10-Q: FOMO Worldwide Reports Q1 2024 Results: Revenue Declines, Net Loss Persists Amidst Going Concern Doubts

Sentiment:

Quarterly Report 16 July 2024 7:28 PM

FOMO Worldwide's Q1 2024 results reveal a significant drop in revenue and a continued net loss, raising concerns about the company's ability to continue as a going concern.

Capital raiseThe company is actively pursuing additional capital raising opportunities (debt or equity).The company is seeking to capitalize DTS for growth and are evaluating merger and acquisition opportunities to add product depth and management to the business.The company is working to settle claims through a planned capital raise and sales of assets subject to Court approval.

Worse than expectedThe company's revenue decreased significantly compared to the same quarter last year.The company's auditors have issued a going concern opinion.The company was placed into receivership on April 1, 2024.

Summary

FOMO Worldwide reported its financial results for the quarter ended March 31, 2024.
The company experienced a decrease in net sales from $552,328 in Q1 2023 to $156,006 in Q1 2024.
Cost of sales also decreased from $397,571 to $83,789 over the same period.
General and administrative expenses decreased from $550,866 to $129,422.
The company's net loss was $(378,390) for Q1 2024, compared to a net loss of $(3,789,102) for Q1 2023.
The company's accumulated deficit increased to $26,216,142 as of March 31, 2024.
The report indicates substantial doubt about the company's ability to continue as a going concern.
The company is pursuing additional capital raising opportunities and exploring strategic partnerships to improve its financial position.
The company was placed into receivership on April 1, 2024.
The company is in default on debt arrangements with multiple providers.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation with declining revenue, continued losses, and a going concern warning. The receivership and debt defaults further contribute to a negative outlook, despite efforts to raise capital and explore strategic partnerships.

Positives

The net loss decreased significantly compared to the same quarter last year.
Gross profit margin increased from 28% to 46%.
General and administrative expenses decreased significantly.
The company is actively pursuing additional capital raising opportunities and strategic partnerships.

Negatives

Net sales decreased significantly compared to the same quarter last year.
The company has a substantial accumulated deficit of $26,216,142.
The company has a significant working capital deficit of $3,856,428.
The company is in default on its debt arrangements with multiple providers of merchant cash advances.
The company was placed into receivership on April 1, 2024.
The company's auditors have issued a going concern opinion.

Risks

The company's ability to continue as a going concern is in substantial doubt.
The company's dependence on additional capital raises is a significant risk.
The company's default on debt arrangements could lead to further legal action and asset seizure.
The receivership could negatively impact the company's operations and strategic plans.
The company's reliance on a single supplier for smartboards poses a supply chain risk.
The company faces intense competition and changing consumer demand.

Future Outlook

The company expects expenses to continue to increase and is dependent on future debt or equity investments to expand its business through mergers and acquisitions and grow sales in the clean air and audio/visual businesses.

Management Comments

Managements strategic plans include the following: Pursuing additional capital raising opportunities (debt or equity), Continue to execute on our strategic planning while increasing operational efficiency, Continuing to explore and execute prospective partnering or distribution opportunities and Identifying unique market opportunities that represent potential positive short-term cash flow.

Industry Context

The company operates in the education technology and clean air disinfection markets, which have seen increased demand due to remote learning trends and health concerns. However, the company faces intense competition and changing consumer demand.

Comparison to Industry Standards

It is difficult to compare FOMO Worldwide's results to industry standards due to its unique business model as a business incubator with subsidiaries in various sectors.
However, the decline in revenue and continued net loss are concerning and suggest the company is underperforming compared to peers in the education technology and clean air disinfection markets.
Companies like SMART Technologies and other audio/visual systems integrators may serve as benchmarks for SST, but the receivership and financial difficulties make direct comparisons challenging.
Comparing FOMO to other small cap companies listed on the OTC market is difficult due to the wide range of industries and business models represented.

Legal Proceedings

The company is involved in lawsuits by a former salesperson for unpaid commissions.
The company is involved in lawsuits by merchant cash advance providers CFS, Globex, and Swift Funding.
The company is involved in a lawsuit by its senior lender Thermo Communications Funding, LLC.

