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What changed in Eightco Holdings Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Eightco Holdings Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+143 added−244 removedSource: 10-K (2024-04-02) vs 10-K (2023-04-17)

Top changes in Eightco Holdings Inc.'s 2023 10-K

143 paragraphs added · 244 removed · 76 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn our experience, packaging has the capability to “tell” the products story, generating increased product awareness, promote brand image, and drive unit growth. Senior management has more than 100 years of combined experience marketing, producing and delivering packaging materials. A hallmark of our operation is our quick production cycle.
Biggest changePackaging Business The Packaging Business, through Ferguson Containers, manufactures and sells custom packaging for a wide variety of products. In our experience, packaging has the capability to “tell” the products story, generating increased product awareness, promote brand image, and drive unit growth. Senior management has more than 100 years of combined experience marketing, producing and delivering packaging materials.
Our reliance on independent party suppliers exposes us to vulnerability because of our dependence on a few sources of supply. We believe, however, that other sources of supply are available. In addition, we continually strive to develop relationships with other sources of supply in order to reduce our dependence on any one source of supply.
Our reliance on independent party suppliers exposes us to vulnerability because of our dependence on a few sources of supply. We believe, however, that other sources of supply are available. In addition, we continually strive to develop relationships with other sources of supply in order to reduce our dependence on any one source of supply.
Our main suppliers of corrugated cardboard are Corrugated Supplies Company, Georgia Pacific, and Freedom Corrugated. We also purchased certain finished products from Delta Packaging for resale to end users. Our Inventory Solutions Business purchases finished products from it’s suppliers and does not have long-term contractual arrangements that guarantee production capacity, prices, lead times, or delivery schedules.
Our main suppliers of corrugated cardboard are Corrugated Supplies Company, Georgia Pacific, and Freedom Corrugated. We also purchased certain finished products from Delta Packaging for resale to end users. Our Inventory Solutions Business purchases finished products from its suppliers and does not have long-term contractual arrangements that guarantee production capacity, prices, lead times, or delivery schedules.
We can often begin a production run within minutes of receipt of an order. Many of our products are manufactured from 100% post-consumer recycled material. When production is complete, we typically ship the product using our own trucks rather than relying on a common carrier.
A hallmark of our operation is our quick production cycle. We can often begin a production run within minutes of receipt of an order. Many of our products are manufactured from 100% post-consumer recycled material. When production is complete, we typically ship the product using our own trucks rather than relying on a common carrier.
The Company’s business has since been focused primarily on the Packaging Business and the business of Forever 8. Our corporate headquarters are located in Safety Harbor, Florida, and our common stock is listed on the Nasdaq Capital Market under the symbol “OCTO.” Forever 8 On October 1, 2022, the Company completed the acquisition of Forever 8, an e-commerce fintech company.
The Company’s business has since been focused primarily on the Packaging Business and the business of Forever 8. Our corporate headquarters are located in Easton, Pennsylvania, and our common stock is listed on the Nasdaq Capital Market under the symbol “OCTO.” Forever 8 On October 1, 2022, the Company completed the acquisition of Forever 8, an e-commerce fintech company.
Ferguson Containers does not have long-term agreements with its customers, and instead manufactures and sells its packaging products subject to purchase orders from its customers. In the fiscal years ended December 31, 2022 and 2021, the Packaging Business had revenue of $8,035,709 and $7,874 ,285, respectively.
Ferguson Containers does not have long-term agreements with its customers, and instead manufactures and sells its packaging products subject to purchase orders from its customers. In the fiscal years ended December 31, 2023 and 2022, the Packaging Business had revenue of $7,729,131 and $8,035,709, respectively.
Corporate Information Eightco Holdings Inc. (f/k/a Cryptyde, Inc.), was incorporated in the State of Nevada on September 21, 2021, and is currently listed on the Nasdaq Capital Market under the symbol “OCTO.” On March 9, 2022, we changed our state of domicile to the State of Delaware.
Corporate Information Eightco Holdings Inc. was incorporated in the State of Nevada on September 21, 2021, and is currently listed on the Nasdaq Capital Market under the symbol “OCTO.” On March 9, 2022, we changed our state of domicile to the State of Delaware. On April 3, 2023, we changed our corporate name from Cryptyde, Inc. to Eightco Holdings Inc.
None of our employees are represented by a union in collective bargaining with us. We consider relations with our employees to be good. We are committed to creating a diverse, equitable and inclusive space for all our employees, customers and retail partners. The core values of our Company include integrity, caring and inclusivity that affirms every individual.
We consider relations with our employees to be good. We are committed to creating a diverse, equitable and inclusive space for all our employees, customers and retail partners. The core values of our Company include integrity, caring and inclusivity that affirms every individual.
Our website is www.8co.holdings, and the information included in, or linked to our website is not part of this Annual Report. We have included our website address in this Annual Report solely as a textual reference.
Our principal executive office is located at 101 Larry Holmes Dr., Suite 313, Easton, PA 18042, and our telephone number is (866) 980-2818. Our website is www.8co.holdings, and the information included in, or linked to our website is not part of this Annual Report. We have included our website address in this Annual Report solely as a textual reference.
Human Capital Resources As of April 14, 2023, the companies that comprise Eightco had 33 employees that perform various administrative, finance and accounting, technology, and corporate management functions. Of the 33 employees, 16 employees were employed by Ferguson Containers, 11 employees were employed by 8co Holdings Shared Services, LLC and 6 were employed by Forever 8.
Human Capital Resources As of April 1, 2024, the companies that comprise Eightco had 22 employees that perform various administrative, finance and accounting, technology, and corporate management functions. Of the 22 employees, 15 employees were employed by Ferguson Containers and 7 were employed by Forever 8. None of our employees are represented by a union in collective bargaining with us.
Forever 8’s unique approach directly purchases inventory on its customers’ behalf, applies a mark-up and collects the revenue as the products are sold. Packaging Business The Packaging Business, through Ferguson Containers, manufactures and sells custom packaging for a wide variety of products.
Forever 8’s unique approach directly purchases inventory on its customers’ behalf, applies a mark-up and collects the revenue as the products are sold. In the fiscal years ended December 31, 2023 and 2022, Forever 8 had revenue of $67,568,353 and $23,785,070, respectively.
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On April 3, 2023, we changed our corporate name from Cryptyde, Inc. to Eightco Holdings Inc. Our principal executive office is located at 200 9th Avenue North, Suite 220, Safety Harbor, Florida 34695, and our telephone number is (866) 980-2818.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePlease also read carefully the section below entitled “Special Note Regarding Forward-Looking Statements.” Summary of our Risk Factors Risks Related to Our Business Generally ● We are a recently formed entity, led by management that has limited experience operating a public company, with little track record and limited historical financial information available; ● We are operating in highly competitive industries that could be affected by a decline in discretionary consumer spending or general economic conditions; ● Loss of any or all of our key management personnel may present challenges; ● We may not be able to raise adequate capital to fund our business, and our ability to raise capital may be negatively affected by the COVID-19 pandemic.
Biggest changePlease also read carefully the section below entitled “Special Note Regarding Forward-Looking Statements.” Summary of our Risk Factors Risks Related to Our Business Generally ● We are a recently formed entity, led by management that has limited experience operating a public company, with little track record and limited historical financial information available; ● The Company has limited financial resources.
Section 203 provides that, subject to limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock. 22 Eightco believes these provisions will protect its stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Eightco’s board of directors and by providing Eightco’s board of directors with more time to assess any acquisition proposal.
Section 203 provides that, subject to limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock. 19 Eightco believes these provisions will protect its stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Eightco’s board of directors and by providing Eightco’s board of directors with more time to assess any acquisition proposal.
For Ferguson Containers’ fiscal years ended December 31, 2022 and 2021, respectively, Ferguson Containers had the following material weakness in internal controls over financial reporting: ● Primarily due to the small size of Ferguson Containers, it does not maintain sufficient segregation of duties to ensure the processing, review and authorization of all transactions including non-routine transactions. ● Ferguson Containers’ processes lacked timely and complete reviews and analysis of information used to prepare its financial statements and disclosures in accordance with accounting principles generally accepted in the United States of America.
For Ferguson Containers’ fiscal years ended December 31, 2023 and 2022, respectively, Ferguson Containers had the following material weakness in internal controls over financial reporting: ● Primarily due to the small size of Ferguson Containers, it does not maintain sufficient segregation of duties to ensure the processing, review and authorization of all transactions including non-routine transactions. ● Ferguson Containers’ processes lacked timely and complete reviews and analysis of information used to prepare its financial statements and disclosures in accordance with accounting principles generally accepted in the United States of America.
If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause our stock price and trading volume to decline. 23 We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and we are taking advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause our stock price and trading volume to decline. 20 We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and we are taking advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of our common stock, and you may not be able to sell your shares of our common stock. 21 We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of our common stock, and you may not be able to sell your shares of our common stock. 18 We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
In addition, current and emerging ESG-related regulation, such as mandated disclosures or requirements to reduce carbon footprint, may result in increased compliance requirements, which may increase our costs. 20 Risks Related to Our Securities We currently do not intend to pay dividends on our common stock.
In addition, current and emerging ESG-related regulation, such as mandated disclosures or requirements to reduce carbon footprint, may result in increased compliance requirements, which may increase our costs. 17 Risks Related to Our Securities We currently do not intend to pay dividends on our common stock.
Increases in costs may need to be passed on to our customers, and ultimately may negatively affect our business. 17 Disruptions in transportation could adversely affect our supply of raw materials and could have an adverse effect on our results of operations, profitability, and liquidity.
Increases in costs may need to be passed on to our customers, and ultimately may negatively affect our business. 14 Disruptions in transportation could adversely affect our supply of raw materials and could have an adverse effect on our results of operations, profitability, and liquidity.
If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business could be materially and adversely affected. 19 We rely on relationships with marketplaces and enterprises to obtain and maintain customers.
If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business could be materially and adversely affected. 16 We rely on relationships with marketplaces and enterprises to obtain and maintain customers.
