UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ______ to ______
Commission
File No.
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| OTC Pink |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for at least the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
There were shares of the Registrant’s $ par value common stock outstanding as of August 19, 2024.
HUMBL, Inc.
INDEX
| i |
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
Table of Contents
| 1 |
HUMBL, INC
CONDENSED CONSOLIDATED BALANCE SHEETS (IN US$)
JUNE 30, 2024 (UNAUDITED) AND DECEMBER 31, 2023
| JUNE 30, | DECEMBER 31, | |||||||
| 2024 | 2023 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Assets related to user cryptocurrencies safeguarding obligation | ||||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Investment - Avrio | ||||||||
| Current assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets: | ||||||||
| Fixed assets, net of depreciation | ||||||||
| Intangible assets, net of amortization | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| User cryptocurrencies safeguarding obligation | ||||||||
| Contingent consideration | ||||||||
| Derivative liabilities | ||||||||
| Current portion of notes payable - bank | ||||||||
| Current portion of notes payable | ||||||||
| Current portion of notes payable - related parties | ||||||||
| Convertible notes payable - related parties, net of current portion | ||||||||
| Current portion of convertible notes payable, net of discount | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities: | ||||||||
| Notes payable - bank, net of current portion | ||||||||
| Notes payable - related parties, net of current portion | ||||||||
| Convertible notes payable, net of current portion, net of discount | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingency | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, shares Series A Preferred stock authorized, Series B Preferred stock authorized and Series C Preferred stock authorized | ||||||||
| Series A Preferred, par value $, and shares issued and outstanding, respectively | ||||||||
| Series B Preferred, par value $, and shares issued and outstanding, respectively | ||||||||
| Series C Preferred, par value $, and shares issued and outstanding, respectively | ||||||||
| Common stock, par value, $, shares authorized, and issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
HUMBL, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN US$)
SIX AND THREE MONTHS ENDED JUNE 30, 2024 AND 2023
| SIX MONTHS ENDED | THREE MONTHS ENDED | |||||||||||||||
| JUNE 30, | JUNE 30, | JUNE 30, | JUNE 30, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| GROSS (LOSS) PROFIT | ( | ) | ( | ) | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Development costs | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Settlement | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Impairment - inventory | ||||||||||||||||
| Impairment - intangible assets including goodwill | ||||||||||||||||
| Impairment - digital assets | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NON-OPERATING INCOME (EXPENSE) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of HUMBL Financial assets | ||||||||||||||||
| Amortization of debt discounts | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of digital assets | ||||||||||||||||
| Change in fair value of derivative liability | ||||||||||||||||
| Derivative expense | ( | ) | ( | ) | ||||||||||||
| Gain (loss) on conversion of convertible notes payable | ( | ) | ( | ) | ||||||||||||
| Total Non-Operating Income (Expenses) | ( | ) | ( | ) | ||||||||||||
| NET LOSS FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS AND PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||||||||||
| (Loss) gain on disposal of discontinued operations | ( | ) | ( | ) | ||||||||||||
| Total discontinued operations | ( | ) | ( | ) | ||||||||||||
| NET INCOME (LOSS) FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for income taxes | ||||||||||||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translations adjustment | ||||||||||||||||
| Comprehensive income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net loss per share - basic | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net loss per share - basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) per share - diluted | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net income (loss) per share - diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average common shares outstanding - basic | ||||||||||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
HUMBL, INC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED) (IN US$)
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Series C Preferred | Common Stock | Additional Paid-In | Other Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance - January 1, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock issued for: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Services (including settlement of obligation to issue common shares) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Acquisition - BM Authentics (to settle obligation to issue common shares) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Settlement of Tickeri sale | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series B Preferred to common shares | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Shares canceled for no consideration | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Contribution of capital | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - restricted stock grants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of contingent consideration - restricted stock units | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Change in comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Services (including settlement of obligation to issue common shares) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Cash | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Vested RSUs | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series B Preferred to common shares | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - restricted stock grants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of contingent consideration - restricted stock units | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Change in comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series B Preferred to common shares | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued in warrant exchange | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of contingent consideration - restricted stock units | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Change in comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued for: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Services | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series B Preferred to common shares | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued in warrant exchange | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Warrant purchases | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Change in comprehensive income | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
HUMBL, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN US$)
SIX MONTHS ENDED JUNE 30, 2024 AND 2023
| 2024 | 2023 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities | . | |||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Impairment expense - digital assets | ||||||||
| (Gain) on sale of digital assets | ( | ) | ||||||
| Loss on conversion of convertible notes payable | ( | ) | ||||||
| Expenses paid for by digital assets | ||||||||
| Fee added to convertible notes | ||||||||
| Amortization of debt discounts | ||||||||
| Foreign currency adjustment | ||||||||
| Stock-based compensation | ||||||||
| Gain on disposal of Tickeri | ( | ) | ||||||
| Gain on disposal of Monster | ( | ) | ||||||
| Derivative expense | ||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Gain on sale of HUMBL Financial assets | ( | ) | ||||||
| Changes in assets and liabilities, net of acquired amounts | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ||||||||
| Prepaid expenses and other assets | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Total adjustments | ( | ) | ||||||
| Net cash used in operating activities of continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by operating activities of discontinued operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related party notes payable | ||||||||
| Payments of notes payable - bank | ||||||||
| Payments of notes payable | ( | ) | ||||||
| Repayment of convertible notes payable | ( | ) | ||||||
| Contribution of capital CEO | ||||||||
| Proceeds from sales of warrants | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from issuance of common and preferred stock for cash | ||||||||
| Net cash provided by financing activities | ||||||||
| NET (DECREASE) IN CASH AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH - BEGINNING OF PERIOD | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| CASH PAID DURING THE PERIOD FOR: | ||||||||
| Interest expense | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL INFORMATION - NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Settlement with Tickeri in disposal | $ | $ | ||||||
| Settlement with Monster in disposal | $ | $ | ||||||
| Conversion of preferred stock into common stock | $ | $ | ||||||
| Conversion of obligation to issue common stock into common stock | $ | $ | ||||||
| Conversion of convertible notes payable, derivative liability and accrued interest to common stock | $ | $ | ||||||
| Settlement of accounts payable for digital assets | $ | $ | ||||||
| Shares issued for vested RSUs | $ | $ | ||||||
| Shares of common stock issued for warrant exchanges | $ | $ | ||||||
| Vesting of contingent consideration | $ | $ | ||||||
| Reclassification of convertible notes payable to derivative liability | $ | $ | ||||||
| Changes in SAB 121 recognition of assets and liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
HUMBL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN US$)
JUNE 30, 2024
(UNAUDITED)
NOTE 1: NATURE OF OPERATIONS
HUMBL, Inc. (“Company” or “HUMBL”) was incorporated in the state of Oklahoma on November 12, 2009. The Company was redomiciled on November 30, 2020 to the state of Delaware.
