10-K: Sunstock Inc. Reports Mixed Results in 2023 Annual Filing, Cites Ongoing Concerns

Sunstock Inc.'s 2023 annual report reveals a decrease in revenue but a slight net income, alongside ongoing concerns about the company's ability to continue as a going concern.

Summary

• Sunstock Inc. reported a revenue of $12,397,189 for the year ended December 31, 2023, a decrease from $13,013,682 in 2022.
• The company's cost of goods sold also decreased to $12,041,893 in 2023 from $12,735,272 in 2022.
• Gross profit increased to $355,296 in 2023 from $278,410 in 2022.
• Operating expenses rose to $229,121 in 2023, up from $150,043 in 2022, primarily due to a lawsuit judgment of $77,863.
• The company experienced a net income of $5,886 in 2023, a significant improvement from a net loss of $3,651,833 in 2022.
• Sunstock held $1,272,999 in gold and silver coins and 27,317 ounces of silver and 80 ounces of gold valued at $814,574 as of December 31, 2023.
• The company has an accumulated deficit of $65,910,092 as of December 31, 2023, raising substantial doubt about its ability to continue as a going concern.
• The company's shares trade on the OTC Link alternative trading system under the symbol SSOK.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with some positive developments (net income) but significant concerns about the company's financial stability and future prospects. The going concern warning and material weaknesses in internal controls are major negatives.

Positives

• The company achieved a net income of $5,886 in 2023, a significant turnaround from the $3,651,833 net loss in 2022.
• Gross profit increased to $355,296 in 2023 from $278,410 in 2022.
• The company reduced its cost of goods sold to $12,041,893 in 2023 from $12,735,272 in 2022.

Negatives

• The company's revenue decreased to $12,397,189 in 2023 from $13,013,682 in 2022.
• Operating expenses increased to $229,121 in 2023, primarily due to a $77,863 lawsuit judgment.
• The company has an accumulated deficit of $65,910,092, raising substantial doubt about its ability to continue as a going concern.

Risks

• The company's ability to continue as a going concern is uncertain due to its accumulated deficit of $65,910,092 and negative cash flows from operations.
• The company faces risks related to price, demand, and supply volatility in the precious metals market due to the COVID-19 pandemic.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is involved in ongoing litigation with Boustead Securities, resulting in a judgment of $338,171 against Sunstock.

Future Outlook

The company's future is dependent on its ability to generate sufficient cash flows or obtain additional financing, and there is no assurance of profitability.

Management Comments

• Management believes that customers are less likely to purchase gold and silver coins in a down market and more likely to purchase them in an up market.
• Management acknowledges substantial doubt about the company's ability to continue as a going concern.
• Management intends to initiate discussions with an undetermined third party in regards to raising funds through a private placement of equity.

Industry Context

The company operates in the precious metals sector, which is influenced by factors such as inflation, economic uncertainty, and supply constraints. The COVID-19 pandemic has caused volatility in both demand and supply for precious metals.

Comparison to Industry Standards

• The company's financial performance is difficult to compare directly to larger, established precious metals dealers like Monex.com and Apmex.com, which have significantly larger operations and resources.
• Sunstock's reliance on a single retail store and limited online presence contrasts with the broader industry trend of online sales and diversified distribution channels.
• The company's goal to become an Authorized Purchaser of bullion coins from the United States Mint is a common aspiration for smaller precious metals dealers, but achieving this requires significant growth and financial stability.

Legal Proceedings

• The company is involved in ongoing litigation with Boustead Securities, resulting in a judgment of $338,171 against Sunstock.
• A former employee of Sunstock filed a claim with the California Labor Commission regarding claimed back pay owed.

Related Party Transactions

• During the year ended December 31, 2023, the company was provided loans totaling $117,161 by the company's chief executive officer.
• During the year ended December 31, 2023, $103,000 in notes payable and accrued interest to the company's chief executive officer were converted to 206,000 shares of the company's common stock.
• As of December 31, 2023, the company has $36,326 in accrued dividends on preferred stock, of which $19,141 are due to the company's chief executive officer.

Stakeholder Impact

• Shareholders face significant risk due to the company's going concern issues and accumulated deficit.
• Employees may be impacted by the company's financial instability.
• Customers may be affected by potential supply and price volatility in the precious metals market.
• Creditors face risk due to the company's financial challenges and ongoing litigation.

Next Steps

• The company intends to initiate discussions with an undetermined third party in regards to raising funds through a private placement of equity.
• The company plans to implement improved accounting systems.
• The company intends to file federal and state tax returns in 2024.

Key Dates

Keywords

precious metals, gold, silver, coins, bullion, retail, investment, OTC Link, financial results, going concern