See “Description of Capital Stock—Preferred Stock.” 24 Our common stock will be subordinate to all of our future indebtedness and any series of preferred stock, and effectively subordinated to all indebtedness and preferred equity claims against our subsidiaries. Shares of our common stock will rank junior to all of our future indebtedness and other liabilities.
See “Description of Capital Stock—Preferred Stock.” 21 Our common stock will be subordinate to all of our future indebtedness and any series of preferred stock, and effectively subordinated to all indebtedness and preferred equity claims against our subsidiaries. Shares of our common stock will rank junior to all of our future indebtedness and other liabilities.
Eightco Holdings Inc. (f/k/a Cryptyde, Inc.) was formed on September 21, 2021, in the State of Nevada and converted to a Delaware corporation on March 9, 2022. Our Packaging Business was formed in 1966, however the rest of our businesses were recently started.
Eightco Holdings Inc. was formed on September 21, 2021, in the State of Nevada and converted to a Delaware corporation on March 9, 2022. Our Packaging Business was formed in 1966, however the rest of our businesses were recently started.
The uncertain nature, magnitude, and duration of hostilities stemming from Russia’s recent military invasion of Ukraine, including the potential effects of sanctions and retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, and such geopolitical risks could have an adverse impact on macroeconomic factors which affect our businesses, as well as our access to capital.
The uncertain nature, magnitude, and duration of hostilities stemming from Russia’s recent military invasion of Ukraine, and the ongoing conflict between Israel and Hamas, including the potential effects of sanctions and retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, and such geopolitical risks could have an adverse impact on macroeconomic factors which affect our businesses, as well as our access to capital.
If we are unable to list on Nasd aq, we would likely be more difficult to trade in or obtain accurate quotations as to the market price of our common stock.
If we are unable to list on Nasdaq, we would likely be more difficult to trade in or obtain accurate quotations as to the market price of our common stock.
The letter also indicated that the Company has a compliance period of 180 calendar days, or until April 3, 2023 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
The letter also indicated that the Company has a compliance period of 180 calendar days, or until March 27, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
Risks Related to the acquisition of Forever 8 and its Operations ● The Company may not experience the anticipated strategic benefits of the acquisition of Forever 8; ● We may be unable to successfully integrate the Forever 8 business with our current management and structure; and ● Our stockholders may experience substantial dilution from the issuance of equity consideration in the Forever 8 acquisition and may not realize a benefit from the Forever 8 acquisition commensurate with the ownership dilution they will experience in connection with the acquisition. ● Our business depends on our strong and trusted brand, and failure to maintain and protect our brand, or any damage to our reputation, or the reputation of our partners, could adversely affect our business, financial condition or results of operations. ● We are dependent upon consumers’ continued and unimpeded access to the internet, and upon their willingness to use the internet for commerce. ● Our results of operations may be adversely affected by changes in foreign currency exchange rates.
Risks Related to Forever 8 and its Operations ● Our stockholders may experience substantial dilution from the issuance of equity consideration in the Forever 8 acquisition and may not realize a benefit from the Forever 8 acquisition commensurate with the ownership dilution they may experience in connection with the acquisition; ● Our business depends on our strong and trusted brand, and failure to maintain and protect our brand, or any damage to our reputation, or the reputation of our partners, could adversely affect our business, financial condition or results of operations; ● We are dependent upon consumers continued and unimpeded access to the internet, and upon their willingness to use the internet for commerce; and ● Our results of operations may be adversely affected by changes in foreign currency exchange rates.
The current economic environment as a result of COVID-19, coupled with high volatility and uncertainty as to the future global economic landscape, may have an adverse effect on consumers’ discretionary income and consumer confidence.
The current economic environment, coupled with high volatility and uncertainty as to the future global economic landscape, may have an adverse effect on consumers’ discretionary income and consumer confidence.
On October 5, 2022, we received a letter from the Listing Qualifications Department of Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 31 consecutive business day period between August 22, 2022, through October 4, 2022, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2).
On September 29, 2023, we received a letter from the Listing Qualifications Department of Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 31 consecutive business day period between August 16, 2023, through September 28, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2).
We expect to incur significant capital, operational and marketing expenses for a few years in connection with our strategy and growth plan. Any failure to achieve or sustain profitability may have a material adverse impact on the value of the shares of our common stock. Loss of any or all of our key management personnel may present challenges.
We expect to incur significant capital, operational and marketing expenses for a few years in connection with our strategy and growth plan. Any failure to achieve or sustain profitability may have a material adverse impact on the value of the shares of our common stock. The Company has limited financial resources.
Risks Related to Our Securities ● We do not expect to issue dividends; ● An active trading market for our securities may never develop, and the price of our securities may be volatile; ● We may issue shares of preferred or common stock in the future, which could dilute your percentage ownership of the Company; and ● In the event that we fail to satisfy any of the listing requirements of Nasdaq, our common stock may be delisted, which could affect our market price and liquidity.
Risks Related to Our Securities ● We do not expect to issue dividends; ● An active trading market for our securities may never develop, and the price of our securities may be volatile; ● We may issue shares of preferred or common stock in the future, which could dilute your percentage ownership of the Company; and ● In the event that we fail to satisfy any of the listing requirements of Nasdaq, our common stock may be delisted, which could affect our market price and liquidity. 10 Risks Related to Our Business Generally We are a recently formed entity with little track record and limited historical financial information available.
The Company will operate in highly competitive industries and our revenues, profits or market share could be harmed if we are unable to compete effectively. Each of the Eightco Businesses will face competition from existing competitors. Our competitors in the Web3 business will depend on what Web3 products we develop or acquire.
We operate in highly competitive industries and our revenues, profits or market share could be harmed if we are unable to compete effectively. Each of the Eightco Businesses will face competition from existing competitors. Our competitors in the Inventory Management Solutions business include Clearco.
Additionally, our Web 3 Business is predominately digital in nature and relies heavily on our ability to maintain the integrity of our computer systems. The integrity and protection of our customer, employee, and company data is critical to our business and our customers and employees are likely to have a high expectation that we will adequately protect their personal information.
The integrity and protection of our customer, employee, and company data is critical to our business and our customers and employees are likely to have a high expectation that we will adequately protect their personal information.
Risks Related to Our Packaging Business An increase in the cost or a reduction in the availability of wood fiber, other raw materials, energy and transportation may have an adverse effect on our profitability and results of operations.
Any additional capital raised through the sale of additional shares of our capital stock, convertible debt or other equity may dilute the ownership percentage of our stockholders. 13 Risks Related to Our Packaging Business An increase in the cost or a reduction in the availability of wood fiber, other raw materials, energy and transportation may have an adverse effect on our profitability and results of operations.
Any performance failure on the part of our suppliers could interrupt production of our products, which would have a material adverse effect on our business. 18 Risks Related to the Acquisition of Forever 8 and its Operations The Company may not experience the anticipated strategic benefits of the acquisition of Forever 8.
Any performance failure on the part of our suppliers could interrupt production of our products, which would have a material adverse effect on our business. 15 Risks Related to Forever 8 and its Operations Our stockholders may experience substantial dilution from the issuance of equity consideration in the Forever 8 acquisition and may not realize a benefit from the Forever 8 acquisition commensurate with the ownership dilution they will experience in connection with the Acquisition.
There can be no assurance that our insurance will be sufficient to cover the full extent of all losses or liabilities for which we are insured, and we cannot guarantee that we will be able to obtain insurance policies on favorable terms, or at all. 12 COVID-19 or another pandemic may negatively impact our ability to operate the Eightco Businesses which could decrease or eliminate the value of our common stock.
There can be no assurance that our insurance will be sufficient to cover the full extent of all losses or liabilities for which we are insured, and we cannot guarantee that we will be able to obtain insurance policies on favorable terms, or at all. 12 Our management has limited experience in operating a public company.
We cannot assure you that our operations will be able to generate sufficient cash flow to fund such costs, or that we will be able to obtain sufficient financing on adequate terms, or at all, which could cause us to delay or abandon certain projects or plans. 11 Continuing general market uncertainties resulting from the COVID-19 Pandemic may affect our ability to raise capital.
We cannot assure you that our operations will be able to generate sufficient cash flow to fund such costs, or that we will be able to obtain sufficient financing on adequate terms, or at all, which could cause us to delay or abandon certain projects or plans. 11 A deterioration in the domestic and international economic environment, whether by way of current inflationary conditions or potential recessionary conditions, could adversely affect our operating results, cash flow and financial condition.
A deterioration in the domestic and international economic environment, whether by way of current inflationary conditions or potential recessionary conditions, could adversely affect our operating results, cash flow and financial condition. Current inflationary conditions in the United States and other parts of the world have increased some of our costs, including our cost of materials and labor.
Current inflationary conditions in the United States and other parts of the world have increased some of our costs, including our cost of materials and labor.
We aim to recruit the most qualified candidates and strive for a diverse and well-balanced workforce.
If we cannot continue as a viable entity, we may be unable to continue our operations and you may lose some or all of your investment in our common stock. Loss of any or all of our key management personnel may present challenges. We aim to recruit the most qualified candidates and strive for a diverse and well-balanced workforce.
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We are also subject to the expenses of operating a public company; ● We face cyber security risks and our insurance coverage may not be adequate to cover losses from both cyber security and other losses; and ● COVID-19 or another pandemic may negatively impact our ability to operate the Eightco Businesses Risks. 9 Related to Our Web 3 Business ● We need to innovate and provide Web3 products and services that are attractive to our users; ● The success of our Web3 Business is substantially dependent on the entertainment professionals we partner with and consumer tastes and preferences for Web3 products; ● If the crypto assets we create are determined to be a “security,” we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties; ● Our Web3 Business intends to rely on the Ethereum blockchain, which we have no control over; and ● We are subject to current and future legislation and rulemaking regarding digital assets that may result in extraordinary, non-recurring expenses.