On
December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the
terms of the Merger Agreement, HUMBL LLC exchanged
The
FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume
control of the Company, the former CEO, Henry Boucher assigned his shares of Series A Preferred Stock as well as shares of common stock to Brian Foote, the President and CEO of HUMBL LLC for a $40,000 note payable.
On
June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $
On
June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in
producing movie trailers and other related content. As part of the acquisition, we entered into certain debt instruments with the founders
of Monster that are in default as they were due December 31, 2022. Effective June 30, 2023, the Company and Phantom Power, LLC (the entity
that sold Monster to the Company two years earlier) entered into a Securities Purchase Agreement whereby the Company sold back the membership
interest they held along with
| 6 |
On February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company determined this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US Air Force and BizSecure’s Mobile ID technology. The Company had issued common shares and restricted stock units (“RSUs”) that vest quarterly commencing April 1, 2022 for a period of as part of this acquisition. On December 30, 2022, as a result of the Company’s failure to timely register the shares of common stock issued February 12, 2022 BizSecure requested the cancellation of such shares and the RSUs that vested during 2022. Pursuant to BizSecure’s request, the shares of common stock and the RSUs were rescinded effective December 30, 2022. The remaining RSUs will continue to vest in accordance with the original terms. For the full description of this transaction, refer to the Form 10-K for the year ended December 31, 2022 filed April 6, 2023.
On
March 3, 2022, the Company acquired Ixaya Business SA de CV, a Mexican corporation (“Ixaya”), under a Stock Purchase Agreement
(“Ixaya SPA”). The acquisition of Ixaya was for $
On
November 2, 2022, the Company acquired BM Authentics (“BM”), a provider of sports merchandise ranging from autographed jerseys,
bats, balls, helmets, and photos for $
On
November 15, 2022 we entered into a Settlement Agreement and Mutual Release of Claims (the “Release Agreement”) with Forwardly,
Inc. (“Forwardly”) under which we agreed to pay Forwardly $
On
June 1, 2023,
| 7 |
On July 19, 2023, we entered into a Settlement Agreement (the “Settlement Agreement”) with BizSecure, Inc. (“BizSecure”). On February 12, 2022, we purchased substantially all of BizSecure’s assets pursuant to an Asset Purchase Agreement (the “APA”). Under the APA, we were obligated to register a certain number of shares for BizSecure with the Commission within 90 days. We failed to timely register those shares. Pursuant to the Settlement Agreement, BizSecure agreed to release its claims against us for failing to timely register the shares as well as all other claims it may have against us arising in connection with the APA. In exchange we agreed to issue shares of our common stock to BizSecure, and release any claims we may have against BizSecure in connection with the APA.
On
February 23, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Avrio Worldwide,
PBC (“Avrio”). Pursuant to the Purchase Agreement, the Company sold the assets associated with its HUMBL Financial product
line, including all BLOCK ETXs and BLOCK Indexes (but not including any active trading algorithms or strategies) to Avrio.
In June 2024, the Company decided to terminate the Ixaya SPA effective April 1, 2024 and deconsolidate from the Company, and utilize their support staff in various projects the Company works on. There was no return of shares previously issued to the owner of Ixaya, and the Company returned the shares they owned in Ixaya, and the separation was amicable on both sides. The results of Ixaya are reflected in discontinued operations.
HUMBL is a Web 3, digital commerce platform built to connect consumers, businesses and governments in the digital economy. HUMBL provides simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades. The Company through their product offerings are looking to simplify and package the digital economy for consumers, corporations and government.
The goal of HUMBL is to provide ready built tools, and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL is built on a patent-pending, decentralized technology stack that utilizes both core and partner technologies, to provide faster connections to the digital economy and each other.
The Company is organized into two divisions: a) HUMBL Consumer and b) HUMBL Commercial (HBS). These two divisions incorporate and expand the Company’s core products and services.
HUMBL – A Verified Commerce Platform
HUMBL delivers a digital wallet and website as our core services. HUMBL provides customers with the ability to connect with consumers and merchants that have all been fully verified.
| 1. | HUMBL Wallet | |
| 2. | HUMBL.com | |
| 3. | HUMBL Commercial Services |
| 8 |
HUMBL Wallet
The HUMBL Wallet is a 4.9-star application that is available for download on major app stores. The HUMBL Wallet is the centerpiece of the consumer experience on the HUMBL platform. The HUMBL Wallet consolidates a variety of services for customers in one place and helps us to verify customers and merchants.
| - | Search Engine | |
| - | Social Media | |
| - | Marketplace | |
| - | Digital Payments |
The HUMBL Wallet is self-custodied by the individual; ensuring that the user has full control over their online identity, digital assets and private keys.
The HUMBL Wallet is also connected to the BLOCKS Registry, a product registry that allows customers to authenticate and track physical and digital items.
HUMBL Wallet customers have the obligation to perform their own tax record keeping; as well as backup of their private keys, to ensure the recoverability, data security and storage of their digital assets.
The HUMBL Wallet is equipped with 2-factor authentication; as well as biometric security features, which are handled by the handset and its manufacturer. We do not store or have access to any biometric information related to our verified users.
The HUMBL Wallet uses SumSub, Clear and Dojah, third-party service providers, to perform know-your-customer/know-your-business services and authenticate customers. We do not capture or store consumers’ information on our servers, except for their corresponding name, wallet address and email address for basic communications with the verified user. We do not resell our customers data.
The HUMBL Wallet is available in over 130 countries and is not available in any OFAC Countries. The HUMBL Wallet no longer allows customers to buy, sell or swap digital assets.
HUMBL.com
i. HUMBL Search Engine
The HUMBL Search Engine is available via the HUMBL Wallet and the HUMBL.com Platform. The HUMBL Search Engine allows customers to search for articles, news, images, videos and more. The search engine also serves as a discovery layer for consumers to search for verified merchandise and tickets.
ii. HUMBL Tickets
Primary - HUMBL is now the Official Technology Platform of the Arena Football League (AFL) through the 2028 season, and will be offering AFL tickets for sale, along with other major arena ticketing partners such as Ticketmaster and Seat Geek.
Secondary - HUMBL Tickets offers secondary (resale) tickets to thousands of live events across North America. HUMBL Tickets inventory listings and ticket fulfillment are provided by Ticket Evolution and we earn a commission for each sale through our website.
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The ticketing content provided on HUMBL Tickets spans across major live music, sports, festivals, and events in multiple countries. HUMBL Tickets advertises its services primarily across social media, including its own HUMBL Social platform.
iii. HUMBL Authentics
HUMBL Authentics was designed to pair authenticated buyers and sellers in verified, digital commerce. HUMBL Authentics currently works with clients such as professional athletes, brands, and marketing and talent agencies, to provide sports merchandise ranging from autographed jerseys, bats, balls, helmets, photos, and more.
HUMBL Authentics mitigates forgeries by pairing physical merchandise with digital certificates of registration. Merchandise is made available on the HUMBL platform and is verified, registered, and cataloged on the blockchain.
We are a software platform and do not act as a broker, financial institution, or creditor for digital collectibles. We facilitate transactions between the buyer and seller in the auction/sale process, but we are not a party to any agreement between the buyer and seller or between any users.
