10-K/A: Limitless X Holdings Files Amended 10-K After Audit Adjustments and Restatement

Limitless X Holdings has filed an amended 10-K to correct audit adjustments and restate financial statements for 2023 and 2022, including replacing the auditor's report.

Summary

• Limitless X Holdings has filed an amended 10-K to correct audit adjustments and restate financial statements for the years ended December 31, 2023 and 2022.
• The restatement includes replacing the report of the independent registered public accounting firm from BF Borgers CPA PC with a report from M&K CPAS, PLLC.
• The company has amended Part II, Item 7 (Management's Discussion and Analysis) and Item 8 (Financial Statements) to reflect the restatement.
• Part III, Item 11 (Executive Compensation) has been updated to disclose compensation paid to certain named executive officers.
• Part III, Item 15 has been updated to add Exhibit 10.12, an agreement for the purchase and sale of stock of Vybe, Inc.
• The company identified a material weakness in its internal control over financial reporting and has outlined actions taken by management to address it.
• The company's common stock is traded on the OTCQB under the symbol VYBE.
• The aggregate market value of voting stock held by non-affiliates on June 30, 2023, was approximately $3,899,529.
• As of December 2, 2024, the company had 3,977,497 shares of common stock outstanding.
• The company incurred net losses of $16.1 million and $10.0 million for the years ended December 31, 2023 and 2022, respectively.

Sentiment

Score: 3

Explanation: The document reveals significant financial challenges, including substantial losses, a going concern warning, and a dependence on related parties. While there are some positive steps, the overall outlook is concerning from an investment perspective.

Positives

• The company has taken steps to address a material weakness in its internal control over financial reporting.
• Operating expenses decreased significantly from 2022 to 2023.
• The company is shifting its marketing strategy to in-house digital marketing to reduce customer acquisition costs.
• The company has a network of high-profile influencers to promote its products.
• The company has a streamlined omni-channel approach to product distribution.

Negatives

• The company has incurred significant losses and expects to incur losses in the future.
• The independent auditor's report includes a going concern uncertainty explanatory paragraph.
• All current brands and products are owned or controlled by the CEO, posing a risk to the business.
• The company relies on third parties for essential business operations and services.
• The company's stock is considered a penny stock, which may discourage broker-dealers from effecting transactions.
• The company has not paid dividends in the past and does not expect to pay dividends in the foreseeable future.
• The company's stock price may be volatile.

Risks

• The company may not be able to generate sufficient revenue to achieve and maintain profitability.
• The company may lose all of its business if the CEO terminates agreements with the company.
• The company may fail to cost-effectively acquire new consumers or retain existing consumers.
• The use of social media and influencers may materially and adversely affect the company's reputation.
• The company relies on third parties for essential business operations and services, which could be disrupted.
• The company's operations are dependent on a single warehouse and distribution center.
• The company faces competition from companies with greater resources.
• The company's business model is evolving and may not be successful.
• The company's securities are considered a penny stock and are subject to penny stock rules.
• The company is dependent on key personnel, many of whom have concurrent responsibilities at other companies.
• The company has identified material weaknesses in its internal control over financial reporting.

Future Outlook

The company plans to offer global marketing services across all areas of the sales process and expects both product sales and service revenue to steadily improve.

Management Comments

• Jas Mathur, the CEO, is an entrepreneur with over 14 years of experience within the health, wellness, and dietary supplements industry and 25 years of experience as a webmaster and internet marketer.
• The company shifted its business model from working with third-party affiliates to an in-house digital marketing team to decrease customer acquisition costs.
• The company is working to integrate the Prime Time Live platform to establish a more robust in-house digital marketing arm.

Industry Context

The global health and wellness market is projected to reach $8,946 billion by the end of 2030, with a compound annual growth rate of approximately 6.9% between 2023 and 2030, according to Zion Market Research.

Comparison to Industry Standards

• The company's shift to in-house digital marketing is a common strategy to reduce customer acquisition costs, similar to other e-commerce businesses.
• The company's reliance on a single warehouse and distribution center is a risk, as many companies use multiple facilities to mitigate disruptions.
• The company's use of social media influencers is a common marketing tactic in the consumer goods industry, but the company's lack of formal long-term contracts with influencers is a risk.
• The company's financial results are significantly below industry benchmarks for profitability and growth, indicating a need for significant improvements in operations and revenue generation.
• The company's high level of related party transactions and control by the CEO is a concern, as it deviates from best practices in corporate governance.

Corporate Governance

Legal Proceedings

• The company is involved in a legal action filed by Mentom Eyewear Inc. alleging breach of an Implied In-Fact Agreement.
• The company is involved in a legal action filed by Harpo Inc. alleging trademark infringement and dilution.

Related Party Transactions

• The company has various royalty payables, notes payable to shareholders, and notes payable to related parties.
• The company's CEO purchased Class A Preferred Convertible Stock from a related party.
• The company sold its subsidiary Vybe Labs, Inc. to Emblaze One, Inc., a company owned by the CEO.

Stakeholder Impact

• Shareholders face significant risks due to the company's financial instability and control by the CEO.
• Employees may be affected by the company's financial challenges and potential restructuring.
• Customers may be impacted by changes in product offerings and marketing strategies.
• Suppliers may face risks due to the company's financial instability and potential changes in operations.
• Creditors face risks due to the company's going concern uncertainty and potential inability to repay debts.

Next Steps

• The company intends to continue to develop its business model as the market evolves.
• The company plans to offer global marketing services across all areas of the sales process.
• The company will continue to implement changes to improve internal controls as funds become available.
• The company intends to progress cybersecurity related measures throughout 2024.

Key Dates

Keywords

financial restatement, audit adjustments, internal control, going concern, executive compensation, convertible debt, digital marketing, e-commerce, consumer packaged goods, health and wellness