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Our auditors have expressed in the report of independent registered public accounting firm that there is substantial doubt about our ability to continue as a going concern; ● Loss of any or all of our key management personnel may present challenges; ● We could be adversely affected by declines in discretionary consumer spending, consumer confidence and general and regional economic conditions; ● We operate in highly competitive industries and our revenues, profits or market share could be harmed if we are unable to compete effectively; ● We may not be able to fund capital expenditures and investment in projects and offerings; ● A deterioration in the domestic and international economic environment, whether by way of current inflationary conditions or potential recessionary conditions, could adversely affect our operating results, cash flow and financial condition; ● Geopolitical risks, such as those associated with Russia’s invasion of Ukraine, could result in a decline in the outlook for the U.S. and global economies; ● Cyber security risks and the failure to maintain the integrity of internal, partner, and consumer data could result in damages to our reputation, the disruption of operations and/or subject us to costs, fines or lawsuits; ● Our insurance coverage may not be adequate to cover all possible losses that we could suffer and our insurance costs may increase; ● Our management has limited experience in operating a public company; ● The requirements of being a public company may strain our resources and distract management; and ● Our business plan may require additional liquidity and capital resources that might not be available on terms that are favorable to us, or at all. 9 Risks Related to Our Packaging Business ● We are subject to the costs and availability of raw materials, and we rely on a limited number of third-party suppliers of raw materials; and ● We may be affected by interruptions in the transportation of the materials we require to produce packaging.
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Risks Related to Our BTC Mining Hardware Business ● Bitcoin mining is capital intensive and if our customers have a decline in discretionary spending, or the price of Bitcoin goes down, they may not engage in Bitcoin mining or buy our products; and ● We are subject to shifting public and governmental positions on digital asset mining activity could reduce our revenue and profitability.
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Our auditors have expressed in the report of independent registered public accounting firm that there is substantial doubt about our ability to continue as a going concern .
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Risks Related to Our Packaging Business ● We are subject to the costs and availability of raw materials, and we rely on a limited number of third-party suppliers of raw materials; and ● We may be affected by interruptions in the transportation of the materials we require to produce packaging.
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The report of our independent registered accounting firm expresses substantial doubt about our ability to continue as a going concern based on the absence of our significant losses from operations and our need for additional financing to fund all of our operations.
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Risks Related to the Separation ● We may not realize the anticipated benefits from the Separation, and the Separation could harm our business; ● We may have indemnification liabilities to Vinco under the Separation and Distribution Agreement; and ● The combined post-Separation value of Vinco and Eightco shares may not equal or exceed the pre-Separation value of Vinco shares. 10 Risks Related to Our Business Generally We are a recently formed entity with little track record and limited historical financial information available.
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It is not possible at this time for us to predict with assurance the potential success of our business. The revenue and income potential of our proposed business and operations are unknown.
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We expect competition for Freespace, our video game we are developing and expect to launch in 2023, to include Decentraland, Sandbox and Fluf World. With respect to our BTC Mining Hardware Business, our competitors include Compass Mining, Miners Dep and Alliance.
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On March 28, 2024, we received a letter from the Listing Qualifications Department of Nasdaq indicating that the Company has not regained compliance with Nasdaq Listing Rule 5810(c)(3)(A) and is not eligible for a second 180 day period. The Company has not regained compliance with the Rule and is not eligible for a second 180 day period.
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Since the outset of the COVID-19 pandemic, the United States and worldwide national securities markets have undergone unprecedented stress due to the uncertainties of the COVID-19 pandemic and the resulting reactions and outcomes of government, business, and the general population. These uncertainties have resulted in declines in many market sectors.
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Specifically, the Company does not comply with the $5,000,000 minimum stockholders’ equity initial listing requirement for The Nasdaq Capital Market.
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As a result, until the pandemic has stabilized, the markets may not be available to the Company for purposes of raising required capital.
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Accordingly, unless the Company requests an appeal of this determination as described in further detail below, we have determined that the Company’s securities will be scheduled for delisting from The Nasdaq Capital Market and will be suspended at the opening of business on April 8, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the “SEC”), which will remove the Company’s securities from listing and registration on The Nasdaq Stock Market.
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Should we not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible we may be unable to sustain the necessary capital to pursue our strategic plan and may have to reduce the planned future growth and/or scope of our operations.
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We intend on appealing the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series. A hearing request will stay the suspension of the Company’s securities and the filing of the Form 25-NSE pending the Panel’s decision. 22 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
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COVID-19 has resulted in significant uncertainty in many areas of our businesses. We do not know how long these conditions will last. This uncertainty may negatively impact our operations. We may experience labor shortages, particularly in our Packaging Business, if our employees are unable or unwilling to come to work.
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If our suppliers cannot deliver the supplies we need to operate our business or if we are unable to ship our products due to trucking or rail shipping disruptions, we may be forced to suspend operations or reduce production.
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If we are unable to operate the Packaging Business at or near its historical rate, it may result in unfavorable operating results. Any shutdown of operations or reduction in production, especially for an extended period of time, could reduce the value of our common stock. Our management has limited experience in operating a public company.
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Any additional capital raised through the sale of additional shares of our capital stock, convertible debt or other equity may dilute the ownership percentage of our stockholders. Risks Related to Our Web3 Business If we do not innovate and provide Web3 based products and services that are attractive to our users, our business could be harmed.
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Our success depends on our continued innovation to provide products and services that are attractive to potential users and customers. As a result, we must invest significant resources in research and development to first create then improve the attractiveness and comprehensiveness of our products and services and effectively incorporate new Web3 technologies into them.
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If we are unable to provide products and services that users and customers want to use, then users may become dissatisfied and use competitors’ products and services.
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If we are unable to continue offering innovative products and services, we may be unable to attract users, which could harm our business, results of operations and financial condition. 13 The success of our Web3 Business is substantially dependent upon the continued success of the entertainment professionals we partner with and our ability to continue to secure favorable contracts with and maintain a good working relationship with these individuals.
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Our Web3 business includes partnerships with entertainment professionals to help them use Web3 technology to distribute, manage, and receive payment for their art, music, or other content.
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Our ability to secure partnerships, and maintain a good working relationship, with artists, celebrities, athletes, and other public figures - through agreements, alliances, opportunities and otherwise – is of critical importance to our long-term success.
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A particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset we develop in our Web3 Business as not a security, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.
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The SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict.
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The SEC generally does not provide advance guidance or confirmation on the status of any particular crypto asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution.
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It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. For example, Chair Gary Gensler recently remarked on the need for further regulatory oversight on crypto assets, crypto trading, and lending platforms by the SEC.
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Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum are securities (in their current form). Bitcoin and Ethereum are the only crypto assets as to which senior officials at the SEC have publicly expressed such a view.
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Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other crypto asset.
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With respect to all other crypto assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our assessment regarding the likelihood that a particular crypto asset could be deemed a “security” under applicable laws.
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Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given crypto asset is a security in April 2019, this framework is also not a rule, regulation, or statement of the SEC and is not binding on the SEC.
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Several foreign jurisdictions have taken a broad-based approach to classifying crypto assets as “securities,” while other foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach. As a result, certain crypto assets may be deemed to be a “security” under the laws of some jurisdictions but not others.
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Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of crypto assets as “securities.” The classification of a crypto asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets.
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For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration.
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Persons that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an ATS in compliance with rules for ATSs.
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Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration, and qualification requirements. 14 We analyze each crypto asset we develop under our Web3 Business to determine its likeliness to be deemed to be a “security” under applicable laws.
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Regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC, a foreign regulatory authority, or a court were to determine that a crypto asset we developed under our Web3 Business is a security under applicable laws.
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Because our Web3 platforms will not be registered or licensed with the SEC or foreign authorities as a broker-dealer, national securities exchange, or ATS (or foreign equivalents), and we do not seek to register or rely on an exemption from such registration or license to facilitate the offer and sale of crypto assets on our Web3 platforms, we will only develop and distributed digital assets for which we determine there are reasonably strong arguments to conclude that the crypto asset is not a security.
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We recognize that the application of securities laws to the specific facts and circumstances of crypto assets may be complex and subject to change, and that a listing determination does not guarantee any conclusion under the U.S. federal securities laws.
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There can be no assurances that we will properly characterize any given crypto asset we develop under our Web3 Business as a security or non-security for purposes of determining whether we will distribute it on a Web3 platform.
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If the SEC, foreign regulatory authority, or a court were to determine that a crypto asset offered, sold, or traded on one of our future Web3 platform is a security, we would not be able to offer the Web3 product associated with the crypto asset until we are able to do so in a compliant manner.
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A determination by the SEC, a foreign regulatory authority, or a court that an asset that we support in the future for trading on our platform constitutes a security may also result in us determining that it is advisable to remove assets from our platform that have similar characteristics to the asset that was determined to be a security.
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In addition, we could be subject to judicial or administrative sanctions for failing to offer or sell the crypto asset in compliance with the registration requirements, or for acting as a broker, dealer, or national securities exchange without appropriate registration.
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Such an action could result in injunctions, cease and desist orders, as well as civil monetary penalties, fines, and disgorgement, criminal liability, and reputational harm. Our Web3 Business intends to rely on the Ethereum blockchain, which we have no control over. Our Web3 Business intends to operate on the Ethereum blockchain.
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Like other blockchains, Ethereum blockchain relies on a network of computers to run certain software programs to solve complex transactions in competition with other mining operations and to process transactions. We have no control over these networks, which subjects us to certain risks.
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For example, to the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the Ethereum blockchain.
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Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks; however, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing Ethereum users to pay transaction fees as a substitute for or in addition to the award of new Ethereum upon the solving of a block), actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the Ethereum blockchain.
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Such delay could harm our business, results of operations, and financial condition. Incidents or adverse publicity concerning the Company or our public-figure partners could harm our reputation as well as negatively impact our revenues and profitability. Our reputation is an important factor in the success of our Web3 Business.
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Our ability to attract and retain both partners and customers depends, in part, upon the external perceptions of our Company, the brands and individuals we are associated with, and our corporate and management integrity. If market recognition or the perception of the Company diminishes, there may be a material adverse effect on our revenues, profits, and cash flow.
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In addition, changing public perception of the brand and public figures we partner with could negatively impact our business and results of operations. Changes in consumer tastes and preferences for Web3 products could reduce demand for our offerings and products and adversely affect the profitability of our Web3 Business.
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The success of our Web3 Business depends on our ability to consistently provide, maintain and innovate Web3 products that meet changing consumer preferences. Our success depends in part on the continued and increasing popularity of Web3 products and on our ability to successfully predict and adapt to tastes and preferences of this consumer group.
