CMGR.OTC.PinkClubhouse Media Group, INC
10-Q: Clubhouse Media Group Reports First Quarter 2024 Results with Revenue Increase but Continued Losses
Sentiment:
Quarterly Report
Clubhouse Media Group's Q1 2024 results show a slight revenue increase but ongoing net losses and negative working capital.
Capital raiseManagement intends to raise additional funds by way of a public or private offering.The company will require additional cash funding to fund operations.The company may obtain additional financing in the future through the issuance of its common stock, or through other equity or debt financing.
Worse than expectedThe company's net loss from continuing operations was $1,749,150, which is a significant loss.The company's cash and cash equivalents decreased significantly to $14,840, indicating a worsening liquidity position.The company has a negative working capital of $9,380,439, which is a sign of financial distress.The company's convertible notes payable are in default, indicating a failure to meet debt obligations.
Summary
- Clubhouse Media Group reported a net revenue of $401,546 for the three months ended March 31, 2024, compared to $351,777 for the same period in 2023.
- The company's cost of sales increased to $273,246 in Q1 2024 from $218,888 in Q1 2023, primarily due to higher sales volume on the Honeydrip.com platform.
- Gross profit decreased to $128,300 in Q1 2024 from $132,889 in Q1 2023, with a gross profit percentage of 24% compared to 38% in the prior year.
- Operating expenses rose to $405,103 in Q1 2024 from $323,614 in Q1 2023, driven by increases in salaries, wages, and professional fees.
- The company's net loss from continuing operations was $1,749,150 for Q1 2024, compared to a net loss of $1,858,737 for Q1 2023.
- Net loss from discontinued operations was $8,960 for Q1 2024, compared to $363,582 for Q1 2023.
- The company had a negative working capital of $9,380,439 as of March 31, 2024, and a stockholders deficit of $8,948,910.
- The company's cash and cash equivalents decreased from $125,207 at the end of 2023 to $14,840 as of March 31, 2024.
- The company has a substantial amount of convertible notes payable totaling $4,162,778, which are in default.
- The company's derivative liability increased to $2,231,297 as of March 31, 2024, from $873,913 at the end of 2023.
Sentiment
Score: 3
Explanation: The document indicates a struggling company with increasing losses, decreasing cash, and significant debt issues. While there is a slight revenue increase, the overall financial health and going concern status are concerning, leading to a low sentiment score.
Positives
- The company's net revenue increased by $49,769 in Q1 2024 compared to Q1 2023.
- The company's net loss from continuing operations decreased slightly from $1,858,737 in Q1 2023 to $1,749,150 in Q1 2024.
Negatives
- The company's gross profit decreased to $128,300 in Q1 2024 from $132,889 in Q1 2023.
- The company's operating expenses increased to $405,103 in Q1 2024 from $323,614 in Q1 2023.
- The company's cash and cash equivalents decreased significantly to $14,840 as of March 31, 2024, from $125,207 at the end of 2023.
- The company has a negative working capital of $9,380,439 as of March 31, 2024, and a stockholders deficit of $8,948,910.
- The company has a substantial amount of convertible notes payable totaling $4,162,778, which are in default.
Risks
- The company's ability to continue as a going concern is dependent on its ability to raise additional capital.
- The company's cash position may not be sufficient to support daily operations.
- The company has a significant amount of convertible notes payable that are in default.
- The company's disclosure controls and procedures were deemed not effective as of March 31, 2024.
- The company's derivative liability has increased significantly, which could impact future financial results.
Future Outlook
The company intends to raise additional funds through a public or private offering to support its operations and continue as a going concern. The company is focused on growing its Honeydrip.com platform.
Management Comments
- Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
- Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.
Industry Context
The company is shifting its focus from brand deals to its own creator monetization platform, Honeydrip.com, which aligns with the trend of content creators seeking direct monetization opportunities. The company's financial results reflect the challenges of this transition and the need for additional capital to support its growth strategy.
Comparison to Industry Standards
- The company's gross profit margin of 24% is below the industry average for social media and content platforms, which typically range from 40% to 70%.
- The company's operating expenses as a percentage of revenue are significantly higher than industry benchmarks, indicating a need for cost optimization.
- The company's negative working capital and stockholders deficit are concerning and suggest a need for significant capital infusion to achieve financial stability.
- The company's reliance on convertible debt and the fact that these notes are in default is a significant risk factor compared to industry peers with more stable capital structures.
- Companies like OnlyFans and Patreon, which operate in a similar space, have demonstrated higher revenue growth and profitability, indicating that Clubhouse Media Group needs to improve its platform and monetization strategies to compete effectively.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Financial Officer | NA | Scott Hoey | NA | NA |
| Chief Executive Officer | NA | Amir Ben-Yohanan | NA | NA |
| Director | Christopher Young | NA | 2022-10-08 | Resigned |
| Director | Simon Yu | NA | 2022-10-08 | Resigned |
| Chief Financial Officer | NA | Dmitry Kaplun | 2022-10-07 | Appointed |
| Director | NA | Massimiliano Musina | 2021-10-12 | Appointed |
Related Party Transactions
- The Company borrowed $12,500 from Amir during the three months ended March 31, 2024.
