HMBL.Humbl, INC
10-Q: HUMBL Inc. Reports Q3 2024 Results, Revenue Growth Offset by Continued Losses
Sentiment:
Quarterly Report
HUMBL Inc. reported increased revenue for the third quarter of 2024, but also significant operating losses and a going concern warning.
Capital raiseThe company received net proceeds of approximately $1.745 million from debt and warrant financings in the nine months ended September 30, 2024.The company acknowledges that the effect of the industry on capital markets may limit its ability to raise additional capital.The company has incurred significant debt from both unrelated and related parties to support operations.
Worse than expectedThe company's net loss from continuing operations was $5.05 million for the nine months ended September 30, 2024, compared to a net loss of $12.47 million for the same period in 2023, but the company also had a gain on the sale of assets in 2023.The company's working capital deficit was $1.93 million as of September 30, 2024, compared to $4.69 million at the end of 2023, but the company also has a going concern warning.The company's monthly cash burn is approximately $204,000, which is a significant amount for a company with limited cash reserves.
Summary
- HUMBL Inc. reported a net loss of $5.52 million for the nine months ended September 30, 2024, compared to a net income of $1.06 million for the same period in 2023, primarily due to a gain on the sale of assets in 2023.
- Revenue increased to $377,305 for the nine months ended September 30, 2024, up from $284,368 in the same period of 2023, driven by merchandise sales.
- Operating expenses decreased significantly to $5.99 million from $11.08 million year-over-year, due to reductions in development costs, professional fees, and stock-based compensation.
- The company's working capital deficit was $1.93 million as of September 30, 2024, compared to $4.69 million at the end of 2023.
- The company's monthly cash burn is approximately $204,000.
- The company received net proceeds of approximately $1.745 million from debt and warrant financings in the nine months ended September 30, 2024.
- 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: 3
Explanation: The document presents a mixed picture with some positive revenue growth and cost reductions, but the significant net losses, working capital deficit, and going concern warning overshadow these positives. The company's reliance on debt financing and the potential limitations on raising additional capital further contribute to a negative sentiment.
Positives
- Revenue increased by $92,937 year-over-year for the nine months ended September 30, 2024, driven by merchandise sales.
- Operating expenses decreased by $5.09 million year-over-year for the nine months ended September 30, 2024, due to reductions in development costs, professional fees, and stock-based compensation.
- The net loss from continuing operations decreased by $7.42 million year-over-year for the nine months ended September 30, 2024.
- The company received a patent for System and Method for Transferring Currency Using Blockchain on October 15, 2024.
Negatives
- The company reported a net loss of $5.52 million for the nine months ended September 30, 2024.
- The company has a working capital deficit of $1.93 million as of September 30, 2024.
- Management has expressed substantial doubt about the company's ability to continue as a going concern.
- The company's monthly cash burn is approximately $204,000.
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 the effect of the industry on capital markets.
- The company faces challenges related to remote work and travel restrictions that may impact its ability to raise additional capital.
- The company has incurred significant debt from both unrelated and related parties to support operations.
Future Outlook
The company expects that the consolidation of its platform into HUMBL.com will bring about revenue-producing operations to improve liquidity. However, the company acknowledges that the effect of the industry on capital markets may limit its ability to raise additional capital.
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 continue to decrease in the next 12 months.
- Management expects stock-based compensation expenses to decline in the next 12 months due to vesting terms.
Industry Context
The company operates in the Web3 and digital commerce space, which is characterized by rapid technological advancements and evolving consumer preferences. The company's focus on blockchain technology and digital wallets aligns with current industry trends, but it faces competition from established players and new entrants.
Comparison to Industry Standards
- The company's revenue growth is modest compared to some high-growth tech companies in the digital commerce space.
- The company's operating losses are significant, indicating a need for improved cost management and revenue generation.
- The company's working capital deficit and going concern warning are concerning and highlight the need for immediate financial improvements.
- The company's patent for System and Method for Transferring Currency Using Blockchain is a positive development, but its impact on revenue and profitability remains to be seen.
- The company's reliance on debt financing is a common practice for early-stage companies, but the level of debt and related party transactions may raise concerns for investors.
Legal Proceedings
- The company is involved in several legal proceedings, including shareholder derivative class action lawsuits and a lawsuit against Pacific Lion.
- The company entered into a settlement agreement with Pacific Lion, but Pacific Lion has not made any payments under the agreement.
- The company entered into a settlement agreement with Robert Hymers III, issuing 700,000,000 shares in exchange for dismissal of the lawsuit.
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 warning and operating losses.
- Employees may be affected by potential cost-cutting measures and the company's financial instability.
- Customers may be impacted by potential changes in the company's products and services.
- Suppliers and creditors face increased risk due to the company's financial challenges.
Next Steps
- The company expects that the consolidation of its platform into HUMBL.com will bring about revenue-producing operations to improve the liquidity of the Company moving forward.
- The company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.
Key Dates
| Date | Description |
|---|---|
| 2009-11-12 | HUMBL, Inc. was incorporated in the state of Oklahoma. |
| 2020-11-30 | The Company was redomiciled to the state of Delaware. |
| 2020-12-03 | HUMBL, LLC merged into the Company in a reverse merger. |
| 2021-02-26 | FINRA approval for the increase in authorized common shares and reverse stock split. |
| 2021-06-03 | The company acquired Tickeri, Inc. |
| 2021-06-30 | The company acquired Monster Creative, LLC. |
| 2022-02-12 | The company entered into an asset purchase agreement with BizSecure, Inc. |
| 2022-03-03 | The company acquired Ixaya Business SA de CV. |
| 2022-11-02 | The company acquired BM Authentics. |
| 2022-11-15 | The company entered into a Settlement Agreement with Forwardly, Inc. |
| 2023-01-31 | The company sold Tickeri back to the former owners. |
| 2023-06-01 | The company amended their Certificate of Incorporation to amend the conversion terms of their Series B Preferred Stock. |
| 2023-06-30 | The company sold back the membership interest in Monster Creative, LLC. |
| 2023-07-19 | The company entered into a Settlement Agreement with BizSecure, Inc. |
| 2023-07-27 | The Company increased their authorized common stock to 12,500,000,000 shares. |
| 2023-10-24 | The Company filed a Certificate of Designation with the State of Delaware to designate 20,000 shares to be authorized for Series C Preferred Stock. |
| 2024-01-26 | The Company increased their authorized common stock to 22,500,000,000 shares. |
| 2024-02-23 | The company entered into an Asset Purchase Agreement with Avrio Worldwide, PBC. |
| 2024-04-01 | The company terminated the Ixaya SPA and deconsolidated from the Company. |
| 2024-07-16 | The company designated a new Series D Preferred Stock and authorized the issuance of up to 250,000 shares of this new series. |
| 2024-09-30 | End of the reporting period for the quarterly report. |
| 2024-10-15 | HUMBL was issued a patent for System and Method for Transferring Currency Using Blockchain. |
| 2024-11-19 | Date of the quarterly report. |
Keywords
HUMBL, financial results, revenue, net loss, operating expenses, working capital, going concern, digital commerce, blockchain, digital wallet, merchandise, tickets, patent
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