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If our Web3 products do not achieve sufficient consumer acceptance or if consumer preferences change or consumers are drawn to other products, our business, financial condition, or results of operations could be materially adversely affected. 15 Blockchain technology may expose us to specially designated nationals or blocked persons or cause it to violate provisions of law.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSuite 1004 Bethlehem, PA 18018 Leased Month-to-Month Office space 101 Seabrook Dr Sylvester, GA 31791 Leased Month-to-Month Warehouse 909 New Brunswick Avenue Phillipsburg, NJ 08865 Leased Month-to-Month Office space 20 Industrial Road Alpha, NJ 08865 Leased Month-to-Month Packaging and Logistics Center 234 5th Ave, Suite 319 New York, NY 1005 Leased Month-to-Month Office space Keizersgracht 482, 1017 EG Amsterdam, Netherlands Leased Month-to-Month Office space UK - International House, 64 Nile Street London, England, N1 7SR Leased Month-to-Month Office space 28
Biggest changePROPERTIES The following table summarizes pertinent details of our properties as of December 31, 2023: Location Owned or Leased Lease Expiration Primary Function 909 New Brunswick Avenue Phillipsburg, NJ 08865 Leased Month-to-Month Principal Executive Office 20 Industrial Road Alpha, NJ 08865 Leased Month-to-Month Packaging and Logistics Center 234 5th Ave, Suite 511 New York, NY 10001 Leased Month-to-Month Office space Keizersgracht 482, 1017 EG Amsterdam, Netherlands Leased Month-to-Month Office space 23
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ITEM 2. PROPERTIES The following table summarizes pertinent details of our properties as of December 31, 2022: Location Owned or Leased Lease Expiration Primary Function 200 9 th Ave North Suite 220 Safety Harbor, FL 34695 Leased July 2024 Principal Executive Office 1 West Broad St.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn January 17, 2023, the Company declared a dividend of one one-thousandth of a share of Series A Preferred Stock, par value $0.001 per share, for each outstanding share of the Company’s common stock, to stockholders of record at 5:00 p.m. Eastern Time on January 27, 2023 (the “Record Date”). Securities Authorized for Issuance under Equity Compensation Plans None.
Biggest changeOn January 17, 2023, the Company declared a dividend of one one-thousandth of a share of Series A Preferred Stock, par value $0.001 per share, for each outstanding share of the Company’s common stock, to stockholders of record at 5:00 p.m. Eastern Time on January 27, 2023 (the “Record Date”).
Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities Except as set forth below, during the period covered by this Annual Report, we have not sold any equity securities that were not registered under the Securities Act that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Recent Sales of Unregistered Securities, Uses of Proceeds and Issuer Purchases of Equity Securities Except as set forth below, during the period covered by this Annual Report, we have not sold any equity securities that were not registered under the Securities Act that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.
Holders of Record The Company had approximately 336 holders of record of our common stock as of April 14, 2023. Dividends We have not historically declared dividends on our common stock, and we do not currently intend to pay dividends on our common stock.
Holders of Record The Company had approximately 336 holders of record of our common stock as of April 1, 2024. Dividends We have not historically declared dividends on our common stock, and we do not currently intend to pay dividends on our common stock.
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None. 29 Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [RESERVED]
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Securities Authorized for Issuance under Equity Compensation Plans The Company’s executive compensation program consists of stock-based awards issued under an equity incentive plan.
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The Company determines the appropriate level for compensation under the equity incentive plan based in part, but not exclusively, on its view of internal equity and consistency, individual performance, the Company’s performance, and other information deemed relevant and timely.
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On November 10, 2023, the Company issued 25,000 shares of its common stock to a consultant for services rendered on behalf of the Company. 24 ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Year Ended December 31, 2022 versus the Year Ended December 31, 2021 The following table sets forth information comparing the components of net (loss) income for the years ended December 31, 2022 and 2021: Year Ended December 31, Period over Period Change 2022 2021 $ % Revenues, net: Inventory Management Solutions $ 23,785,070 $ - $ 23,785,070 100.00 % Corrugated 8,035,709 7,874,285 161,424 2.05 % Total 31,820,779 7,874,285 23,946,494 304.11 % Cost of revenues: Inventory Management Solutions 23,554,550 - 23,554,550 100.00 % Corrugated 6,072,319 5,682,117 390,202 6.87 % Total 29,626,869 5,682,117 23,944,752 421.41 % Gross profit: Inventory Management Solutions 230,520 - 230,520 100.00 % Corrugated 1,963,390 2,192,168 (228,778 ) -10.44 % Total 2,193,910 2,192,168 1,742 0.05 % Operating expenses: Selling, general and administrative 16,401,414 2,623,460 13,777,954 525.18 % Impairment 1,300,000 - 1,300,000 100.00 % Operating loss (15,507,504 ) (431,292 ) (15,076,212 ) 3,495.60 % Other (expense) income: Rental income - 71,543 (71,543 ) -100.00 % Interest (expense) (6,966,606 ) (11,421 ) (6,955,185 ) 60,898.21 % Loss on issuance of warrants (25,318,519 ) - (25,318,519 ) 100.00 % Other income 173,572 481,090 (307,518 ) -63.92 % Total other (expense) income, net (32,111,553 ) 541,212 (32,652,765 ) -6,033.27 % (Loss) income before income taxes (47,619,057 ) 109,920 (47,728,977 ) -43,421.56 % Income tax expense (benefit) (172,997 ) 210,000 (382,997 ) -182.38 % Net (loss) $ (47,446,060 ) $ (100,080 ) $ (47,345,980 ) 47,308.13 % 44 Revenue For the year ended December 31, 2022, revenues increased by $23,946,494 or 304.11%, as compared to the year ended December 31, 2021.
Biggest changeResults of Operations Year Ended December 31, 2023 versus the Year Ended December 31, 2022 The following table sets forth information comparing the components of net (loss) income for the years ended December 31, 2023 and 2022: Year Ended December 31, Period over Period Change 2023 2022 $ % Revenues, net: Inventory Management Solutions $ 67,568,353 $ 23,785,070 $ 43,783,283 184.08 % Corrugated 7,729,131 8,035,709 (306,578 ) -3.82 % Total 75,297,484 31,820,779 43,476,705 136.63 % Cost of revenues: Inventory Management Solutions 61,308,561 23,554,550 37,754,011 160.28 % Corrugated 5,496,462 6,072,319 (575,857 ) -9.48 % Total 68,805,023 29,626,869 37,178,154 125.49 % Gross profit: Inventory Management Solutions 6,259,792 230,520 6,029,272 2,615.51 % Corrugated 2,232,669 1,963,390 269,279 13.72 % Total 8,492,461 2,193,910 6,298,551 287.09 % Operating expenses: Selling, general and administrative 16,335,651 16,401,414 (65,763 ) -0.40 % Restructuring and severance 2,133,982 1,300,000 833,982 64.15 % Operating loss (9,977,172 ) (15,507,504 ) 5,530,332 -35.67 % Other (expense) income: Interest (expense) (11,553,589 ) (6,966,606 ) (4,586,983 ) 65.84 % Loss on issuance of warrants (46,928,815 ) (25,318,519 ) (21,610,296 ) 85.35 % Other income 139,162 173,572 (34,410 ) -19.82 % Total other (expense) income, net (58,343,242 ) (32,111,553 ) (26,231,689 ) 81.69 % (Loss) income before income taxes (68,320,414 ) (47,619,057 ) (20,701,357 ) 43.47 % Income tax expense (benefit) - (172,997 ) 172,997 -100.00 % Net (loss) $ (68,320,414 ) $ (47,446,060 ) $ (20,874,354 ) 44.00 % 37 Revenue For the year ended December 31, 2023, revenues increased by $43,476,705 or 136.63%, as compared to the year ended December 31, 2022.
The Note contains events of default that are typical for transactions of this type, as well as the following events: ● the failure of any registration statement required by the Registration Rights Agreement to be filed within five trading days after the date required by the Registration Rights Agreement or the failure of any such registration statement to become effective within five trading days after the date required by the Registration Rights Agreement; ● the lapse or unavailability of any registration statement required by the Registration Rights Agreement for more than 5 consecutive trading days or more than an aggregate of 10 trading days in any 365-day period (other than certain allowable grace periods); ● the suspension from trading or failure of the Common Stock to be listed for trading on an eligible market for more than 2 consecutive trading days or more than an aggregate of 5 trading days in any 365-day period; ● the failure of the Company to issue shares upon conversion of the Note for more than 2 trading days after the relevant conversion date or a notice of the Company’s intention not to comply with a request for conversion; ● the failure for 2 consecutive trading days to have reserved for issuance 250% of the full number of shares issuable upon conversion in accordance to the terms of the Note; ● the failure for 2 trading days to pay the Investor principal, interest, late charges or other amounts when and as due under the Note; ● the occurrence of any default under, redemption of or acceleration prior to maturity of any indebtedness of the Company or a subsidiary; ● the invalidity of any material provision of the Security Documents (defined below) or if the enforceability of validity of any material provision of the Security Documents is contested by the Company; ● the failure of the Security Documents to perfect or maintain the Investor’s first priority security interest; and ● the failure to comply with certain covenants of the Note. 32 If there is an event of default, then the Investor has the right to request redemption of all or any portion of the Note, at 130% of the sum of the outstanding principal, interest and late fees to be redeemed, provided that if certain conditions specified in the Note are not satisfied, then the Investor has the right to request redemption of all or any portion of the Note, at 130% of the greater of (i) the sum of the outstanding principal, interest and late fees to be redeemed and (ii) the product of (a) the number of shares into which the Note (including all principal, interest and late fees) subject to redemption may be converted and (b) the greatest closing sale price for the Common Stock beginning on the date immediately preceding the event of default and ending on the date the Company makes the entire payment required to be made upon the redemption provided, however, that if no Cash Release Event (as defined in the Note) has occurred on or prior to the applicable of default redemption date, the principal amount used in calculating the applicable event of default redemption price on such event of default redemption date shall be decreased by the holder’s pro rata portion of $222,000.
