10-Q: Authentic Holdings Reports First Quarter 2024 Results, Revenue Growth Offset by Increased Operating Expenses

Authentic Holdings saw revenue growth in the first quarter of 2024, but also experienced a net loss due to increased operating expenses and derivative liabilities.

Summary

• Authentic Holdings reported a net loss of $1,071,951 for the three months ended March 31, 2024, compared to a net loss of $1,209,261 for the same period in 2023.
• The company generated revenue of $40,240 in Q1 2024, a significant increase from no revenue in Q1 2023.
• Operating expenses increased to $245,358 in Q1 2024 from $114,766 in Q1 2023, primarily due to amortization of license agreements and professional fees.
• The company's derivative liabilities increased to $2,413,019 from $1,633,052 due to changes in fair value.
• Authentic Holdings has an accumulated deficit of $39,110,719 and a working capital deficit of $5,794,657 as of March 31, 2024.
• The company's current liabilities include defaulted convertible notes with a face value of $951,163, secured promissory notes of $18,000, related party promissory notes of $447,150, and self-liquidating promissory notes.
• The company is actively working to tokenize its library of 14,000 plus full-length motion pictures and serial television shows.

Sentiment

Score: 3

Explanation: The document highlights significant financial challenges, including a large accumulated deficit, high operating expenses, and defaulted debt. While there is some revenue growth and strategic initiatives, the overall financial health and going concern status raise serious concerns.

Positives

• The company generated revenue of $40,240 in Q1 2024, a significant improvement from no revenue in the same period last year.
• The net loss decreased from $1,209,261 in Q1 2023 to $1,071,951 in Q1 2024.
• Maybacks Global Entertainment has expanded its reach to over 41 million households and launched a multi-platform phone application.
• The company is actively working to tokenize its library of 14,000 plus full-length motion pictures and serial television shows.

Negatives

• The company has an accumulated deficit of $39,110,719 and a working capital deficit of $5,794,657 as of March 31, 2024.
• Operating expenses increased significantly to $245,358 in Q1 2024.
• The company's derivative liabilities increased to $2,413,019.
• The company has defaulted on several debts, including convertible notes, secured promissory notes, related party promissory notes, and self-liquidating promissory notes.
• The company has limited cash resources and anticipates future losses.

Risks

• The company's ability to continue as a going concern is dependent on raising additional capital and generating positive cash flow.
• The company has a substantial working capital deficit and limited cash resources.
• The company has defaulted on several debt obligations, which could lead to lenders calling the notes and potentially forcing the company out of business.
• The company faces competition from larger, more established companies with greater financial resources.
• The company's success is dependent on the successful implementation of its business plan, including the tokenization of its movie library.
• The company has material weaknesses in its internal controls over financial reporting.

Future Outlook

The company intends to fund operations through increased sales and debt and/or equity financing arrangements, and plans to tokenize its movie library and market it on its platforms.

Management Comments

• Management plans to raise additional debt or equity and continue to settle obligations by issuing stock.
• Management intends to continue to grow other debt and equity until the Company has positive cash flows from an operating company.
• Management is currently in negotiations with lenders to extend loans or seek settlements.
• Management believes the NFT platform will create substantial opportunities and credibility in the Blockchain and NFT community.

Industry Context

The company is operating in the competitive media and entertainment industry, facing challenges from larger, more established companies. The company is also involved in the emerging NFT and blockchain space, which presents both opportunities and risks.

Comparison to Industry Standards

• The company's revenue of $40,240 is very low compared to established media companies like Sling TV (owned by DISH Network) which have significantly larger revenues.
• The company's accumulated deficit of $39,110,719 is a significant concern compared to companies with positive retained earnings.
• The company's reliance on debt financing and the high level of defaulted debt is not typical of financially stable companies in the media industry.
• The company's plan to tokenize its movie library is an innovative approach, but its success is not guaranteed and is not a common practice among established media companies.

Legal Proceedings

• The company is involved in three pending litigation matters related to unpaid rent and wages from a previous entity, Avani Holdings LLC.
• The company is unable to hire outside counsel for two of the litigation matters due to cash flow constraints.

Related Party Transactions

• The company has received loans from related parties to support operations.
• The company has a promissory note payable to a related party for $447,150, which is in default.
• The company has convertible notes payable to a related party with accrued interest of $37,693.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern issues.
• Employees may be impacted by the company's financial difficulties and potential restructuring or cessation of operations.
• Creditors face the risk of not being repaid due to the company's defaulted debt obligations.
• Customers may be impacted by the company's ability to continue providing services.

Next Steps

• The company plans to tokenize its library of 14,000 plus full-length motion pictures and serial television shows.
• The company intends to start the tokenization process within thirty days of this filing and have the Alpha version completed within 90 days from its start date.
• The company plans to aggressively market its tokenized platform to other TV networks as well as major film production and distribution companies.
• The company plans to seek additional financing in a private equity offering to secure funding for operations.

Key Dates

Keywords

Authentic Holdings, Maybacks Global Entertainment, NFT, tokenization, derivative liabilities, financial results, operating expenses, revenue, debt, going concern, motion pictures, television shows