LIMX.OQXLimitless X Holdings INC
10-Q: Limitless X Holdings Reports Significant Revenue Decline in Second Quarter 2024
Sentiment:
Quarterly Report
Limitless X Holdings experienced a substantial decrease in revenue and increased net losses for the second quarter of 2024 compared to the same period in 2023, primarily due to a shift in marketing strategies.
Capital raiseThe company needs to raise additional capital to fund future operations.The company anticipates needing additional debt financing in the near future.There are no current agreements or understandings with regard to the form, time or amount of such financing.
Worse than expectedThe company's revenue, gross profit, and net income were significantly worse than the same period in the prior year.The company's cash position has deteriorated significantly.The company has a material weakness in internal control over financial reporting.
Summary
- Limitless X Holdings reported a significant decrease in revenue for the three and six months ended June 30, 2024, compared to the same periods in 2023.
- Product sales decreased by $4.9 million for the three months and $10.4 million for the six months ended June 30, 2024.
- Service revenue also saw a substantial decrease, dropping by $2.5 million for the three months and $2.8 million for the six months ended June 30, 2024.
- The company's cost of sales decreased to $0.2 million for the three months and $0.4 million for the six months ended June 30, 2024, reflecting a reduction in operations.
- Gross profit decreased by $5.8 million for the three months and $10.6 million for the six months ended June 30, 2024.
- Operating expenses decreased by $8.0 million for the three months and $20.4 million for the six months ended June 30, 2024, primarily due to reduced advertising, marketing, and payroll costs.
- The net loss for the three months ended June 30, 2024, was $0.7 million, and $1.7 million for the six months ended June 30, 2024.
- The company had an accumulated deficit of $28 million as of June 30, 2024.
- The company's cash balance decreased from $116,100 at the end of 2023 to $5,681 as of June 30, 2024.
- The company has raised $583,596 through borrowings from investors and a stockholder during the six months ended June 30, 2024.
Sentiment
Score: 2
Explanation: The document indicates a very negative outlook due to significant revenue decline, substantial net losses, a critically low cash balance, and a material weakness in internal controls. The company's ability to continue as a going concern is in doubt.
Positives
- Operating expenses decreased significantly due to a shift in marketing strategies and reduced headcount.
- Cost of sales decreased in line with the reduction in sales.
- The company has raised $583,596 through borrowings from investors and a stockholder during the six months ended June 30, 2024.
Negatives
- The company experienced a substantial decrease in both product and service revenue.
- Gross profit decreased significantly due to the decline in revenue.
- The company reported a net loss of $1.7 million for the six months ended June 30, 2024.
- The company has a significant accumulated deficit of $28 million.
- The company's cash balance is critically low at $5,681.
- There is a material weakness in internal control over financial reporting due to insufficient personnel.
Risks
- The company's ability to continue as a going concern is in doubt due to the accumulated deficit and net losses.
- The company needs to raise additional capital to fund future operations.
- The company faces risks related to the renewal of loans and competitive industry conditions.
- There is no assurance that additional financing can be obtained.
- The company has a material weakness in internal control over financial reporting, which could lead to misstatements in financial reports.
Future Outlook
The company anticipates needing additional debt financing to fund operations in the near future, but there are no current agreements or understandings regarding the form, time, or amount of such financing.
Management Comments
- Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole.
- Management is of the opinion that legal matters will be resolved without material effect on the company's financial condition or results of operations.
Industry Context
The company operates in the health and wellness industry, which is highly competitive. The shift in marketing strategies and the resulting decrease in revenue suggest the company is struggling to maintain its market position. The company's focus on performance marketing, digital services, and product sales is common in the industry, but the company's results indicate challenges in executing this strategy.
Comparison to Industry Standards
- The significant revenue decline and net losses reported by Limitless X Holdings are substantially worse than industry averages for companies in the health and wellness sector.
- Comparable companies such as GNC and Vitamin Shoppe, while facing their own challenges, have not reported such drastic declines in revenue.
- The company's reliance on a few suppliers and related party transactions also raises concerns compared to industry best practices.
- The material weakness in internal control over financial reporting is a significant deviation from industry standards for public companies.
Related Party Transactions
- The company has various notes payable with its shareholder who is the Chief Executive Officer of the Company.