The Note contains events of default that are typical for transactions of this type, as well as the following events: ● the failure of any registration statement required by the Registration Rights Agreement to be filed within five trading days after the date required by the Registration Rights Agreement or the failure of any such registration statement to become effective within five trading days after the date required by the Registration Rights Agreement; ● the lapse or unavailability of any registration statement required by the Registration Rights Agreement for more than 5 consecutive trading days or more than an aggregate of 10 trading days in any 365-day period (other than certain allowable grace periods); ● the suspension from trading or failure of the Common Stock to be listed for trading on an eligible market for more than 2 consecutive trading days or more than an aggregate of 5 trading days in any 365-day period; ● the failure of the Company to issue shares upon conversion of the Note for more than 2 trading days after the relevant conversion date or a notice of the Company’s intention not to comply with a request for conversion; ● the failure for 2 consecutive trading days to have reserved for issuance 250% of the full number of shares issuable upon conversion in accordance to the terms of the Note; ● the failure for 2 trading days to pay the Investor principal, interest, late charges or other amounts when and as due under the Note; ● the occurrence of any default under, redemption of or acceleration prior to maturity of any indebtedness of the Company or a subsidiary; ● the invalidity of any material provision of the Security Documents (defined below) or if the enforceability of validity of any material provision of the Security Documents is contested by the Company; ● the failure of the Security Documents to perfect or maintain the Investor’s first priority security interest; and ● the failure to comply with certain covenants of the Note. 29 If there is an event of default, then the Investor has the right to request redemption of all or any portion of the Note, at 130% of the sum of the outstanding principal, interest and late fees to be redeemed, provided that if certain conditions specified in the Note are not satisfied, then the Investor has the right to request redemption of all or any portion of the Note, at 130% of the greater of (i) the sum of the outstanding principal, interest and late fees to be redeemed and (ii) the product of (a) the number of shares into which the Note (including all principal, interest and late fees) subject to redemption may be converted and (b) the greatest closing sale price for the Common Stock beginning on the date immediately preceding the event of default and ending on the date the Company makes the entire payment required to be made upon the redemption provided, however, that if no Cash Release Event (as defined in the Note) has occurred on or prior to the applicable of default redemption date, the principal amount used in calculating the applicable event of default redemption price on such event of default redemption date shall be decreased by the holder’s pro rata portion of $222,000.
The Preferred Members have a put right, on terms and conditions set forth in Section 7.01 of the Operating Agreement, to cause Eightco to redeem the Preferred Units as follows: (a) starting on the later of (i) six (6) months following the Closing and (ii) the Threshold Date (as defined in the Subordination Agreement), one (1) Eightco Share per Initial Base Preferred Unit being redeemed up to a maximum of 6,281,949 Initial Base Preferred Units; (b) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the Closing and (iii) the occurrence of the Threshold Date, one (1) Eightco Share per Initial Base Preferred Units that could not be converted due to the 6,281,949 unit limit in Section 7.01(a) of the Operating Agreement (such shares being an aggregate of 718,051 Initial Base Preferred Units being defined as the “Extra Initial Base Preferred Units”) being redeemed, and one (1) OCTO Share per Additional Base Preferred Unit being redeemed; (c) if Shareholder Approval is not obtained on or before June 30, 2023, subject to both (i) six (6) months following the Closing and (ii) the terms of the Subordination Agreement, a cash payment equal to the difference between $3.07 minus the Additional Base Preferred Unit VWAP (as defined in the Purchase Agreement with it being subject to a $2.00 floor) (such difference being the “Additional Base Preferred Unit Cash Catch Up Amount”) with the Additional Base Preferred Unit Cash Catch Up Amount being multiplied by each Extra Initial Base Preferred Unit and each Additional Base Preferred Unit being redeemed; (d) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time a Preferred Unit issued in connection with the first Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii) the occurrence of the Threshold Date, one (1) OCTO Share per Earnout One Unit being redeemed; (e) if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout One Unit is earned under Section 1.04 of Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to the amount of $15,000,000 divided by the number of Earnout One Units (the “Earnout One Unit Redemption Amount”) with such Earnout One Unit Redemption Amount then being multiplied by each Earnout One Unit being redeemed; (f) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time a Preferred Unit issued in connection with the second Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii) the occurrence of the Threshold Date, one (1) OCTO Share per Earnout Two Unit being redeemed; (g) if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout Two Unit is earned under Section 1.04 of the Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to the amount of $12,000,000 divided by the number of Earnout Two Units (the “Earnout Two Unit Redemption Amount”) with such Earnout Two Unit Redemption Amount then being multiplied by each Earnout Two Unit being redeemed; (h) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time a Preferred Unit issued in connection with the third Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii) the occurrence of the Threshold Date, one (1) OCTO Share per Earnout Three Unit being redeemed; 40 (i) if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout Three Unit is earned under Section 1.04 of the Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to the amount of $10,000,000 divided by the number of Earnout Three Units (the “Earnout Three Unit Redemption Amount”) with such Earnout Three Unit Redemption Amount then being multiplied by each Earnout Three Unit being redeemed.
The Preferred Members have a put right, on terms and conditions set forth in Section 7.01 of the Operating Agreement, to cause Eightco to redeem the Preferred Units as follows: (a) starting on the later of (i) six (6) months following the Closing and (ii) the Threshold Date (as defined in the Subordination Agreement), one (1) Eightco Share per Initial Base Preferred Unit being redeemed up to a maximum of 6,281,949 Initial Base Preferred Units; (b) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the Closing and (iii) the occurrence of the Threshold Date, one (1) Eightco Share per Initial Base Preferred Units that could not be converted due to the 6,281,949 unit limit in Section 7.01(a) of the Operating Agreement (such shares being an aggregate of 718,051 Initial Base Preferred Units being defined as the “Extra Initial Base Preferred Units”) being redeemed, and one (1) OCTO Share per Additional Base Preferred Unit being redeemed; (c) if Shareholder Approval is not obtained on or before June 30, 2023, subject to both (i) six (6) months following the Closing and (ii) the terms of the Subordination Agreement, a cash payment equal to the difference between $3.07 minus the Additional Base Preferred Unit VWAP (as defined in the Purchase Agreement with it being subject to a $2.00 floor) (such difference being the “Additional Base Preferred Unit Cash Catch Up Amount”) with the Additional Base Preferred Unit Cash Catch Up Amount being multiplied by each Extra Initial Base Preferred Unit and each Additional Base Preferred Unit being redeemed; (d) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time a Preferred Unit issued in connection with the first Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii) the occurrence of the Threshold Date, one (1) OCTO Share per Earnout One Unit being redeemed; (e) if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout One Unit is earned under Section 1.04 of Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to the amount of $15,000,000 divided by the number of Earnout One Units (the “Earnout One Unit Redemption Amount”) with such Earnout One Unit Redemption Amount then being multiplied by each Earnout One Unit being redeemed; (f) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time a Preferred Unit issued in connection with the second Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii) the occurrence of the Threshold Date, one (1) OCTO Share per Earnout Two Unit being redeemed; (g) if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout Two Unit is earned under Section 1.04 of the Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to the amount of $12,000,000 divided by the number of Earnout Two Units (the “Earnout Two Unit Redemption Amount”) with such Earnout Two Unit Redemption Amount then being multiplied by each Earnout Two Unit being redeemed; (h) upon the satisfaction of (i) the receipt of Shareholder Approval on or prior to June 30, 2023, (ii) six (6) months following the time a Preferred Unit issued in connection with the third Earn-Out Target is earned under Section 1.04 of the Purchase Agreement and (iii) the occurrence of the Threshold Date, one (1) OCTO Share per Earnout Three Unit being redeemed; 33 (i) if Shareholder Approval has not been obtained on or before June 30 2023, subject to both (i) six (6) months following the time an Earnout Three Unit is earned under Section 1.04 of the Purchase Agreement and (ii) the terms of the Subordination Agreement, a cash payment equal to the amount of $10,000,000 divided by the number of Earnout Three Units (the “Earnout Three Unit Redemption Amount”) with such Earnout Three Unit Redemption Amount then being multiplied by each Earnout Three Unit being redeemed.
If (i) the registration statement is not filed by the Filing Deadline or declared effective by the Effectiveness Deadline, (ii) the sales of all of the securities required be included on such registration statement cannot be made pursuant to such registration statement, or (iii) the registration statement is not effective for any reason and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), or (y) the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2), then the Company shall pay to the Investor in an amount equal to 2% of the aggregate purchase price paid by the Investor on the day of delinquency and each 30th day (pro-rated for periods of less than 30 days) of delinquency thereafter. 34 Pursuant to the Registration Rights Agreement, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, subject to the Company’s right to suspend or defer the use of the registration statement in certain events.
If (i) the registration statement is not filed by the Filing Deadline or declared effective by the Effectiveness Deadline, (ii) the sales of all of the securities required be included on such registration statement cannot be made pursuant to such registration statement, or (iii) the registration statement is not effective for any reason and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), or (y) the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2), then the Company shall pay to the Investor in an amount equal to 2% of the aggregate purchase price paid by the Investor on the day of delinquency and each 30th day (pro-rated for periods of less than 30 days) of delinquency thereafter. 31 Pursuant to the Registration Rights Agreement, the Company must maintain the effectiveness of the registration statement from the effective date until the date on which all securities registered under the registration statement have been sold, or are otherwise able to be sold pursuant to Rule 144 without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, subject to the Company’s right to suspend or defer the use of the registration statement in certain events.
The Note contains a variety of covenants on the part of Company that are typical for transactions of this type, as well as the following covenants: ● the Note ranks senior to all other indebtedness of the Company, except that certain permitted indebtedness ranks pari passu with the Note; ● the Company will not incur other indebtedness, except for certain permitted indebtedness; ● the Company will not incur any liens, except for certain permitted liens; ● the Company will not, directly or indirectly, redeem or repay all or any portion of any permitted indebtedness if at the time such payment is due or is made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an event of default has occurred and is continuing; and ● the Company will not redeem, repurchase or pay any dividend or distribution on its Common Stock or any other capital stock. 33 Warrant to Purchase Shares of Common Stock The Warrant was issued upon closing and is immediately exercisable and, in the aggregate, entitles the Investor to timely purchase up to 889,512 shares of Common Stock.