We previously offered an NFT marketplace and in an effort to ensure compliance with applicable regulations, we have terminated its use. HUMBL customers may no longer buy or sell NFTs on our platform.
iv. HUMBL Social
HUMBL Social is one of the world’s first user-verified social media platforms. The social media platform is available via web browser and the HUMBL Wallet. The goal of HUMBL Social is to provide real people, real profiles, and real merchants with a place to connect on the worldwide web. HUMBL Social supports only verified user profiles, to ensure authenticity of the platform and enhance consumer protection.
HUMBL - Commercial Division (HBS)
Our digital wallet and website can also be used as a white label or “Powered by HUMBL” solution for commercial clients.
| - | Government - HUMBL is one of the first government-approved digital wallets in the State of California. We are currently in the middle of rolling out a pilot program with the County of Santa Cruz, California, that will deliver a digital wallet for Santa Cruz County citizens to help them interact more effectively with County government in areas of record keeping such as applications, permits and licensing. | |
| - | Sports Leagues and Arenas - HUMBL is the “Official Technology Platform” of the Arena Football League (AFL) through the 2028 season. HUMBL will be providing a digital wallet, website and ticketing services for all 16 teams of this sports league, alongside other major ticketing providers such as Ticketmaster and Seat Geek. |
Going Concern
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
During the past two years, we devoted a substantial amount of capital to build out our platform and as a result our working capital deficit and accumulated deficit have increased significantly. In addition, we have incurred significant debt from both unrelated and related parties to assist in supporting our operations.
As
of June 30, 2024, we had $
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We
had a working capital deficit of $
In
January 2023 and June 2023, we recognized a gain on disposal of $
Net
cash used in operating activities was $
We had no activities from investing activities in the six months ended June 30, 2024 and 2023, respectively.
Cash
provided by financing activities was $
We expect that the consolidation of our platform into HUMBL.com as well as our arrangement with the AFL will bring about revenue producing operations to improve the liquidity of the Company moving forward. However, going forward, the effect of our industry on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. The additional post-COVID challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.
The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.
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Impact of Cryptocurrency Bankruptcies
In November 2022, both FTX Trading and BlockFi filed for bankruptcy protection under Chapter 11. These bankruptcies have impacted several companies either directly or indirectly. Customers of the HUMBL Wallet use our platform to hold their cryptocurrency. Assets related to user cryptocurrencies safeguarding obligation and the user cryptocurrencies safeguarding obligation represent the Company’s obligation to safeguard customers’ crypto assets in digital wallets on the Company’s platform. The Company safeguards these assets for customers and is obligated to safeguard them from loss, theft, or other misuse. The Company recognizes the users cryptocurrencies liabilities and corresponding assets related to the users cryptocurrencies, on initial recognition and at each reporting date, at fair value of the crypto assets. Any loss, theft, or misuse would impact the measurement of users crypto assets. We removed the HUMBL Pay app from the Apple App Store and Google Play store on January 31, 2023 and have migrated all customers from HUMBL Pay to the HUMBL Wallet. HUMBL Wallet users maintain their own private digital wallets where the cryptocurrency is held and HUMBL has no access to those wallets. In addition, Wyre informed us they will no longer accept any cryptocurrency in our platform effective July 31, 2023. Any funds that remain as of that date will be considered unclaimed funds, and we expect no SAB 121 amounts to be reflected in the future.
We do not, nor have we ever used either of these exchanges to conduct business. We have not been impacted by these bankruptcies. And we continue to monitor the industry and protect our customers’ assets.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”). It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.
Principles of Consolidation
The
consolidated financial statements include the accounts of HUMBL, Inc. and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. HUMBL, Inc. holds
The Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
Reclassification
The Company has reclassified certain amounts in the 2023 financial statements to comply with the 2024 presentation. These principally relate to classification of certain expenses and liabilities. The reclassifications had no impact on total net loss or net cash flows for the six months ended June 30, 2023.
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Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds
In 2022, the Company established a service to their HUMBL Pay app users. The service enables HUMBL Pay app users the ability through a Company maintained digital asset wallet with Wyre (“Wyre”) to purchase digital assets (cryptocurrency). As it can take 5 to 8 business days to physically settle funds in the Wyre wallet, there may be delays in digital assets being received by customers and the delivery of BLOCKS in a BitGo wallet (“BitGo”). BitGo is a third-party custodian service that provides the custody for the customers’ BLOCKS.
The BitGo account is not the Company’s account; however, it represents the pool of all BLOCKS held by and allocated to HUMBL Pay users accounts. The users may choose to transfer the purchased BLOCKS to their individual wallets outside of HUMBL.
The
services related to Wyre and BitGo are no longer being offered as we have shut down our HUMBL Pay app. We currently hold
Safeguarding Obligation
Assets related to user cryptocurrencies safeguarding obligation and the user cryptocurrencies safeguarding obligation represent the Company’s obligation to safeguard customers’ crypto assets in digital wallets on the Company’s platform. The Company safeguards these assets for customers and is obligated to safeguard them from loss, theft, or other misuse. The Company recognizes the users’ cryptocurrencies liabilities and corresponding assets related to the users’ cryptocurrencies, on initial recognition and at each reporting date, at fair value of the crypto assets. Any loss, theft, or misuse would impact the measurement of users’ crypto assets.
Wyre informed us they will no longer custody any cryptocurrency for our customers on their platform effective July 31, 2023. Any funds that remain as of that date will be considered unclaimed funds, and we expect no SAB 121 amounts to be reflected in the future upon BLOCKS being removed from the HUMBL platform, which is not accepted in Wyre.
Fixed Assets and Long-Lived Assets
ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.
The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.
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Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.
The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1. Significant underperformance relative to expected historical or projected future operating results;
2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3. Significant negative industry or economic trends.
When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Revenue Recognition
The Company accounts for revenues based on the verticals in which they were earned. The three principal verticals in which the Company operates today are HUMBL Mobile Wallet, HUMBL Marketplace, and HUMBL Blockchain Services.
HUMBL Mobile Wallet (formerly HUMBL Pay)
The Company is anticipated to earn transaction revenues primarily from fees charged to consumers and merchants on a transaction basis through the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”).
The Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral fees, subscription fees, gateway fees, ticketing, peer-to-peer payments, and other services that will be provided to merchants and consumers. These contracts typically have one performance obligation which is provided and recognized over the term of the contract.
The transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from other value-added services on a net basis when they are considered the agent with respect to processing transactions.
HUMBL Search Engine
Revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements. Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e., the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.
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The Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration to the extent it is probable that a significant reversal of revenue will not occur.
HUMBL Tickets
The Company recognizes revenues from HUMBL Tickets primarily from service fees. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for those goods or services. For service fees and payment processing fees, revenue is recognized when the ticket is sold.
We evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk, and have the latitude in establishing pricing and selecting suppliers, among other factors.
For the payment processing service, we determined that we are the principal in providing the service as we are responsible for fulfilling the promise to process the payment and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the consolidated statements of operations.
Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator.
If a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.
