10-Q: HUMBL Inc. Reports First Quarter 2024 Results, Cites Ongoing Restructuring and Strategic Shifts
Quarterly Report
HUMBL Inc. reported a net loss of $232,022 for the first quarter of 2024, amidst ongoing restructuring and strategic shifts, including the sale of its HUMBL Financial assets.
Summary
- HUMBL Inc. reported a net loss of $232,022 for the first quarter of 2024, a significant improvement compared to a net loss of $4,429,896 in the same period of 2023.
- The company's revenue increased to $342,379, up from $270,685 in the first quarter of 2023, driven by merchandise sales and services from its Mexican subsidiary.
- Operating expenses decreased to $2,615,640 from $3,832,492 year-over-year, due to reductions in non-cash charges and general and administrative costs.
- The company sold its HUMBL Financial product line to Avrio Worldwide, receiving a 10% stake in Avrio valued at $2.8 million and a 2.5% revenue share.
- HUMBL's working capital deficit decreased to $2,057,151 from $4,690,800 at the end of 2023, primarily due to reductions in notes payable and accrued expenses.
- The company's monthly cash burn is approximately $270,000, which is expected to decrease as core products are completed.
- Management has expressed substantial doubt about the company's ability to continue as a going concern due to operating losses and working capital deficit.
Sentiment
Score: 4
Explanation: The document presents a mixed picture. While there are positive signs like reduced losses and increased revenue, the going concern warning and reliance on debt financing create a negative sentiment. The strategic shifts and partnerships are promising but their success is uncertain.
Positives
- The net loss significantly decreased year-over-year, indicating improved financial performance.
- Revenue increased, driven by merchandise sales and services.
- Operating expenses were reduced, primarily due to lower non-cash charges and general and administrative costs.
- The sale of HUMBL Financial assets generated a $2.8 million gain and a potential future revenue stream.
- The working capital deficit decreased, reflecting improved financial management.
- The company secured $580,000 in debt financing during the quarter.
Negatives
- The company still reported a net loss of $232,022 for the quarter.
- The company has a working capital deficit of $2,057,151.
- Management has expressed substantial doubt about the company's ability to continue as a going concern.
- The company's monthly cash burn is still approximately $270,000.
- The company has a significant amount of debt.
Risks
- The company's ability to continue as a going concern is in doubt due to operating losses and working capital deficit.
- The company's ability to raise additional capital may be limited by industry conditions and capital market effects.
- The company faces challenges in meeting disclosure obligations due to remote work and travel restrictions.
- The company is involved in ongoing legal proceedings, including a lawsuit against Pacific Lion.
- The company has a significant amount of debt, including convertible notes.
Future Outlook
The company expects that the consolidation of its platform into HUMBL.com and its arrangement with the AFL will improve its liquidity. However, the company acknowledges that its ability to raise additional capital may be limited by industry conditions and capital market effects.
Management Comments
- Management has determined that there is substantial doubt about the Company's ability to continue as a going concern.
- Management expects development costs and professional fees to decrease in the next 12 months.
- Management expects stock-based compensation expenses to decline in the next 12 months.
Industry Context
The document highlights the challenges faced by companies in the digital commerce and cryptocurrency sectors, including the impact of market volatility and regulatory uncertainty. The company's strategic shift towards a more focused platform and partnerships with sports leagues reflects a broader trend of companies seeking to diversify revenue streams and establish sustainable business models in the evolving digital economy.
Comparison to Industry Standards
- The company's financial performance is mixed when compared to industry standards. While the reduction in net loss and operating expenses is a positive sign, the company's ongoing working capital deficit and going concern issues are significant concerns.
- The sale of HUMBL Financial assets for a stake in Avrio is a strategic move that could potentially generate future revenue, but its success depends on Avrio's performance.
- The company's partnership with the Arena Football League (AFL) is a unique approach to revenue generation, but its impact on the company's overall financial health remains to be seen.
- Compared to other tech companies, HUMBL's revenue is relatively low, and its reliance on debt financing is a risk factor.
- The company's focus on a verified commerce platform and digital wallet aligns with industry trends, but its ability to compete with established players remains uncertain.
Legal Proceedings
- The company is a defendant in two putative shareholder derivative class action lawsuits.
- The company has filed a lawsuit against Pacific Lion for breach of contract.
Related Party Transactions
- The company has entered into notes payable with related parties.
- The company has issued convertible notes payable to related parties.
- The company exchanged $6,150,000 in related party notes payable and $355,402 in accrued interest into 8,775 shares of Series C preferred stock.
Stakeholder Impact
- Shareholders face significant risk due to the company's going concern issues and ongoing losses.
- Employees may be impacted by potential cost-cutting measures and uncertainty about the company's future.
- Customers may be affected by changes in the company's product offerings and services.
- Creditors face the risk of non-payment due to the company's financial instability.
Next Steps
- The company plans to consolidate its platform into HUMBL.com.
- The company will continue to develop its partnership with the AFL.
- The company will seek to improve its liquidity and reduce its cash burn.
- The company will continue to pursue its legal rights against Pacific Lion.
Key Dates
| Date | Description |
|---|---|
| 2020-12-03 | HUMBL LLC merged into the Company in a reverse merger. |
| 2021-02-26 | FINRA approved the increase in authorized common shares and reverse stock split. |
| 2021-06-03 | HUMBL acquired Tickeri, Inc. |
| 2021-06-30 | HUMBL acquired Monster Creative, LLC. |
| 2022-02-12 | HUMBL entered into an asset purchase agreement with BizSecure, Inc. |
| 2022-03-03 | HUMBL acquired Ixaya Business SA de CV. |
| 2022-11-02 | HUMBL acquired BM Authentics. |
| 2022-11-15 | HUMBL entered into a Settlement Agreement with Forwardly, Inc. |
| 2023-01-31 | HUMBL sold Tickeri back to its former owners. |
| 2023-05-10 | HUMBL entered into an Equity Financing Agreement with Pacific Lion. |
| 2023-06-01 | HUMBL amended the conversion terms of their Series B Preferred Stock. |
| 2023-06-30 | HUMBL sold back the membership interest in Monster Creative, LLC. |
| 2023-07-19 | HUMBL entered into a Settlement Agreement with BizSecure, Inc. |
| 2023-07-27 | The Company increased their authorized common stock to 12,500,000,000 shares. |
| 2023-10-03 | HUMBL signed a Securities Purchase Agreement with Pacific Lion. |
| 2023-10-24 | The Company filed a Certificate of Designation of the Series C Preferred Stock. |
| 2024-01-26 | The Company increased their authorized common stock to 22,500,000,000 shares. |
| 2024-02-23 | HUMBL entered into an Asset Purchase Agreement with Avrio Worldwide, PBC. |
| 2024-03-13 | HUMBL filed a complaint against Pacific Lion. |
| 2024-03-31 | End of the reporting period for the quarterly report. |
| 2024-05-20 | Date of the report, 14,490,586,874 shares of common stock outstanding. |
Keywords
HUMBL, financial results, net loss, revenue, operating expenses, working capital, going concern, debt financing, HUMBL Financial, Avrio, digital commerce, AFL, convertible notes
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