10-Q: Business Warrior Corporation Reports Q3 2024 Results: Revenue Declines, Net Loss Widens Amid Strategic Shift

Business Warrior Corporation's Q3 2024 results reveal a revenue decrease and a widened net loss, attributed to strategic operational changes and non-cash expenses.

Summary

• Business Warrior Corporation reported a net loss of $1,627,912 for the three months ended May 31, 2024, compared to a net loss of $249,300 for the same period in 2023.
• Revenue for the quarter was $555,129, down from $910,719 in the prior year, primarily due to decreased marketing agency revenue from the Helix division.
• Operating expenses decreased by 12% to $694,994, driven by operational efficiencies and cost-cutting measures.
• For the nine months ended May 31, 2024, the company's net loss was $5,845,255, compared to $3,735,794 in 2023.
• Revenue for the nine-month period was $2,352,458, a decrease from $3,243,742 in the previous year.
• The company's total current assets decreased to $212,591, while total liabilities increased to $13,326,888.
• The company acknowledges substantial doubt about its ability to continue as a going concern.
• The company is focusing on growing revenue from operations and improving profit margins to meet near-term obligations.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to declining revenue, increasing net losses, and concerns about the company's ability to continue as a going concern. While there are some positive aspects, such as cost-cutting measures, the overall tone is pessimistic.

Positives

• Operating expenses decreased by 12% for the three months ended May 31, 2024, indicating improved efficiency.
• The company is actively pursuing cost-cutting measures and operational efficiencies.
• Loss from operations decreased by 19% in the recent nine-month period compared to the same period the previous year.
• The company settled the lawsuit with the previous ownership of Alchemy in September 2024.

Negatives

• Revenue decreased significantly for both the three and nine months ended May 31, 2024.
• Net loss increased substantially for both the three and nine months ended May 31, 2024.
• The company has a working capital deficit, stockholders' deficit, and accumulated deficit.
• The company's auditors have raised substantial doubt about its ability to continue as a going concern.
• Total liabilities have increased significantly.
• The company experienced a $2,172,212 loss on the exchange of debt.

Risks

• The company's ability to continue as a going concern is uncertain.
• The company is subject to ongoing legal proceedings.
• The company's revenue is concentrated among a few customers.
• The company's disclosure controls and procedures have material weaknesses.
• The company is exposed to market risk related to its derivative financial instruments.
• The company is in default on outstanding obligations to IPSI.

Future Outlook

The company anticipates operating losses will continue in the near term and intends to meet near-term obligations with existing funding options while growing revenue and improving profit margins; however, there is no guarantee that these plans will be successful.

Management Comments

• The majority of the decrease [in revenue] is due to the loss of marketing agency revenue from the Helix division.
• This revenue was not profitable and enabled the Company to reduce the cost of sales and other expenses to contribute to our plan to reach profitability as quickly as possible.
• These decreases [in operating expenses] were all due to operational efficiencies attained from the acquisitions, cost cutting measures, and a reduction in Company marketing while we focused on building and releasing our new product (PayPlan).

Industry Context

The company operates in the competitive marketing and lending technology sectors, facing challenges common to small businesses, including securing funding and managing growth.

Comparison to Industry Standards

• It is difficult to compare Business Warrior's results directly to industry standards due to its unique combination of marketing services, lending technology, and direct lending operations.
• Companies like HubSpot and Salesforce are benchmarks for marketing software, while companies like LendingClub and Upstart are benchmarks for lending platforms.
• Business Warrior's revenue decline and net losses are concerning compared to the growth trajectories of established players in these sectors.
• The company's focus on small business lending puts it in competition with both traditional banks and alternative lenders, each with different risk profiles and capital requirements.

Legal Proceedings

• Business Warrior Corporation was involved in several legal proceedings, including disputes with Timothy Li, MBOCAL and JKB Financial Inc., Adam Spencer, ELEV8 Advisors Group LLC, EVRGRN Industries LLC, and American Express Travel Related Services Company, Inc.
• A settlement was reached on September 24, 2024, resolving disputes across several legal cases.

Related Party Transactions

• Amounts due to related parties were $303,849 as of May 31, 2024.
• Related party notes payable carry a 10% interest rate.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial difficulties and uncertainty about its future.
• Employees may be affected by cost-cutting measures and potential restructuring.
• Customers may experience changes in service as the company focuses on scaling PayPlan.
• Creditors face increased risk due to the company's high level of debt and going concern uncertainty.

Next Steps

• The company plans to focus on scaling PayPlan, improving financial performance, and working toward SEC filing regulations and recommencing trading with the submission and approval of a 15c-211 by FINRA filed through a market maker.
• The company plans to work with IPSI to negotiate mutually agreeable terms for a consolidated note that would restructure the outstanding balances and establish revised repayment terms.

Key Dates

Keywords

financial results, net loss, revenue, going concern, Business Warrior Corporation, BZWR, financial statements, convertible notes, derivative liability, Helix House, Alchemy, PayPlan