HUMBL Marketplace
The Company recognizes revenue when they transfer control of promised goods or services to customers in an amount that reflects the consideration to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which are subsequently remitted to governmental authorities.
Net transaction revenues
The net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise sellers. The net transaction revenues are reduced by incentives provided to customers.
The Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings, that are not distinct within the context of the contract.
Accordingly, fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.
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Further, to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees, discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later of when revenue is recognized or when the incentive is paid or promised to be paid. Promotions and incentives to most buyers on our Marketplace platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a significant reversal of revenue will not occur and updated as additional information becomes available.
HUMBL Blockchain Services
The Company disaggregates revenue from contracts with customers into product revenues and services revenues.
Product revenue related contracts with customers begin upon contract inception when a purchase order for a specific customer order of a product to be delivered in the near term. These purchase orders are short-term in nature. Product revenue is recognized at a point in time upon shipment or upon customer receipt of the product, depending on shipping terms. The Company determined that this method best represents the transfer of goods as transfer of control typically occurs upon shipment or upon customer receipt of the product.
Service revenues primarily consist of revenues derived from maintenance support and the use of the Company’s service platforms and application programming interface (“APIs”) on a subscription basis. The Company generates this revenue from fees for maintenance and support, monthly active user fees, SaaS fees, and hosting and storage fees. In most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company applies a time-based measure of progress to the total transaction price, which results in ratable recognition over the term of the contract. The Company determined that this method best represents the transfer of services as the customer obtains equal benefit from the service throughout the service period.
The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. In SaaS agreements, the Company provides a service to the customer that combines the software functionality, maintenance and hosting into a single performance obligation. In product-related contracts, a purchase order may cover different products, each constituting a separate performance obligation.
Accounts Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of June 30, 2024 and December 31, 2023, there was
Inventory
Inventory consisted of sports merchandise and memorabilia ranging from autographed jerseys, bats, balls, helmets, and photos being sold in the HUMBL Marketplace. Inventory is valued at the lower of cost or net realizable value. Management evaluates quantities on hand and physical condition as these characteristics may be impacted by anticipated customer demand for current products.
Income Taxes
Income taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Investment
The Company accounts for their investment in Avrio under the guidance of ASC 321. The Company has elected to apply the measurement alternative discussed in ASC 321-10-35-2, and as a result will measure the investment at cost and adjust to fair value if impaired or upon observable prices.
Uncertain Tax Positions
The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.
The Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made. For stock options and warrants, the Company uses the Black-Scholes model to estimate the value of those grants. The Company has not had any forfeitures of these grants, and these estimates of value will include a percentage of forfeitures when that percentage is able to be estimated.
The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair Value of Financial Instruments
ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term. When the Company enters into leases with a term in excess of one year, they will recognize a lease liability and right of use asset in accordance with the provisions of ASC 842.
Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.
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Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including convertible notes and warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
The Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is remeasured at the end of each reporting period.
Digital Assets
The Company no longer owns any digital assets or non-fungible tokens. Digital assets were initially recorded at cost and are subsequently remeasured at cost, net of any impairment losses on our consolidated balance sheets. We assigned costs to digital asset transactions on a first-in, first-out basis. Gains or losses were not recorded until realized upon sale(s).
We determined the fair value of our digital assets on a nonrecurring basis, based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level 1 inputs). We performed a quarterly, or more frequent review to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges on any day during the quarter, indicate that it is more likely than not that our digital assets are impaired.
On June 30, 2023, we transferred the remaining digital assets out of our account to repay advances from related parties.
Fair Value Measurements
ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level 1 inputs: Quoted prices for identical instruments in active markets.
Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 inputs: Instruments with primarily unobservable value drivers.
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Segment Reporting
The Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions.
Commencing January 1, 2022, the Company simplified their business model to segment their business into two distinct divisions: Consumer and Commercial. The segments remained this way until April 1, 2024 when Ixaya was deconsolidated from the Company upon the agreement to terminate the Ixaya SPA. At that time all of the Company’s operations were considered to be consumer related. As we only reflect segment reporting for continuing operations, no amounts are provided for the six and three months ended June 30, 2024.
All of the Company’s sales are from North America, therefore the Company has determined that segment reporting by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report segment information by location.
Recent Accounting Pronouncements
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. This standard will be effective for smaller reporting companies in fiscal years beginning after December 15, 2023, with early adoption permitted. The adoption did not have a material impact on our consolidated financial statements.
NOTE 3: DISCONTINUED OPERATIONS
TICKERI
On
January 31, 2023, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Javier Gonzalez (“Javier”)
and Juan Luis Gonzalez (“Juan”). Under the terms of the Settlement Agreement, Tickeri was transferred back to Javier and
Juan, free of any encumbrances and including all of Tickeri’s intellectual property, since the Company was in default of the promissory
notes for $
Per
ASC 205-20-50-1(a), the timing of the disposal was January 31, 2023, but the Company had made the decision to dispose of this business
in December 2022, and it represented a strategic shift in the business of the Company. The Company met the criteria for the Tickeri operations
to be classified as held for sale at that time. In addition to the assets and liabilities reflected as discontinued operations, the settlement
with Tickeri resulted in the forgiveness of the two promissory notes totaling $
The Company reclassified the following operations to discontinued operations for the six months ended June 30, 2023.
| Revenue | $ | |||
| Operating expenses | ||||
| Other non-operating expenses | ||||
| Net loss from discontinued operations | $ | ( | ) |
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The Company reflected the following gain on disposal for the six months ended June 30, 2023 related to the sale of Tickeri:
| Common shares issued | $ | ( | ) | |
| Forgiveness of related party notes | ||||
| Forgiveness of accrued expenses | ||||
| Cash | ( | ) | ||
| Accounts receivable | ( | ) | ||
| Accounts payable and accrued expenses | ||||
| Other (income) loss | ||||
| Net gain on disposal | $ |
MONSTER
Effective
June 30, 2023, the Company and Phantom Power, LLC (the entity that sold Monster to the Company two years earlier) entered into a Securities
Purchase Agreement whereby the Company sold back the membership interest they held along with
The Company reclassified the following operations to discontinued operations for the six months ended June 30, 2023.
| Revenue | $ | |||
| Operating expenses | ||||
| Other non-operating expenses | ||||
| Net loss from discontinued operations | $ | ( | ) |
The Company reclassified the following operations to discontinued operations for the three months ended June 30, 2023.
| Revenue | $ | |||
| Operating expenses | ||||
| Other non-operating expenses | ||||
| Net income from discontinued operations | $ |
The Company reflected the following gain on disposal for the six and three months ended June 30, 2023 related to the sale of Monster:
| Forgiveness of related party notes | $ | |||
| Forgiveness of accrued expenses | ||||
| Cash | ( | ) | ||
| Accounts receivable | ( | ) | ||
| Prepaid expenses and other current assets | ( | ) | ||
| Fixed assets | ( | ) | ||
| Accounts payable and accrued expenses | ||||
| Due to seller | ||||
| Net gain on disposal | $ |
IXAYA
Effective April 1, 2024, the Company and Ixaya agreed to terminate the Ixaya SPA and continue working together on certain projects in a contractor role. In this agreement, Ixaya will keep the shares previously issued to them when they were acquired and the Company would deconsolidate Ixaya as of April 1, 2024. The operations of Ixaya for the six and three months ended June 30, 2024 and 2023 are reflected in discontinued operations.