The Note contains a variety of covenants on the part of Company that are typical for transactions of this type, as well as the following covenants: ● the Note ranks senior to all other indebtedness of the Company, except that certain permitted indebtedness ranks pari passu with the Note; ● the Company will not incur other indebtedness, except for certain permitted indebtedness; ● the Company will not incur any liens, except for certain permitted liens; ● the Company will not, directly or indirectly, redeem or repay all or any portion of any permitted indebtedness if at the time such payment is due or is made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an event of default has occurred and is continuing; and ● the Company will not redeem, repurchase or pay any dividend or distribution on its Common Stock or any other capital stock. 30 Warrant to Purchase Shares of Common Stock The Warrant was issued upon closing and is immediately exercisable and, in the aggregate, entitles the Investor to timely purchase up to 889,512 shares of Common Stock.
If Eightco elects to issue additional Preferred Units upon the achievement of any Earn-Out Target and the VWAP of Eightco’s common stock for the 15 trading days preceding the date that any Earn-Out Target is achieved (the “Earn-Out VWAP”) is (A) with respect to the first Earn-Out Target, less than $5.00, (B) with respect to the second Earn-Out Target, less than $6.00 or (C) with respect to the third Earn-Out Target, less than $5.00, then Sellers shall be entitled to receive an additional number of additional Preferred Units (the “True-up Units” and together with the additional Preferred Units, the “Total Additional Preferred Units”) such that the Total Additional Preferred Units multiplied by the Earn-Out VWAP equals (x) $15 million for the first Earn-Out Target, (y) $12 million for the second Earn-Out Target and (z) $10 million for the third Earn-Out Target; provided that in no event shall more than 4.5 million True-up Units be issued for the first Earn-Out Target, in no event shall more than 4.0 million True-up Units be issued for the Second Earn-Out Target and in no event shall more than 3.0 million True-up Units be issued for the Third Earn-Out Target. 39 In accordance with the Purchase Agreement, the Company’s existing operating agreement was amended and restated.
If Eightco elects to issue additional Preferred Units upon the achievement of any Earn-Out Target and the VWAP of Eightco’s common stock for the 15 trading days preceding the date that any Earn-Out Target is achieved (the “Earn-Out VWAP”) is (A) with respect to the first Earn-Out Target, less than $5.00, (B) with respect to the second Earn-Out Target, less than $6.00 or (C) with respect to the third Earn-Out Target, less than $5.00, then Sellers shall be entitled to receive an additional number of additional Preferred Units (the “True-up Units” and together with the additional Preferred Units, the “Total Additional Preferred Units”) such that the Total Additional Preferred Units multiplied by the Earn-Out VWAP equals (x) $15 million for the first Earn-Out Target, (y) $12 million for the second Earn-Out Target and (z) $10 million for the third Earn-Out Target; provided that in no event shall more than 4.5 million True-up Units be issued for the first Earn-Out Target, in no event shall more than 4.0 million True-up Units be issued for the Second Earn-Out Target and in no event shall more than 3.0 million True-up Units be issued for the Third Earn-Out Target. 32 In accordance with the Purchase Agreement, the Company’s existing operating agreement was amended and restated.
The Maturity Date may be extended at the sole option of the Investor for so long as certain events of default is continuing or for so long as an event is continuing that if not cured and with the passage of time would result in an event of default. 31 The Note is convertible at the option of the Investor into shares of Common Stock at a conversion price of $6.245 per share, subject to adjustment for stock splits, combinations or similar events (each a “Stock Combination Event”).
The Maturity Date may be extended at the sole option of the Investor for so long as certain events of default is continuing or for so long as an event is continuing that if not cured and with the passage of time would result in an event of default. 28 The Note is convertible at the option of the Investor into shares of Common Stock at a conversion price of $6.245 per share, subject to adjustment for stock splits, combinations or similar events (each a “Stock Combination Event”).
Goodwill is a significant percentage of the Company’s’ long term assets and therefore, estimates regarding the fair value of our goodwill have a material impact on our financial statements. 43 Warrant Accounting The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.
Goodwill is a significant percentage of the Company’s’ long term assets and therefore, estimates regarding the fair value of our goodwill have a material impact on our financial statements. 36 Warrant Accounting The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.
As previously announced, we concluded a spin-off from Vinco (the “Separation”) and continue operating our Web3 Business, our BTC Mining Hardware Business and our Packaging Business.
As previously announced, we concluded a spin-off from Vinco (the “Separation”) and continue operating our BTC Mining Hardware Business and our Packaging Business.
The purchase price of the Note and the Warrant is $5 million. 30 In connection with the Private Placement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”), a Security and Pledge Agreement (the “Pledge Agreement”), and various ancillary certificates, disclosure schedules and exhibits in support thereof prior to the closing of the Securities Purchase Agreement.
The purchase price of the Note and the Warrant is $5 million. 27 In connection with the Private Placement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”), a Security and Pledge Agreement (the “Pledge Agreement”), and various ancillary certificates, disclosure schedules and exhibits in support thereof prior to the closing of the Securities Purchase Agreement.
Actual results may differ materially from these estimates under different assumptions or conditions. 42 Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.
Actual results may differ materially from these estimates under different assumptions or conditions. 35 Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.
Cash Flows for the Years Ended December 31, 2022 and 2021 Since inception, Eightco Holdings Inc. and its subsidiaries have primarily used its available cash to fund its operations.
Cash Flows for the Years Ended December 31, 2023 and 2022 Since inception, Eightco Holdings Inc. and its subsidiaries have primarily used its available cash to fund its operations.
Our Inventory Solution Business, Forever 8 Fund, LLC, a Delaware limited liability company focused on purchasing inventory for e-commerce retailers, which we acquired on October 1, 2022 (“Forever 8”). We no longer intend to generate revenue from our Web 3 Business.
Our Inventory Cash Flow Solution Business, Forever 8 Fund, LLC, a Delaware limited liability company is focused on purchasing inventory and becoming the supplier for e-commerce retailers, which we acquired on October 1, 2022 (“Forever 8”). We no longer intend to generate revenue from our Web 3 Business.
The decrease in income tax expense for the year ended December 31, 2022 was a result of state taxes related to Ferguson Containers, Inc. for the year ended December 31, 2021. Net (loss) income Net loss was ($47,446,060) for the year ended December 31, 2022, versus net income of ($100,080) for the year ended December 31, 2021.
The decrease in income tax benefit for the year ended December 31, 2023 was a result of state taxes related to Ferguson Containers, Inc. for the year ended December 31, 2021. Net (loss) income Net loss was ($68,320,414) for the year ended December 31, 2023, versus a net loss of ($47,446,060) for the year ended December 31, 2022.
The trading symbol for the Common Stock following the Reverse Stock Split and the Name Change is “OCTO.” The new CUSIP number for the Common Stock following the Reverse Stock Split and the Name Change is 22890A203. Recent Financings and Forever 8 Acquisition Recent Financings March 2023 Offering On March 15, 2023, Eightco Holdings Inc.
The trading symbol for the Common Stock following the Reverse Stock Split and the Name Change is “OCTO.” The new CUSIP number for the Common Stock following the Reverse Stock Split and the Name Change is 22890A203. Recent Financings and Forever 8 Acquisition Recent Financings February 2024 Private Placement On February 26, 2024, Eightco Holdings Inc.
On April 43 2023, the Company changed its name to Eightco Holdings Inc. from Cryptyde, Inc. and its stock symbol to “OCTO.” The Company is comprised of three main businesses, Forever 8 Inventory Cash Flow Solution, our Web3 Business, which includes the sale of BTC mining hardware, and our Packaging Business.
On April 3, 2023, the Company changed its name to Eightco Holdings Inc. from Cryptyde, Inc. and its stock symbol to “OCTO.” The Company is comprised of two main businesses, Forever 8 Inventory Cash Flow Solution and our Packaging Business.
Interest Expense and Income, Net Interest expense includes the cost of our borrowings under our debt arrangements. Interest income includes the interest earned under our notes receivable. Other Income Other income includes the gain on disposal of the building located in Washington, New Jersey.
Interest income includes the interest earned under our notes receivable. Other Income Other income includes the gain on disposal of the building located in Washington, New Jersey.
The increase in net loss was a result of the increase in selling, general and administrative expenses and loss on issuance of warrants. 45 Liquidity and Capital Resources Eightco Holdings Inc. has required funding from the Former Parent to fund its operations.
The increase in net loss was largely attributable to the loss on issuance of warrants and amortized interest expense. 38 Liquidity and Capital Resources Eightco Holdings Inc. has required funding from the Former Parent to fund its operations.
The Investor is entitled to receive any dividends paid or distributions made to the holders of the Common Stock on an “as if exercised” to Common Stock basis.
The Investor is entitled to receive any dividends paid or distributions made to the holders of the Common Stock on an “as if exercised” to Common Stock basis. The Company redeemed all of the Warrants related to the Investor for $660,000 on October 23, 2023.
Total other (expense) income Total other (expense) income was ($32,111,553) for the year ended December 31, 2022 versus $541,212 for the year ended December 31, 2021. The increase in total other income (expense) was largely attributable to the loss on issuance of warrants and amortized interest expense.
The increase in total other income (expense) was largely attributable to the loss on issuance of warrants and amortized interest expense. Income tax expense Income tax expense (benefit) was $- for the year ended December 31, 2023, versus an income tax benefit of ($172,997) for the year ended December 31, 2022, respectively.
Interest Expense Interest expense was $6,966,606 for the year ended December 31, 2022, versus $11,421 for the year ended December 31, 2021. The increase in interest expense was largely attributable to the amortization of debt issuance costs related to borrowing under the convertible notes payable.
The increase in interest expense was largely attributable to the amortization of debt issuance costs related to borrowing under the convertible notes payable. Total other (expense) income Total other (expense) income was ($58,343,242) for the year ended December 31, 2023 versus ($32,111,553) for the year ended December 31, 2022.
