reporting, including insufficient resources, inadequate segregation of duties, and lack of an audit committee.

Risks

• The company's ability to continue as a going concern is uncertain due to recurring losses, a working capital deficit, and significant debt.
• The company may be unable to generate sufficient revenues and/or additional financing to service its debt, potentially leading to lenders calling the notes and the company going out of business.
• The company faces intense competition in its various business segments from companies with greater financial, technical, and marketing resources.
• The company's success depends on external factors in the streaming network industry, which are difficult to predict.
• The company's business involves risks of liability claims for content of material, which could adversely affect its business, results of operations, and financial condition.
• The company's activities are subject to a variety of laws and regulations relating to privacy and child protection, which, if violated, could subject it to an increased risk of litigation and regulatory actions.
• The company is dependent on key executives, and the departure of Mr. Giordano or Mr. Serbiak could materially adversely affect its ability to implement its business strategy.
• The company has material weaknesses in internal control over financial reporting, which could lead to inaccurate financial reporting and loss of investor confidence.

Future Outlook

The company intends to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements, until the company generates positive cash flow from operations.

Management Comments

• Management is committed to improving its internal controls and will continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities.
• Management plans to seek additional financing in a private equity offering to secure funding for operations.

Industry Context

The company acknowledges intense competition in its various business segments from companies with greater financial, technical, and marketing resources, including Sling TV, Lionsgate, New Line Pictures, Universal Films, Fanatics, Nike and Mitchell and Ness.

Comparison to Industry Standards

• The company competes with larger, more established companies such as Sling TV (owned by DISH Network) in the Over the Air and platform driven television networks.
• In the Movie Production and Movie Distribution businesses, the company competes with Lionsgate, New Line Pictures and Universal Films.
• In the collectible clothing business, the company competes with Fanatics, Nike and Mitchell and Ness.

Legal Proceedings

• The company is a party to three pending litigation matters: Randazzo LLC v. Avani Holdings LLC & Global Fashion Technologies, Inc., Patricia Witthuhn v. Global Fashion Technologies, Inc., and William Corso v. Global Fashion Technologies, Inc.

Related Party Transactions

• On December 31, 2024, and 2023, the Company had accumulated balances due its President, Chris Giordano and its CEO, Paul Serbiak in the amounts of $479,533 and $560,799, respectively.
• On June 18, 2019, the Company issued a promissory note at a principal amount of $447,150 as part of the consideration for the acquisition of assets from AH Originals, Inc., a corporation controlled by the same owner group of Global Fiber Technologies, Inc.
• In August 2015, the Company issued an unsecured promissory note to an investor in the amount of $50,000, convertible to common stock at $1.00 per share.
• The Company received a loan from its CEO Paul Serbiak totaling $210,534, plus accrued interest of $71,291 and $63,923 on December 31, 2024, and 2023, respectively.
• On May 2, 2022, Authentic Heroes, Inc. entered into a License Agreement with Paul Serbiak.

Stakeholder Impact

• Shareholders face significant risk of losing their investment due to the company's financial instability and potential inability to continue as a going concern.
• Employees may be impacted by potential restructuring or cessation of operations if the company cannot secure additional funding or generate positive cash flow.
• Creditors face the risk of not being repaid if the company is unable to service its debt.
• Customers and suppliers may be affected by potential disruptions in the company's operations.

Next Steps

• The company intends to fund operations through increased sales and debt and/or equity financing arrangements.
• The company plans to seek additional financing in a private equity offering to secure funding for operations.
• The company plans to tokenize all the titles, namely 14,000 plus full-length motion pictures and serial television shows from Goliath Motion Picture Promotions.
• The company is in the process of attempting to recapture the 146,000 Old is Gold 16 Christmas Classics Vinyl albums which have been stored in a warehouse in Mainland China due to US Customs challenges which we feel we can rectify.

Key Dates

Keywords

going concern, financial statements, Authentic Holdings, Maybacks, promissory notes, convertible debt, accumulated deficit, net loss, 10-K, NFT, tokenization, litigation, internal control, risk factors, revenue, expenses