The Company reclassified the following operations to discontinued operations for the six months ended June 30, 2024 (there were no operations for the three months ended June 30, 2024).
| Revenue | $ | |||
| Operating expenses | ||||
| Other non-operating expenses | ||||
| Net loss from discontinued operations | $ | ( | ) |
The Company reclassified the following operations to discontinued operations for the six months ended June 30, 2023.
| Revenue | $ | |||
| Operating expenses | ||||
| Other non-operating expenses | ||||
| Net loss from discontinued operations | $ | ( | ) |
The Company reclassified the following operations to discontinued operations for the three months ended June 30, 2023.
| Revenue | $ | |||
| Operating expenses | ||||
| Other non-operating expenses | ||||
| Net income from discontinued operations | $ | ( | ) |
The Company reflected the following loss on disposal for the six and three months ended June 30, 2024 related to the deconsolidation of Ixaya:
| Cash | $ | ( | ) | |
| Accumulated comprehensive income | ( | ) | ||
| Bank loan | ||||
| Accounts payable and accrued expenses | ||||
| Due to officer | ||||
| Net loss on disposal | $ | ( | ) |
NOTE 4: INVESTMENT - AVRIO
On
February 23, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Avrio Worldwide,
PBC (“Avrio”). Pursuant to the Purchase Agreement, the Company sold the assets associated with its HUMBL Financial
product line, including all BLOCK ETXs and BLOCK Indexes (but not including any active trading algorithms or strategies) to Avrio.
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NOTE 5: BUSINESS COMBINATIONS
For all acquisitions prior to January 1, 2023, refer to the Form 10-K for the year ended December 31, 2023 filed March 28, 2024.
NOTE 6: REVENUE
On
July 14, 2023, the Company entered into Technology Services Agreement dated July 15, 2023 (the “Agreement”) with Arena Football
League Management, LLC (“AFL”). Under the terms of the Agreement, the Company will serve as, and be acknowledged in AFL’s
marketing efforts as, the official technology ticketing platform for all AFL events. AFL is a professional indoor football league in
the United States. The Company had agreed to allocate $
Under
the compensation terms of the Agreement, the Company was to receive a service fee of $
The AFL season was cancelled and as a result, none of the shares had been vested and tickets sold for games not played were refunded. The Company does not expect to incur revenue from these sales in the future.
The following table disaggregates the Company’s revenue by major source for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: | ||||||||
| Merchandise | $ | $ | ||||||
| Software | ||||||||
| Tickets | ||||||||
| Other | ||||||||
| $ | $ | |||||||
The following table disaggregates the Company’s revenue by major source for the three months ended June 30, 2024 and 2023:
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: | ||||||||
| Merchandise | $ | $ | ||||||
| Software | ||||||||
| Tickets | ||||||||
| Other | ||||||||
| $ | $ | |||||||
There were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE 7: INVENTORY
On
November 2, 2022, in the acquisition of BM Authentics, the Company acquired $
| 21 |
NOTE 8: FIXED ASSETS
As of June 30, 2024 and December 31, 2023, the Company has the following fixed assets:
| June 30, 2024 | December 31, 2023 | |||||||
| Equipment – | $ | $ | ||||||
| Furniture and fixtures – | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense for the six months ended June 30, 2024 and 2023 was $
NOTE 9: INTANGIBLE ASSETS AND GOODWILL
As of June 30, 2024 and December 31, 2023, the Company has the following intangible assets:
| June 30, 2024 | December 31, 2023 | |||||||
| Intellectual property - software
– | $ | $ | ||||||
| Customer relationship – | ||||||||
| Domain names – | ||||||||
| Accumulated amortization - software | ( | ) | ( | ) | ||||
| Accumulated amortization – customer relationship | ( | ) | ( | ) | ||||
| Accumulated amortization - domain names | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization
expense for the six months ended June 30, 2024 and 2023 was $
Amortization expense for the next five years and in the aggregate is as follows:
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| $ |
NOTE 10: INTANGIBLE ASSETS – DIGITAL ASSETS
The Company had nominal amounts of digital assets in the period January 1, 2023 through June 30, 2023, and had divested themselves of all digital assets by June 30, 2023. See the Annual Report filed on Form 10-K for the year ended December 31, 2023 filed on March 28, 2024 for details of the digital assets.
Digital Assets Owned By HUMBL Pay Users (SAB 121 disclosure):
Under SAB 121, companies are required to present the asset and liability at fair value for any crypto-assets and obligations to safeguard crypto-assets. The Company earns no revenue from providing this service to their customers. It is simply an added benefit that HUMBL Pay customers receive for using the app. The “Buy Crypto, Earn Rewards” service enables HUMBL Pay app users the ability through a Company maintained digital asset wallet with Wyre to purchase digital assets (cryptocurrency) and earn rewards. These rewards are not paid by the Company, but by Wyre itself. As it can take 5 to 8 business days to physically settle funds in Wyre, there may be delays in digital assets being received by customers and the delivery of BLOCKS to BitGo. BitGo is a third-party custodian service that provides the custody for the customers’ BLOCKS.
| 22 |
Upon adoption of this guidance, the Company has reflected the asset and liability related to the user cryptocurrencies safeguarded on the Company’s platform. We do not have any ownership or custody of the digital assets maintained on our platform. We engage the services of Wyre and BitGo to act as the custodians of the digital assets held on our platform. Wyre informed us they will no longer accept any cryptocurrency in our platform effective July 31, 2023. Any funds that remain as of that date, will be considered unclaimed funds, and we expect no SAB 121 amounts to be reflected in the future.
NOTE 11: NOTE PAYABLE - BANK
On
March 3, 2022 with the acquisition of Ixaya, the Company assumed a loan with Citibanamex. The loan was due in monthly payments of $
Refer to the Form 10-K for the year ended December 31, 2023 filed March 28, 2024 for a full description of notes that existed as of December 31, 2023 and 2022. All notes payable had either been repaid or converted prior to December 31, 2023.
