10-Q: Authentic Holdings Reports Q3 2024 Results, Revenue Growth Offset by Net Losses and Going Concern Doubts

Authentic Holdings Inc. reported revenue growth in Q3 2024, but continues to face significant net losses, a working capital deficit, and substantial doubts about its ability to continue as a going concern.

Summary

• Authentic Holdings Inc. reported a net loss of $512,854 for the nine months ended September 30, 2024, compared to a net loss of $947,369 for the same period in 2023.
• The company's revenue for the nine months ended September 30, 2024, was $164,668, a significant increase from no revenue in the same period of 2023.
• Operating expenses increased to $674,092 for the nine months ended September 30, 2024, up from $348,816 in 2023, primarily due to amortization of license agreements.
• The company has an accumulated deficit of $38,551,622 as of September 30, 2024, and a working capital deficit of $4,728,182.
• Authentic Holdings has several promissory notes in default, including convertible notes with a face value of $1,051,664, secured promissory notes of $101,550, related party promissory notes of $484,974, and self-liquidating promissory notes of $132,083.
• The company's ability to continue as a going concern is dependent on its ability to repay or settle its current indebtedness, generate positive cash flow, and raise capital through equity and debt financing.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with some positive developments like revenue generation and growth in Maybacks, but these are overshadowed by significant financial losses, a large accumulated deficit, substantial debt defaults, and material weaknesses in internal controls. The going concern warning further lowers the sentiment.

Positives

• The company has started generating revenue, with $164,668 reported for the first nine months of 2024.
• Maybacks has significantly increased its reach and channel count, indicating growth in its operations.
• The launch of the iDreamCTV app and its user base growth shows potential for future revenue streams.
• The development of a platform to help NFT investors could enhance the company's credibility and market position in the blockchain space.

Negatives

• The company has incurred a net loss of $512,854 for the nine months ended September 30, 2024.
• The company has a substantial accumulated deficit of $38,551,622.
• The company has a significant working capital deficit of $4,728,182.
• Multiple promissory notes are in default, totaling over $1.7 million.
• The company has minimal cash resources and is dependent on raising additional capital.
• There are material weaknesses in the company's internal controls over financial reporting.

Risks

• The company's ability to continue as a going concern is in doubt due to its accumulated losses, working capital deficit, and defaulted debt.
• The company is dependent on raising additional capital through debt or equity financing, which may not be available on favorable terms or at all.
• The company faces significant competition from larger, more established companies with greater resources.
• The company's internal controls over financial reporting are not effective, which could lead to misstatements in financial reporting.
• The company is involved in three pending litigation matters, which could result in financial liabilities.
• The company's business plan is subject to risks inherent in the establishment of a new business enterprise, including high debt and limited capital resources.

Future Outlook

The company expects revenue to increase in future quarters as Maybacks expands its market reach and the company develops its NFT platform. The company also intends to fund operations through increased sales and debt and/or equity financing arrangements.

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 has waived compensation for the nine months ended September 30, 2024 and year ended December 31, 2023.

Industry Context

The company operates in the competitive media and entertainment industry, facing challenges from larger, more established players. The company is attempting to capitalize on the 'cutting the cord' trend with its Maybacks network and is also exploring opportunities in the growing NFT market.

Comparison to Industry Standards

• The company's revenue of $164,668 for the nine months ended September 30, 2024, is significantly lower than established television networks like Sling TV, which is owned by DISH Network.
• The company's accumulated deficit of $38,551,622 and working capital deficit of $4,728,182 are indicative of a company struggling to achieve profitability, which is not uncommon for early-stage companies in the media and technology sectors.
• The company's reliance on debt financing and the default on multiple promissory notes is a significant concern, especially when compared to more financially stable competitors.
• The company's development of an NFT platform is a move to capitalize on a growing trend, but it is still in its early stages and faces competition from established NFT marketplaces.
• The company's iDreamCTV app has reached 91,000 active users, which is a positive sign, but it is still a small number compared to established streaming platforms.

Legal Proceedings

• The company is a party to three pending litigation matters.
• One matter involves eviction and unpaid rent claims.
• Two matters involve claims for unpaid wages from former employees of a company that Authentic Holdings never acquired.

Related Party Transactions

• The company has received loans from related parties to support operations.
• The company has promissory notes payable to related parties.
• The company has convertible notes payable to related parties.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and going concern doubts.
• Employees may be impacted by potential restructuring or cessation of operations.
• Creditors face the risk of not being repaid due to the company's debt defaults.
• Customers may be impacted by potential disruptions in service if the company faces financial difficulties.

Next Steps

• The company plans to continue to expand the markets for its movie and TV programming.
• The company plans to continue to develop its NFT platform.
• The company plans to seek additional financing through a private equity offering.
• The company plans to take remedial action to address the material weaknesses in internal controls.

Key Dates

Keywords

Authentic Holdings, Maybacks, iDreamCTV, NFT, Promissory Notes, Convertible Notes, Revenue, Net Loss, Going Concern, Financial Statements, Debt, License Agreements, Blockchain, Advertising, Television Network