Eightco Holdings Inc. quarterly report, Q3 FY2022

Business context and reporting period

The supplied filing is Cryptyde, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2022, filed November 14, 2022. The request identifies Eightco Holdings Inc., but the filing names Cryptyde, Inc. as registrant and TYDE as its Nasdaq symbol; verify the issuer’s identity and corporate/name-change history before relying on this summary.

Cryptyde became an independent public company following its June 29, 2022 spin-off from Vinco Ventures. Its businesses included custom packaging, Bitcoin-mining equipment and planned Web3 activities. The filing describes the acquisition of Forever 8 Fund, an inventory-financing business, as closing October 1, 2022—after the reporting date.

Key financial metrics

Revenue rose 135% in Q3 and 173% for the nine-month period versus 2021. The filing attributes much of the increase to Bitcoin-mining equipment shipments—$3.08 million in Q3 and $9.59 million year to date. Cost of revenue grew faster than revenue, and gross margin fell from approximately 28.5% to 8.9% in Q3 and from 28.6% to 11.2% year to date.

The nine-month net loss included a $25.32 million warrant-modification loss and $5.80 million of interest expense, largely associated with amortization of debt issuance costs. These substantially affected reported results; cash interest paid for the nine-month period was $203.

At September 30, cash and cash equivalents were $6.63 million, restricted cash was $1.00 million, current assets were $18.21 million, and current liabilities were $9.32 million. Total assets were $23.20 million and total liabilities were $17.18 million. The balance sheet reported $7.75 million of convertible notes net of discount (gross principal $9.74 million) and $7.23 million due to the former parent. Cash-flow financing provided $20.97 million during the first nine months, primarily from equity and convertible-note financing.

Material changes versus the prior comparable period

• Q3 shifted from $0.61 million net income in 2021 to a $34.85 million net loss in 2022; nine-month results shifted from $0.58 million net income to a $39.45 million net loss.
• SG&A rose to $4.19 million in Q3 from $0.21 million, and to $10.40 million year to date from $1.35 million. The company cited public-company costs, professional fees, payroll, insurance, rent and stock-based compensation.
• Operating cash flow fell from $0.35 million provided in the prior-year nine-month period to $15.17 million used. Financing cash flow changed from $0.64 million used to $20.97 million provided.
• Reported common shares outstanding rose to 31.68 million from 10,000 at December 31, 2021, reflecting the spin-off and financing-related issuances. The filing also lists substantial warrants and potential note-conversion shares that could add dilution.

Outlook, risks and unusual items

• Management said it believed available funds would support its strategic plan for the next 12 months. However, the company reported significant operating cash use and dependence on external financing and former-parent funding.
• Management did not anticipate near-term Bitcoin-mining equipment sales for the remainder of 2022, while evaluating market conditions. This matters because mining-equipment shipments drove much of reported revenue growth.
• Forever 8 closed its acquisition on October 1, 2022. Disclosed consideration included 7 million initial preferred units, $27.5 million of seller convertible promissory notes, potential earnout consideration, and arrangements that may require cash payments or share issuance. The notes bear 10% interest for the first year and 12% thereafter; the transaction also includes preferred-unit put rights and potential share or cash redemption obligations.
• The senior convertible-note terms were amended: the conversion price was reduced to $1.06 and then to $1.00 under a September waiver, and the holder obtained a future redemption right. The company recorded a $25.32 million warrant-modification loss. The August 2022 resale/underlying-share registration statement had not been declared effective as of the filing.
• Nasdaq notified the company on October 5, 2022 that it failed the $1.00 minimum bid-price requirement, with until April 3, 2023 to regain compliance. The company warned that delisting could impair share liquidity and access to financing.
• Management concluded disclosure controls were ineffective and that a previously identified material weakness—limited accounting staff, insufficient segregation of duties and gaps in transaction controls—remained. The company planned to use outside consultants to improve controls.
• Revenue was concentrated: one customer represented 61% of nine-month revenue; two customers represented 22% and 13% of accounts receivable at September 30. The filing says routine legal matters were not expected to have a material adverse effect and reports no off-balance-sheet arrangements.

Important facts for investors to verify

1. Confirm that this Cryptyde/TYDE filing is the intended issuer and establish its relationship to Eightco Holdings Inc.
2. Reconcile reported cash: the balance sheet shows $6.63 million cash plus $1.00 million restricted cash, while the cash-flow statement reports $6.63 million of cash and restricted cash at period-end.
3. Check the balance-sheet accrued-liabilities figure against its note: the balance sheet reports $537,155, while the supporting note reports $237,155.
4. Review the final Forever 8 acquisition accounting, seller-note obligations, put and earnout terms, and any subsequent share issuance or dilution.
5. Assess financing capacity, convertible-note and warrant terms, Nasdaq bid-price compliance, and progress in remediating the material weakness.