The
Company entered into a note payable with an individual on June 13, 2024 that matures
NOTE 13: NOTES PAYABLE – RELATED PARTIES
The Company entered into notes payable – related parties as follows as of June 30, 2024 and December 31, 2023. The chart below does not include notes payable that were repaid or converted during 2023, or notes payable that were reclassified to liabilities of discontinued operations or disposed of. Refer to the Form 10-K for the year ended December 31, 2023 filed March 28, 2024 for a full description of those notes:
| June 30, 2024 | December 31, 2023 | |||||||
| Note payable with a company controlled
by a senior member of management dated August 1, 2023 for a period of eighteen months; $ | $ | $ | ||||||
| Note payable with a trust related to an officer
and director of the Company dated May 13, 2024 for a period of one year maturing | ||||||||
| Note payable with a trust related to an officer
and director of the Company dated June 27, 2024 for a period of one year maturing | ||||||||
| Note payable with an employee dated June 12,
2024 maturing | ||||||||
| Total | ||||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Less: Discount | ( | ) | ||||||
| Long-term debt | $ | $ | ||||||
Maturities of notes payable – related parties as of June 30 is as follows:
| 2025 | $ | |||
| $ |
Interest
expense for the six months ended June 30, 2024 and 2023 was $
| 23 |
On
January 31, 2023, in the sale back to the former owners of Tickeri, the $
On
April 28, 2023, $
On
July 13, 2023, $
On
October 24, 2023, the Company exchanged $
Effective
April 1, 2024, the $
The
Company received $
| June 30, 2024 | December 31, 2023 | |||||||
| Convertible note at | $ | $ | ||||||
| Convertible notes due | ||||||||
| Convertible note payable entered into April
10, 2023, with a maturity date of | ||||||||
| Convertible note up to $ | ||||||||
| Convertible note at | ||||||||
| Convertible note, maturing | ||||||||
| Convertible note payable entered into November
6, 2023, with a maturity date of | ||||||||
| Convertible note payable entered into November
15, 2023, with a maturity date of | ||||||||
| Convertible note payable entered into November
20, 2023, with a maturity date of | ||||||||
| Convertible note payable entered into December
14, 2023, with a maturity date of | ||||||||
| Convertible note payable entered into December
19, 2023, with a maturity date of | ||||||||
| Convertible note payable at | ||||||||
| Convertible note payable entered into February
12, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into February
14, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into February
22, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into March
13, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into March
26, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into April
2, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into April
17, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into April
23, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into April
15, 2024, with a maturity date of | ||||||||
| Convertible note payable entered into May 22,
2024, with a maturity date of | ||||||||
| Convertible note payable
entered into June 4, 2024, with a maturity date of | ||||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Less: Discounts | ( | ) | ( | ) | ||||
| Long-term debt | $ | $ | ||||||
| 24 |
On
May 17, 2021, the Company issued a convertible promissory note to an investor for $
On
February 23, 2023, the Company entered into a convertible promissory note in the amount up to $
On
April 10, 2023, the Company entered into a Promissory Note in the amount of $
| 25 |
On
May 10, 2023, the Company issued a convertible promissory note in the amount of up to $
On
July 26, 2023, the Company entered into Securities Purchase Agreements with three different investors (the “Purchase Agreements”).
Pursuant to the Purchase Agreements, the Company issued three convertible promissory notes in the original principal amount of $
On
August 24, 2023, the Company issued a
On
November 6, 2023, the Company issued a Promissory Note in the amount of $
On
November 15, 2023, the Company issued a Promissory Note in the amount of $
On
November 20, 2023, the Company issued a Promissory Note in the amount of $
On
December 14, 2023, the Company issued a Promissory Note in the amount of $
On
December 19, 2023, the Company issued a Promissory Note in the amount of $
On
January 4, 2024, the Company issued a Convertible Promissory Note in the amount of $
| 26 |
On
February 12, 2024, the Company issued a Promissory Note in the amount of $
On
February 14, 2024, the Company issued a Promissory Note in the amount of $
On
February 22, 2024, the Company issued a Promissory Note in the amount of $
On
March 13, 2024, the Company issued a Promissory Note in the amount of $
On
March 26, 2024, the Company issued a Promissory Note in the amount of $
On
April 2, 2024, the Company issued a Promissory Note in the amount of $
On
April 15, 2024, the Company entered into a Securities Purchase Agreement pursuant to which it sold a Convertible Promissory Note in the
amount of $
On
April 16, 2024, the Company issued a Promissory Note in the amount of $
On
April 22, 2024, the Company entered into a Securities Purchase Agreement pursuant to which it sold a Convertible Promissory Note in the
amount of $
On
May 22, 2024, the Company entered into a Securities Purchase Agreement pursuant to which it sold a Convertible Promissory Note in the
amount of $
On
June 4, 2024, the Company entered into a Securities Purchase Agreement pursuant to which it sold a Convertible Promissory Note in the
amount of $
All
of the convertible promissory notes as of June 30, 2024 except $
The Company evaluated the terms of the convertible notes and determined that there were derivative liabilities to be recorded at inception of the notes as there were sufficient shares to net share settle the notes at the discounted values.
Interest
expense for the six months ended June 30, 2024 and 2023 was $
The
Company recognized a loss (gain) on conversion of notes of $
NOTE 15: CONVERTIBLE PROMISSORY NOTES – RELATED PARTIES
The Company issued convertible notes payable – related parties as follows as of June 30, 2024 and December 31, 2023. The chart below does not include convertible notes payable – related parties that were repaid or converted during 2023. Refer to the Form 10-K for the year ended December 31, 2023 filed March 28, 2024 for a full description of those notes:
| June 30, 2024 | December 31, 2023 | |||||||
| Monster Creative purchase – June 30, 2021 | $ | $ | ||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Long-term debt | $ | $ | ||||||
The convertible promissory notes – related parties are in default and reflected in current liabilities as of June 30, 2024.
| 27 |
On
June 30, 2021, the Company acquired Monster Creative, LLC. The Monster Purchase Price included: (a) a convertible note to Phantom Power,
LLC in the amount of $
The Company evaluated the terms of the convertible notes and determined that there were no terms that would necessitate the recognition of any derivative liabilities.
Interest
expense for the six months ended June 30, 2024 and 2023 was $
NOTE 16: DERIVATIVE LIABILITIES
The Company entered into several convertible notes payable, that terms include variable conversion prices (see Note 14). The Company evaluated these terms and determined that the conversion option on the convertible notes payable contained characteristics that required the Company to classify them as derivative liabilities. The Derivative Instruments have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Instruments. The estimated fair value of the Derivative Instruments has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided by management, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense).
The Company identified embedded features in some of the agreements which were classified as liabilities. These embedded features included a variable conversion price that would convert those instruments into a variable number of common shares. The accounting treatment of derivative financial instruments requires that the Company treat the instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.
The Company determined the derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2024. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following assumptions were used on June 30, 2024 and at inception:
Six Months Ended June 30, 2024 |
Inception | |||||||
| Expected term | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | % | ||||||
| Market price | $ | – $ | $ | - $ | ||||
| 28 |
The Company’s derivative liabilities as of June 30, 2024 and December 31, 2023 associated with the offerings are as follows.
| June 30, 2024 | December 31, 2023 | |||||||
| Fair value of conversion option on September 7, 2023 note (see Note 14) | $ | $ | ||||||
| $ | $ | |||||||
Activity related to the derivative liabilities for the period ended June 30, 2024 is as follows:
| Beginning balance as of December 31, 2023 | $ | |||
| Bifurcation of conversion option on convertible notes payable | ||||
| Reclassification to equity upon conversion of convertible notes payable | ||||
| Change in fair value of derivative liabilities | ( | ) | ||
| Ending balance as of June 30, 2024 | $ |
NOTE 17: STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
As of June 30, 2024 and December 31, 2023, the Company has shares of Preferred Stock authorized, designated as follows: shares of Series A Preferred Stock authorized, shares of Series B Preferred Stock, and shares of Series C Preferred Stock authorized. All shares of preferred stock have a par value of $.