Related Party Transactions

During the three months ended March 31, 2024, the Company converted related party loans receivable of $41,028 into 278,442 shares of Series B preferred stock of HMLA.

Stakeholder Impact

Shareholders face significant risk due to the company's financial difficulties and potential dilution from future capital raises.
Employees face uncertainty due to the receivership and potential restructuring.
Customers may be impacted by the company's ability to fulfill orders and provide services.
Suppliers and creditors face risk of non-payment due to the company's debt defaults.

Next Steps

The company needs to secure additional capital to continue operations.
The company needs to address its debt defaults and legal proceedings.
The company needs to improve its financial controls and procedures.
The company needs to negotiate an exit from receivership.

Key Dates

Date	Description
1990	FOMO WORLDWIDE, INC. (FOMO or the Company) incorporated in California
1995	SMARTSolution Technologies, L.P. (SST) incorporated in Pennsylvania
October 19, 2020	The Company acquired 100% of the membership interests of Purge Virus, LLC in exchange for the issuance of 2,000,000 Series B Preferred Shares
February 12, 2021	The Company purchased the assets of Independence LED Lighting LLC (iLED), later rebranded as IAQ Technologies, LLC, in exchange for the issuance of 250,000 Series B Preferred Shares
March 7, 2021	The Company purchased the assets of Energy Intelligence Center LLC (EIC of PA), an affiliate of iLED, in exchange for the issuance of 125,000 Series B Preferred Shares
May 18, 2021	FOMO incorporated FOMO ADVISORS LLC, a Wyoming limited liability company, as a wholly owned private merchant banking subsidiary.
June 28, 2021	Date of initial loan to Himalaya Technologies, Inc.
December 14, 2021	FOMO incorporated FOMO CORP., later renamed FOMO WORLDWIDE, INC., a Wyoming C-Corp., as a wholly owned subsidiary
February 28, 2022	FOMO closed the acquisition of the general and all the limited partnership interests of SMARTSolution Technologies L.P. and shares of SMARTSolution Technologies, Inc.
June 21, 2022	The amount of the accounts receivable credit facility was increased to a total availability of $1,500,000.
September 1, 2022	Effective date the Company increased our available loan to Himalaya of $50,000 to $100,000 to fund its operations.
June 21, 2023	The Company established Diamond Technology Solutions LLC (DTS) in Pennsylvania.
June 27, 2023	The Company assigned 100% of the operating assets, customer lists and data, and software systems and support contracts from SST to DTS.
July 10, 2023	FOMO, its subsidiary SMARTSolution Technologies, Inc. and its predecessor SMARTSolution Technologies LP (together SST), our CEO Vikram Grover, and our former SVP Finance Mary Kirk were served with a business lawsuit by a former salaried employee seeking $600,000+ (since modifgied to $480,000) in commissions plus liquidated damages of 25%, legal fees, penalties and interest.
August 3, 2023	The Company approved the transfer of 100% of the assets of EIC Wyoming to its wholly owned subsidiary Diamond Solution Technologies LLC (DTS).
October 1, 2023	The transfer of assets from SST to DTS closed.
January 4, 2024	Thermo Communications Funding, LLC (Thermo) defaulted us and our subsidiary SMARTSolution Technologies, Inc. (SST), terminated its senior secured asset backed lending agreement executed with us on February 28, 2022, and demanded repayment of $1,044,164.93 plus interest.
February 22, 2024	The Company effectuated a 1:100 reverse stock split.
March 4, 2024	1800 Diagonal Lending LLC funded the Company $54,000 in a 18% promissory note due December 15, 2024.
March 31, 2024	End of the reporting period for the Q1 2024 results.
April 1, 2024	Our holding company and all subsidiaries were placed into receivership by the Court of Common Pleas of Allegheny County, PA at the request of our senior secured lender to assess our financial condition and wherewithal to fund operations.
June 4, 2024	The transfer of assets from SST to DTS was reversed.
May 20, 2024	A third-party lender converted $2,950.00 principal and $578.68 interest of a junior note into 5,348,484 common shares.
July 16, 2024	Date of the report.

Keywords

financial results, net loss, revenue, going concern, receivership, debt, FOMO Worldwide, SMARTSolution Technologies, capital raise, financial statements

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