The following table sets forth a summary of cash flows for the periods presented: For the Years Ended December 31, 2022 2021 Cash (used in) provided by: Operating Activities $ (16,719,389 ) $ (197,159 ) Investing Activities 468,419 (3,705,756 ) Financing Activities 20,920,207 4,637,350 Net increase in cash and restricted cash $ 4,669,237 $ 734,435 Operating Activities Net cash (used in) operating activities was ($16,179,389) during the year ended December 31, 2022, which consisted primarily of a net loss of $47,446,060 offset by non-cash depreciation expense of $848,933, amortization of debt issuance costs of $6,217,053, impairment charges of $1,300,000, share based compensation of $1,463,250, loss on issuance of warrants of $25,318,519, bad debt expense of $608,356 and changes in assets and liabilities of ($5,070,690).
Net cash (used in) operating activities was ($16,719,389) during the year ended December 31, 2022, which consisted primarily of a net loss of $47,446,060 offset by non-cash depreciation expense of $848,933, amortization of debt issuance costs of $6,217,053, impairment charges of $1,300,000, share based compensation of $1,504,500, loss on issuance of warrants of $25,318,519, bad debt expense of $608,356 and changes in assets and liabilities of ($5,070,690).
In addition, we will generate revenues from the sale of corrugated custom packaging to a wide array of customers, the sales of Bitcoin mining equipment offered through CW Machines, LLC and Web3 Products and services offered through BlockHiro, LLC.
In addition, we will generate revenues from the sale of corrugated custom packaging to a wide array of customers and the sales of Bitcoin mining equipment offered through CW Machines, LLC. Cost of Revenues Our cost of revenues includes inventory costs, materials and supplies costs, internal labor costs and related benefits, subcontractor costs, depreciation, overhead and shipping and handling costs.
This discussion and analysis contain forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. Overview As used herein, “Eightco” and the “Company” refer to Eightco Holdings Inc.
This discussion and analysis contain forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. Overview As used herein, “Eightco” and the “Company” refer to Eightco Holdings Inc. and subsidiaries and/or where applicable, its management, a Delaware corporation originally incorporated on September 21, 2021 (date of inception) under the laws of the State of Nevada.
Investing Activities Net cash provided by investing activities was $468,419 during the year ended December 31, 2022 compared to $3,705,756 for the year ended December 31, 2021. The decrease is largely attributable to less capital expenditures required for the corrugated business during the year ended December 31, 2022.
Investing Activities Net cash provided by (used in) investing activities was ($295,150) during the year ended December 31, 2023 compared to $468,419 for the year ended December 31, 2022. The decrease is largely attributable to cash received from the acquisition of the Forever 8 Fund, LLC recognized in the year ended December 31, 2022.
(f/k/a Cryptyde, Inc.) and subsidiaries and/or where applicable, its management, a Delaware corporation originally incorporated on September 21, 2021 (date of inception) under the laws of the State of Nevada. On March 9, 2022, the Company converted to a Delaware corporation pursuant to a plan of conversion entered into with the Former Parent.
On March 9, 2022, the Company converted to a Delaware corporation pursuant to a plan of conversion entered into with the Former Parent.
In addition, other than those that relate to the Note Private Placement, which currently amount to approximately $7.9 million, the Company has no significant debt obligations. The Company currently has approximately $5.6 million in cash. The Company believes it will have sufficient funds for the next 12 months to accomplish its strategic plan.
In addition, other than those that relate to the Note Private Placement, which currently amount to approximately $7.9 million, the Company has no significant debt obligations. The Company currently has approximately $500,000 in cash. The Company expects to need additional capital in order to fund its operations and increase revenues above current levels.
Since inception, Ferguson Containers Inc.’s operations have been funded principally through its operations.
Eightco Holdings Inc. has required funding from the Former Parent to launch operations. Ferguson Containers has historically had positive cash flows from operations. Since inception, Ferguson Containers Inc.’s operations have been funded principally through its operations.
Cost of Revenues For the year ended December 31, 2022, cost of revenues increased by $23,944,752 or 421.41%, as compared to the year ended December 31, 2021. The increase was largely attributable to the increase in total revenues, increased costs of materials and production, as well as the costs associated with inventory financing through Forever 8.
The increase was largely attributable to the increase in total revenues, increased costs of materials and production, as well as costs associated with the delivery and sale of goods related to the inventory management solutions business.
Operating Expenses Selling, general and administrative expenses were $16,401,414 and $2,623,460 for the years ended December 31, 2022 and 2021, respectively, representing an increase of $13,777,684, or 525.17%. The increase was largely attributable to the increase in professional fees, payroll costs, insurance expense, rent expense and operating costs as a standalone public company as well as stock-based compensation of $1,463,250.
Operating Expenses Selling, general and administrative expenses were $16,335,561 and $16,401,414 for the years ended December 31, 2023 and 2022, respectively, representing a decrease of $65,763, or 0.40%. The decrease was largely attributable to the decrease in salaries.
Unless the Company requests an appeal of the Determination, the Company’s securities will be scheduled for delisting from The Nasdaq Capital Market at the opening of trading on April 20, 2023.
Accordingly, unless the Company requests an appeal of this determination as described in further detail below, we have determined that the Company’s securities will be scheduled for delisting from The Nasdaq Capital Market and will be suspended at the opening of business on April 8, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the “SEC”), which will remove the Company’s securities from listing and registration on The Nasdaq Stock Market.
All shares of Series A Preferred Stock issued have been since redeemed. 41 Nasdaq Deficiency Notice On October 5, 2022, we received a letter from the Listing Qualifications Department of Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 31 consecutive business day period between August 22, 2022, through October 4, 2022, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2).
All shares of Series A Preferred Stock issued have been since redeemed. 34 Nasdaq Deficiency Notice On September 29, 2023, the Company received a written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company is not in compliance with the minimum bid price requirement of $1.00 per share set forth in Nasdaq Rules for continued listing on Nasdaq.
Gross Profit For the year ended December 31, 2022, gross profit increased by $1,022, or 0.05%, as compared to the year ended December 31, 2021. The decrease was largely attributable to higher cost of goods related to the sale of mining equipment which generates lower margins.
Gross Profit For the year ended December 31, 2023, gross profit increased by $6,298,551, or 287.09%, as compared to the year ended December 31, 2022. The increase was largely attributable to the increase in sales through the Forever 8 Fund.
The capital expenditures of $1,775,748 are not included above due to them being non-cash. Financing Activities Net cash provided by (used in) financing activities was $20,920,207 during the year ended December 31, 2022 compared to $4,637,350 for the year ended December 31, 2021.
Financing Activities Net cash provided by financing activities was $6,361,634 during the year ended December 31, 2023 compared to $20,920,207 for the year ended December 31, 2022. This decrease was largely attributable to a decrease in proceeds from the issuance of common stock and borrowings under convertible notes as compared to the year ended December 31, 2022.
The letter also indicated that the Company has a compliance period of 180 calendar days, or until April 3, 2023 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). On April 11, 2023, the Company received a Staff Determination (the “Determination”) that the Company did not comply with the Listing Rule.
On March 28, 2024, we received a letter from the Listing Qualifications Department of Nasdaq indicating that the Company has not regained compliance with Nasdaq Listing Rule 5810(c)(3)(A) and is not eligible for a second 180 day period. The Company has not regained compliance with the Rule and is not eligible for a second 180 day period.
Removed
January 2022 Offering On January 26, 2022, the Company entered into the January 2022 Purchase Agreement with Hudson Bay for the issuance and sale of the January 2022 Note with a principal amount of $33,333,333 at a conversion price of $500.00 per share (“January 2022 Note Shares”), and the January 2022 Warrant to purchase up to 66,667 shares of our common stock with a exercise price of $500.00 per share (the “January 2022 Warrant Shares”), for consideration of $30,000,000 (the “January 2022 Offering”).
Added
(the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Investors”), pursuant to which the Company sold to the Investors an aggregate of 865,856 shares (the “Shares”) of the Company’s common stock at a purchase price of $0.82 per Share (the “Private Placement”).
Removed
The January 2022 Offering closed on May 5, 2022. In connection with the closing of the January 2022 Purchase Agreement, the Company issued the HB SPA Palladium Warrants to purchase up to 1,067 shares of the Company’s common stock at an exercise price of $500.00 per share to Palladium Capital Group, LLC (“Palladium”) for acting as placement agent.
Added
The Company received aggregate gross proceeds from the Private Placement of approximately $0.71 million. The Shares are being offered and sold in reliance on the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(a)(2) and Regulation D promulgated thereunder for transactions not involving a public offering.
Removed
The HB SPA Palladium Warrants are subject to terms that are identical in all material respects to the HB Warrants. In connection with the January 2022 Offering, Eightco also entered into a registration rights agreement (the “Registration Rights Agreement”) with the same investor. This registration statement is being filed in accordance with the Registration Rights Agreement.
Added
The Purchase Agreement contains representations and warranties of the Company and the Investors that are typical for transactions of this type. The Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type.
Removed
In accordance with the Registration Rights Agreement, prior to amendment by the 2022 Amendment Agreement, Eightco filed the June 2022 S-1, which included all of the common stock underlying the January 2022 Note (66,667 shares of common stock), and 200% of the common stock underlying the January 2022 Warrant (133,333 shares of common stock). 35 In connection with the January 2022 Offering, Eightco, and its subsidiaries, as applicable, entered into guarantee agreements, a pledge agreement (the “Pledge Agreement”), a control agreement and all financing statements, security agreements, pledges, assignments, opinions of counsel, and other documents requested by the collateral agent in the January 2022 Offering.
Added
Series A Financing On May 30, 2023, the Company’s wholly owned subsidiary, Forever 8 Fund, LLC (the “Borrower”), entered into a Loan and Security Agreement (the “Agreement”) with several individuals, financial institutions and entities (collectively, the “Lenders”).
Removed
On July 28, 2022, the Company entered into the 2022 Amendment Agreement with Hudson Bay to amend the January 2022 Purchase Agreement, the January 2022 Note and the Registration Rights Agreement.
Added
Under the terms of the Agreement, each Lender will severally (and not jointly) make available to Borrower, in an amount not to exceed its respective Commitment, a Loan Advance amount to be determined by the Lender (as such amount may be increased, the “Aggregate Commitment”) in the aggregate, of which (x) a certain amount will be deposited into an account of the Borrower in accordance with its written instructions (the “Initial Loan Advance”) and (y) the remaining balance of the Aggregate Commitment after deducting the Initial Loan Advance shall be deposited into the Escrow Account (the “Escrow Funds”).