Series A Preferred Stock
Dividends. Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion. There are no conversion rights.
Redemption.
Voting
Rights.
Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
| 29 |
The shares were issued to a former officer of the Company and assigned to the new CEO at the time of the reverse merger of HUMBL.
Series B Preferred Stock
Prior to the amendment of the Certificate of Incorporation on October 29, 2021, the criteria established for the Series B Preferred Stock was as follows:
Dividends. Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion. Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at the office of the Company or any transfer agent for such stock, into ten thousand () fully paid and nonassessable shares of common stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.
Redemption.
Voting
Rights.
Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series B Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
For the three months ended March 31, 2024, there were shares of Series B Preferred Stock converted into common shares.
For the three months ended June 30, 2024, there were shares of Series B Preferred Stock converted into common shares.
For the three months ended March 31, 2023, there were shares of Series B Preferred Stock converted into common shares.
For the three months ended June 30, 2023, there were shares of Series B Preferred Stock converted into common shares.
As of June 30, 2024, the Company has shares of Series B Preferred Stock issued and outstanding.
Series C Preferred Stock
On October 24, 2023, the Company filed a Certificate of Designation with the State of Delaware to designate shares to be authorized for Series C Preferred Stock.
The criteria established for the Series C Preferred Stock was as follows:
Dividends. Shares of Series C Preferred Stock shall not be entitled to receive any dividend.
| 30 |
Conversion.
(a) Automatic Conversion – upon such time the Company shall become listed on a national securities exchange, the Series C Preferred
stock shall automatically convert into shares of the Company’s common stock at a conversion price equal to a
Redemption. The Series C Preferred Stock shall not be subject to mandatory redemption.
Voting Rights. Holders of Series C Preferred Stock shall have no voting rights.
Liquidation. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (“Liquidation Event”), before any distribution or payment shall be made to the holders of the Series C Preferred Stock, and after the distribution or payment to the Series A Preferred Stock and Series B Preferred Stock, in accordance with their respective terms, the holders of the Series C Preferred Stock shall be entitled to receive an amount per share equal to the sum of the initial issuance price applicable to such Series C Preferred Stock for each outstanding share of Series C Preferred Stock plus any declared but unpaid dividends on such share. The initial issuance price shall mean $ per share (as adjusted for stock splits, stock dividends, recapitalizations, and similar transactions). If upon, any Liquidation Event, the assets of the Company shall be insufficient to make payment in full to the holders of the Series C Preferred Stock of the applicable Liquidation Preference, then such assets shall be distributed among the holders of the Series C Preferred Stock at the time outstanding, ratably in proportion to the full preferential amounts to which they would otherwise be entitled.
In the period October 24, 2023 through December 31, 2023, the Company issued shares of Series C Preferred Stock for cash, exchange of debt and exchange of warrants.
During the three months ended June 30, 2024, the Company issued shares of Series C Preferred Stock for services.
As of June 30, 2024, there are amount of shares of Series C Preferred Stock issued and outstanding..
Common Stock
The Company has shares of common stock, par value $, authorized. The Company has and shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. On May 26, 2023 the Board of Directors agreed to increase the number of common shares authorized from shares to shares. The stockholders approved this action on May 29, 2023. This action became effective on July 27, 2023. On January 26, 2024, the Board of Directors agreed to increase the authorized common shares to shares.
In
the three months ended March 31, 2023, the Company: (a) issued shares for services rendered; (b) issued shares
in conversion of Series B Preferred stock; (c) shares for conversion of notes payable valued at $
During
the three months ended March 31, 2023, the Company expensed $ related to shares issued to consultants and advisors for services
as noted above, leaving $ of stock-based compensation yet to be expensed as of March 31, 2023. The Company has reduced their obligation
to issue common stock by
In
the three months ended June 30, 2023, the Company: (a) issued shares for services rendered valued at $
| 31 |
During the three months ended June 30, 2023, the Company expensed $ related to shares issued to consultants and advisors for services as noted above, leaving $ of stock-based compensation yet to be expensed as of June 30, 2023.
In
the three months ended September 30, 2023, the Company: (a) issued shares for services rendered valued at $
During the three months ended September 30, 2023, the Company expensed $ related to shares issued to consultants and advisors for services as noted above, leaving $ of stock-based compensation yet to be expensed as of September 30, 2023.
In
the three months ended December 31, 2023, the Company: (a) issued shares for services rendered valued at $
In
the three months ended March 31, 2024, the Company: (a) issued shares for services rendered valued at $
In
the three months ended June 30, 2024, the Company: (a) issued shares for services rendered valued at $
Stock Incentive Plan
On July 21, 2021, the Company established the HUMBL, Inc. 2021 Stock Incentive Plan (the “Plan”) for a total issuance not to exceed shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.
The Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and nonqualified stock options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance Awards, other stock-based awards, or any combination of the foregoing.
Warrants
Warrants issued in 2024 and 2023 consisted of the following:
On
May 10, 2023, the Company issued
On
May 15, 2023, the Company issued
On
June 30, 2023, the Company issued
| 32 |
On
July 26, 2023, the Company entered into Securities Purchase Agreements with three different investors (the “Purchase Agreements”).
Pursuant to the Purchase Agreements, the Company issued three convertible promissory notes in the original principal amount of $
On
November 17, 2023, the Company issued warrants with an exercise price of $
On
December 14, 2023, the Company issued
On
December 19, 2023, the Company issued
On
January 31, 2024, the Company issued
On
February 12, 2024, the Company issued
On
March 12, 2024, the Company issued
On
March 26, 2024, the Company issued
On
April 8, 2024, the Company issued
On
April 16, 2024, the Company issued
On
May 22, 2024, the Company issued
On
May 24, 2024, the Company issued
The following represents a summary of the warrants:
Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | |||||||||||||||
| Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |||||||||||||
| Beginning balance | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Forfeited/Exchanged | ( | ) | ( | ) | ||||||||||||
| Expired | ( | ) | ( | ) | ||||||||||||
| Ending balance | $ | $ | ||||||||||||||
| Intrinsic value of warrants | $ | $ | ||||||||||||||
| Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||
As of June 30, 2024, warrants are vested.
For the six months ended June 30, 2024 and 2023, the Company incurred stock-based compensation expense of $ and $, respectively for the warrants in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants was calculated based on the black-scholes calculation using the assumptions reflected in the chart below for both the service-based grants and the performance-based grants.
| 33 |
As of June 30, 2024, there remains unrecognized stock-based compensation expense related to these warrants of $ comprising of service-based grants through June 30, 2026.