- The company has various notes payable with shareholders of the Company.
- The company had related party, Amarose, Inc., in the amount of receivables of $27,593 as of June 30, 2024.
- The company has royalty payables to companies at least 50% owned by a shareholder of the company.
Stakeholder Impact
- Shareholders are negatively impacted by the significant losses and the uncertainty about the company's future.
- Employees may be impacted by potential layoffs or restructuring due to the company's financial difficulties.
- Customers may be impacted by potential disruptions in product availability or service quality.
- Suppliers may be impacted by potential delays or non-payment of invoices.
- Creditors face increased risk of non-payment due to the company's financial instability.
Next Steps
- The company needs to secure additional financing to continue operations.
- The company needs to address the material weakness in internal control over financial reporting.
- The company needs to re-evaluate its marketing and sales strategies to improve revenue.
Key Dates
| Date | Description |
|---|---|
| 2020-01-15 | Effective date of the 2020 Stock Incentive Plan. |
| 2021-03-01 | Date of a $35,000 loan to Prime Time Live, Inc. |
| 2021-12-01 | Date of manufacturing and distributorship license agreements with related parties. |
| 2021-12-06 | Date of a $50,000 loan from a shareholder. |
| 2022-02-11 | Date of a $150,000 loan from a shareholder. |
| 2022-05-08 | Date of a $550,000 loan from a shareholder. |
| 2022-05-09 | Date of a $1,100,000 loan from a shareholder. |
| 2022-05-10 | Date of various loans from related parties. |
| 2022-05-11 | Date Bio Lab Naturals, Inc. entered into a Share Exchange Agreement with Limitless X, Inc. |
| 2022-05-16 | Date of a $450,000 loan from a shareholder. |
| 2022-05-18 | Date of a $450,000 loan from a shareholder. |
| 2022-05-20 | Date of the closing of the LimitlessX Acquisition. |
| 2022-05-31 | Date of various loans from related parties. |
| 2022-06-01 | Date of a $500,000 loan from a shareholder. |
| 2022-06-09 | Date of a $15,000 loan from a related party. |
| 2022-06-10 | Date Bio Lab changed its name to Limitless X Holdings Inc. |
| 2022-06-30 | Date of a $922,028 loan from a shareholder. |
| 2022-08-09 | Effective date of the 2022 Stock Option Plan and 2022 Restricted Stock Plan. |
| 2022-08-25 | Date of a $290,000 loan from a shareholder. |
| 2022-11-15 | Date of a $450,000 loan from a shareholder. |
| 2023-05-01 | Various loan payment due dates. |
| 2023-05-04 | Date the 2020 Stock Incentive Plan was terminated. |
| 2023-05-16 | Date of a $150,000 loan from a shareholder. |
| 2023-05-18 | Date of a $50,000 loan from a shareholder. |
| 2023-06-03 | Date of the Funding Commitment Agreement with Jaspreet Mathur. |
| 2023-06-05 | Date of a $150,000 loan from a shareholder. |
| 2023-06-15 | Date the company was required to start paying royalties to licensors. |
| 2023-06-20 | Date of a $50,000 loan from a shareholder as part of the Funding Commitment. |
| 2023-07-01 | Various loan payment due dates. |
| 2023-07-13 | Date of a $50,000 loan from a shareholder as part of the Funding Commitment. |
| 2023-08-01 | Date of a $190,000 loan from a shareholder as part of the Funding Commitment. |
| 2023-08-07 | Date of a $50,000 loan from a shareholder as part of the Funding Commitment. |
| 2023-10-01 | Date the company terminated the license agreements with related parties. |
| 2023-10-23 | Date the company issued Class B Preferred Stock and extinguished convertible debt. |
| 2024-03-12 | Date of a $20,000 loan from a related party. |
| 2024-03-15 | Date of a $419,428 loan from a related party. |
| 2024-03-27 | Date of a $100,000 loan from a related party. |
| 2024-06-30 | End of the reporting period for the quarterly report. |
| 2024-08-14 | Date of the report and the number of shares outstanding. |
Keywords
revenue decline, net loss, operating expenses, marketing strategy, financial reporting, going concern, capital raise, product sales, service revenue, internal control
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.