Removed
Pursuant to the 2022 Amendment Agreement, the Company released an aggregate of $29,000,000 (the “Released Funds”) from the restricted funds account maintained in accordance with the January 2022 Purchase Agreement (the “Restricted Funds Account”) and, going forward, must deposit 50% of any Warrant Exercise Cash (as defined in the 2022 Amendment Agreement) into the Restricted Funds Account.
Added
The Borrower may, at any time, request an advance for all or a portion of the Escrow Funds (each such advance, a “Subsequent Draw”). The Borrower issued a Promissory Note (the “Note”) to each of the Lenders in the amount of the Lender’s respective Initial Loan Advance.
Removed
As required by the 2022 Amendment Agreement, the Company used $22,000,000 of the Released Funds to repurchase from Hudson Bay $22,000,000 of the principal of the January 2022 Note.
Added
The principal balance of the Initial Loan Advance and each Subsequent Draw shall bear interest thereon from the Closing Date and applicable Advance Date, respectively, at 15.00% per annum.
Removed
Pursuant to the 2022 Amendment Agreement, the conversion price of the balance of the January 2022 Note that remained was voluntarily adjusted to $53.00 (the “Adjustment”) and in accordance with the terms of the January 2022 Warrant, the exercise price of the January 2022 Warrant was adjusted to $53.00 as a result of the Adjustment.
Added
The Borrower shall pay each Lender, according to its Applicable Percentage, an unused commitment fee on the actual daily amount of the Unused Commitment Amount during the immediately preceding calendar quarter at the rate of five percent (5.00%) per annum (the “Unused Commitment Fee”).
Removed
The 2022 Amendment Agreement also amended the Registration Rights Agreement to require the Company to register (i) the number of shares of common stock equal to 200% of the shares issuable upon conversion of the January 2022 Note and (ii) the number of shares of common stock equal to 200% of the shares issuable upon exercise of the January 2022 Warrant, assuming all cash has been released from the Restricted Funds Account and the number of shares of common stock issuable upon exercise of the January 2022 Warrant has been adjusted in accordance with Section 2(c) of the January 2022 Warrant.
Added
In the event any payment is not paid on or within five (5) Business Days of the scheduled payment date, an amount equal to two percent (2.00%) of the past due amount shall be payable on demand, in addition to interest accruing.
Removed
On January 26, 2022, the Company entered into the Equity Private Placement with BHP for the issuance of 30,000 shares of Eightco’s common stock, and BHP Warrants to purchase up to 30,000 shares of common stock with an exercise price of $400.00 per share of common stock. The Equity Private Placement closed on May 20, 2022.
Added
In addition, upon the occurrence and during the continuation of an Event of Default hereunder, the Initial Loan Advance and all Subsequent Draws, including principal, interest, compounded interest, and professional fees thereupon, shall upon the election of the Lenders, bear interest at the Interest Rate, plus five (5) percentage points.
Removed
In accordance with the provisions of the Equity Private Placement, the Company registered the shares of common stock underlying the BHP Warrants in the June 2022 S-1.
Added
In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded. 25 As security for the prompt and complete payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, Borrower grants to Lenders a security interest in all of Borrower’s right, title, and interest in and to all Inventory or Equipment and machinery, in each case, purchased (or refinanced) with the proceeds of the Initial Loan Advance and any Subsequent Draw, and, to the extent not otherwise included, all Proceeds of each of the foregoing and all products, additions, increases and accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing (collectively, the “Collateral”).
Removed
In connection with the closing of the Equity Private Placement, the Company issued the BHP SPA Palladium Warrants to purchase up to 4,800 shares of the Company’s common stock at an exercise price of $400.00 per share to Palladium for acting as placement agent.
Added
As of the date of this filing, $3,425,000 has been committed by the Lenders. Series B Financing On October 6, 2023, the Company’s wholly owned subsidiary, Forever 8 Fund, LLC (the “Borrower”), entered into a Series B Loan and Security Agreement (the “Series B Agreement”) with an individual (the “Lender”).
Removed
The BHP SPA Palladium Warrants are subject to terms that are identical in all material respects to the BHP Warrants. The Company registered the shares underlying the BHP SPA Palladium Warrants in the June 2022 S-1.
Added
Under the terms of the Series B Agreement, the Lender will make available to Borrower, in an amount not to exceed its respective Commitment, a Loan Advance amount to be determined by the Lender (as such amount may be increased, the “Aggregate Commitment”) in the aggregate, of which (x) a certain amount will be deposited into an account of the Borrower in accordance with its written instructions (the “Initial Loan Advance”) and (y) the remaining balance of the Aggregate Commitment after deducting the Initial Loan Advance shall be deposited into the Escrow Account (the “Escrow Funds”).
Removed
In connection with the Adjustment, under the terms of the BHP Warrants and the warrants issued to Palladium, the exercise price of such warrants were reduced to match the conversion price of $53.00 applicable to the January 2022 Note.
Added
The Borrower may, at any time, request an advance for all or a portion of the Escrow Funds (each such advance, a “Subsequent Draw”). The Borrower issued a Promissory Note (the “Note”) to the Lender in the amount of the Lender’s respective Initial Loan Advance.
Removed
On November 11, 2021, the Company entered into an amendment agreement (the “2021 Amendment Agreement”) by and among Vinco, Hudson Bay and the Company. In connection with the 2021 Amendment Agreement on May 18, 2022, the Company issued to Hudson Bay warrants exercisable into 173,049 shares of the Company’s common stock with an exercise price of $0.05 per share.
Added
The principal balance of the Initial Loan Advance and each Subsequent Draw shall bear interest thereon from the Closing Date and applicable Advance Date, respectively, at 15.00% per annum.
Removed
On May 18, 2022, in connection with its spin-off and based upon Vinco warrants exercisable into Vinco common stock, the Company issued to Palladium, CVI Investments, Inc. and Armistice Capital Master Fund Ltd. warrants exercisable into 15,355, 10,000 and 6,000 shares, respectively, of the Company’s common stock at an exercise price of $0.05 per share. 36 On September 14, 2022, the Company and Hudson Bay entered into a waiver (the “Waiver”) to permit, the entry into that certain Membership Interest Purchase Agreement (the “F8 Purchase Agreement”) by and among the Company, Forever 8, the members of Forever 8 (the “Sellers”) and Paul Vassilakos, solely in his capacity as representative of the Sellers (the “Sellers’ Representative”).
Added
The Borrower shall pay each Lender, according to its Applicable Percentage, an unused commitment fee on the actual daily amount of the Unused Commitment Amount during the immediately preceding calendar quarter at the rate of five percent (5.00%) per annum (the “Unused Commitment Fee”).
Removed
Pursuant to the F8 Purchase Agreement, the Company acquired 100% of the issued and outstanding membership interests of Forever 8 from the Sellers (the “Acquisition”), in consideration for the mutual execution at closing of the Acquisition of a subordination agreement by and among Hudson Bay, the Sellers and the Company (the “Subordination Agreement”).
Added
In the event any payment is not paid on or within five (5) Business Days of the scheduled payment date, an amount equal to two percent (2.00%) of the past due amount shall be payable on demand, in addition to interest accruing.
Removed
Pursuant to the Waiver, the conversion price and exercise price of the January 2022 Note and the January 2022 Warrant, respectively, were voluntarily and irrevocably adjusted to equal $50.00, subject to further adjustment as set forth therein, and Hudson Bay, the Sellers and the Company entered into the Subordination Agreement.
Added
In addition, upon the occurrence and during the continuation of an Event of Default hereunder, the Initial Loan Advance and all Subsequent Draws, including principal, interest, compounded interest, and professional fees thereupon, shall upon the election of the Lender, bear interest at the Interest Rate, plus five (5) percentage points.
Removed
The Waiver also caused the number of shares of common stock underlying the January 2022 Warrant to increase pursuant to a price adjustment feature of the January 2022 Warrant.
Added
In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded.
Removed
As a result of the January 2022 Warrant exercise price adjustment in the Waiver, the exercise price of the BHP Warrants, HB SPA Palladium Warrants, and BHP SPA Palladium Warrants was adjusted to $50.00 per share of common stock.
Added
As security for the prompt and complete payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, Borrower grants to Lender a security interest in all of Borrower’s right, title, and interest in and to all Inventory or Equipment and machinery, in each case, purchased (or refinanced) with the proceeds of the Initial Loan Advance and any Subsequent Draw, and, to the extent not otherwise included, all Proceeds of each of the foregoing and all products, additions, increases and accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing (collectively, the “Collateral”).
Removed
In addition, the number of shares of common stock underlying the BHP Warrants, HB SPA Palladium Warrants, BHP SPA Palladium Warrants was increased to include the Additional BHP Warrant Shares, Additional HB SPA Palladium Warrant Shares, and the Additional BHP SPA Palladium Warrant Shares.
Added
From October 12, 2023, through February 26, 2024, the Borrower entered into Lender Joinder Agreements (the “Joinder Agreement”) with several individuals and entities (the “Subsequent Lenders”).
Removed
Pursuant to the F8 Purchase Agreement, consideration paid to the Sellers consisted of (i) an aggregate of 7,000,000 non-voting preferred membership units of Forever 8 (the “Initial Base Preferred Units”), subject to adjustment based on the price of the Company’s common stock, (ii) convertible promissory notes in an aggregate principal amount of $27.5 million (the “Promissory Notes”), and (iii) the right to receive potential earnout amounts up of to 7,000,000 additional non-voting preferred membership units of Forever 8 (“Preferred Units”) which may be increased by up to 11,500,000 additional non-voting preferred membership units of Forever 8 (the “Earnout Preferred Units”), upon the achievement of certain performance thresholds relating to cumulative collected revenues.
Added
Under the terms of the Joinder Agreement, the Subsequent Lenders agreed to become a Lender and be bound by the terms of the Series B Agreement as a Lender pursuant to Section 2.6 of the Series B Agreement.
Removed
In addition, the Company transferred $4.6 million in cash to Forever 8 to pay off certain obligations of Forever 8.

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