- The Company has a payable balance owed to the sellers of Magiclytics of $97,761 as of March 31, 2024.
- During the year ended December 31, 2023, Mr. Young and Mr. Yu prior accrued and unpaid wages amounting $80,000 a piece for total of $160,000 as of September 30, 2023 were forgiven per consulting agreement section 3(c) by the Company.
- During the year ended December 31, 2023, Mr. Ben-Yohanan entered into an agreement with the Company to forgive all prior accrued and unpaid wages amounting to $785,000 as of September 30, 2023 and agreed to forego any wages until further notification to the Company.
Stakeholder Impact
- Shareholders face significant risk due to the company's negative equity and going concern issues.
- Employees may be impacted by potential cost-cutting measures or restructuring due to the company's financial difficulties.
- Creditors face increased risk of non-payment due to the company's default on convertible notes.
- Customers may experience disruptions in service if the company's financial situation worsens.
Next Steps
- The company intends to raise additional funds by way of a public or private offering.
- The company will need to further implement its business plan and generate revenues.
- The company will need to improve its financial controls and procedures.
Key Dates
| Date | Description |
|---|---|
| 2006-12-19 | Clubhouse Media Group, Inc. was incorporated under the laws of the State of Nevada. |
| 2006-12-27 | Tongji, Inc. acquired 100% of the equity in NTH. |
| 2017-12-31 | The Company sold its equity ownership interest in NTH to Placer Petroleum Co., LLC. |
| 2019-05-20 | Joseph Arcaro was appointed custodian of Tongji Healthcare Group, Inc. |
| 2020-05-29 | Mr. Arcaro entered into a Stock Purchase Agreement with West of Hudson Group, Inc. |
| 2020-06-18 | The Stock Purchase closed, resulting in a change of control of the Company. |
| 2020-07-07 | The Company increased the authorized capital stock. |
| 2020-11-12 | The Company and WOHG entered into the Merger Agreement. |
| 2021-02-19 | The Company entered into a securities purchase agreement with GS Capital. |
| 2021-03-16 | The Company entered into another securities purchase agreement with GS Capital. |
| 2021-04-01 | The Company entered into another securities purchase agreement with GS Capital. |
| 2021-04-13 | The Company entered into a securities purchase agreement with Eagle Equities LLC. |
| 2021-04-29 | The Company entered into a securities purchase agreement with GS Capital. |
| 2021-06-03 | The Company entered into a securities purchase agreement with GS Capital. |
| 2021-08-27 | The Company entered into a note purchase agreement with Chris Etherington and Rui Wu. |
| 2021-11-02 | The Company entered into an Equity Purchase Agreement with Peak One Opportunity Fund, L.P. |
| 2022-01-13 | The Company entered into a Securities Purchase Agreement with Fast Capital, LLC. |
| 2022-02-16 | The Company entered into a Securities Purchase Agreement with ONE44 Capital LLC. |
| 2022-03-16 | The Company entered into another securities purchase agreement with GS Capital. |
| 2022-04-11 | Amir Ben-Yohanan's employment agreement became effective. |
| 2022-04-19 | The board of directors approved the 2022 Equity Incentive Plan. |
| 2022-05-20 | The Company entered into a Securities Purchase Agreement with ONE44 Capital LLC. |
| 2022-06-13 | The Company filed a Certificate of Amendment to reduce the par value of common stock. |
| 2022-06-23 | The Company entered into a Securities Purchase Agreement with Diagonal Lending LLC. |
| 2022-06-29 | The Company entered into an Exchange Agreement with GS Capital. |
| 2022-07-08 | The Company entered into a Securities Purchase Agreement with Diagonal Lending LLC. |
| 2022-07-11 | The Board and stockholders approved the 2023 Equity Incentive Plan. |
| 2022-07-31 | The Company entered into a joint venture deal memo with Alden Henri Reiman. |
| 2022-10-07 | Dmitry Kaplun was appointed as the Company's Chief Financial Officer. |
| 2022-10-12 | Massimiliano Musina was appointed to the Company's Board of Directors. |
| 2022-11-15 | The Company filed a certificate of amendment to increase authorized shares of common stock. |
| 2023-02-17 | The Company entered into a Settlement and Release Agreement with 1800 Diagonal Lending LLC. |
| 2023-03-07 | The Company entered into a Debt Repayment and Release Agreement with ONE44 Capital LLC. |
| 2023-05-10 | The Company entered into a debt repayment and release agreement with ONE44 Capital LLC. |
| 2023-05-11 | The Company paid ONE44 $77,893, settling the debt. |
| 2023-09-30 | Mr. Young and Mr. Yu prior accrued and unpaid wages were forgiven. |
| 2023-12-14 | The Company terminated employment of Mr. Reiman. |
| 2024-03-31 | End of the reporting period for the quarterly report. |
| 2024-05-08 | Date of common stock outstanding. |
| 2024-05-13 | Date of report filing. |
Keywords
Honeydrip, convertible notes, revenue, net loss, operating expenses, derivative liability, going concern, working capital, financial results, stockholders deficit
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