Options
As of June 30, 2024, of the May 26, 2022 options as well as options issued in 2021 have been forfeited. As of June 30, 2024, options are exercisable.
| Six
Months Ended June 30, 2024 | Year
Ended December 31, 2023 | |||||||||||||||
| Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |||||||||||||
| Beginning balance | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Expired | ||||||||||||||||
| Ending balance | $ | $ | ||||||||||||||
| Intrinsic value of options | $ | $ | ||||||||||||||
| Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||
For the six months ended June 30, 2024 and 2023, the Company incurred stock-based compensation expense of $ and $, respectively for the options in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants was calculated based on the black-scholes calculation using the assumptions reflected in the chart below for the service-based grants.
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:
Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Expected term | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | % | % | ||||||
Restricted Stock Units (RSUs)
On February 12, 2022, the Company granted RSUs in the acquisition of the asserts of BizSecure that was recorded as contingent consideration. These RSUs commenced vesting on April 1, 2022.
Six Months Ended June 30, 2024 | Year
Ended December 31, 2023 | |||||||||||||||
| Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |||||||||||||
| Beginning balance | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Vested | ( | ) | ( | ) | ||||||||||||
| Ending balance | $ | $ | ||||||||||||||
| 34 |
On December 30, 2022, the Company and BizSecure negotiated a settlement of all claims resulting from the Company’s inability to timely register the shares of common stock issued February 12, 2022 and RSUs that vested during 2022. As a result, the shares of common stock and the RSUs were rescinded effective December 30, 2022. The remaining RSUs will continue to vest in accordance with the original terms and the Company will continue the process to get those RSUs registered for resale and re-negotiate the terms of the common shares to be issued to BizSecure. For the year ended December 31, 2023, RSUs vested. In 2023 of these shares were issued for the vested RSUs. For the six months ended June 30, 2024 RSUs vested, and no shares were issued for vested RSUs.
For
the six months ended June 30, 2024 and 2023, the Company amortized $
NOTE 18: RELATED-PARTY TRANSACTIONS
On
October 24, 2023, the Company exchanged $
NOTE 19: SEGMENT REPORTING
The Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating decisions.
The segments remained this way until April 1, 2024 when Ixaya was deconsolidated from the Company upon the agreement to terminate the Ixaya SPA. At that time all of the Company’s operations were considered to be consumer related. As we only reflect segment reporting for continuing operations, no amounts are provided for the six and three months ended June 30, 2024.
The following represents segment reporting for continuing operations only:
| Six Months Ended June 30, 2023 | Consumer | Commercial | Total | |||||||||
| Segmented operating revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||
| Total operating expenses net of depreciation, amortization and impairment | ||||||||||||
| Depreciation, amortization and impairment | ||||||||||||
| Other expenses (income) | ||||||||||||
| (Loss) from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Three Months Ended June 30, 2023 | Consumer | Commercial | Total | |||||||||
| Segmented operating revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Total operating expenses net of depreciation, amortization and impairment | ||||||||||||
| Depreciation, amortization and impairment | ||||||||||||
| Other expenses (income) | ( | ) | ( | ) | ||||||||
| (Loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | |||||
| Segmented assets as of June 30, 2023 | ||||||||||||
| Property and equipment, net | $ | $ | $ | |||||||||
| Intangible assets | $ | $ | $ | |||||||||
| Capital expenditures | $ | $ | $ | |||||||||
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NOTE 20: LEGAL PROCEEDINGS
On May 19, 2022, we were named as a defendant in a putative shareholder derivative class action lawsuit filed in the United States District Court for the Southern District of California styled Matt Pasquinelli and Bryan Paysen v. HUMBL, LLC, Brian Foote, Jeffrey Hinshaw and George Sharp, Case No. 22CV0723 AJB BLM. The complaint alleges federal securities law violations by the Company, including false or misleading statements regarding our business and operations, that the HUMBL Pay App did not have the functionality that it promised to investors and that several international business partnerships had a low chance of contributing material revenues to our bottom line, and sales of unregistered securities through our BLOCK Exchange Traded Index products, which plaintiffs allege caused a decline in the market value of our shares of common stock. Plaintiffs seek unspecified monetary damages. On July 7, 2023, the United States District Court for the Southern District of California granted our Motion to Transfer Venue and transferred the case to the District Court of Delaware. On October 30, 2023, we filed a Motion to Dismiss the lawsuit with the District Court of Delaware which the parties have fully briefed and which motion is presently pending for resolution before the court. We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims.
On July 14, 2022, we were named as ae defendant in a putative shareholder derivative class action lawsuit filed in the Delaware Chancery Court styled Mike Armstrong, derivatively on behalf of HUMBL, Inc. v. Brian Foote, Jeffrey Hinshaw, George Sharp, Michele Rivera, and William B. Hoagland (Case No. 2022-0620). This case alleges the same claims as the Pasquinelli litigation described above and also seeks unspecified monetary damages. The case is currently stayed by agreement of the parties. We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims.
Pacific
Lion failed to purchase over $
On March 11, 2024, Pacific Lion filed a lawsuit against the Company in Pinellas County, Florida alleging breaches of the contracts entered into in connection with certain loans made by Pacific Lion to the Company and certain related claims. On March 13, 2023, Pacific Lion also filed a lawsuit against the Company in Orange County, California alleging breach of the SPA and the other contracts entered in connection with Pacific Lion’s purchase of Series C Preferred Stock from the Company and certain related claims.
On July 20, 2024, Pacific Lion entered into a settlement agreement pursuant to which the Company dismissed its lawsuit against Pacific Lion and Pacific Lion released its two lawsuits against the Company. Pursuant to the settlement agreement, Pacific Lion also agreed to purchase additional shares of Series C Preferred Stock and to make certain required payments thereunder but to date has not made any such payments.
On May 16, 2024, Robert Hymers III filed a lawsuit against the Company in Maricopa County, Arizona alleging breach of a consulting agreement. On July 2, 2024, the Company and Mr. Hymers entered into a settlement agreement pursuant to which the Company issued Mr. Hymers shares for work performed under the consulting agreement and Mr. Hymers agreed to dismiss his lawsuit against the Company.
NOTE 21: COMMITMENTS
On
August 1, 2023, the Company entered into a Master Consulting Agreement (the “Agreement”) and Promissory Note (“Note”)
with BRU, LLC (“BRU”). Under the terms of the Agreement, BRU will provide information technology support to the Company for
a three-year term. The Company has agreed to pay compensation in common stock and cash. The initial stock consideration is
shares of common stock as compensation for past due invoices owed to BRU’s predecessor in interest with a 24-month price floor
of $
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Additional shares of common stock will be issued to BRU based on milestones to be mutually agreed to by the Company and BRU by August 11, 2023. The Company will issue shares of its common stock (the “Additional Shares”) upon completion of the milestones that shall not be more than two years after execution of the Agreement. The value of the Additional Shares shall be equal to the number of Additional Shares multiplied by $ (the “Additional Share Value”). On each anniversary of the execution date (the “Anniversary Date”) until the milestones are met, but in no event more than two years from the execution date, the Additional Share Value shall equal the value of the common stock on the Anniversary Date, based on the closing price of the Company’s common stock on the Anniversary Date (the “Anniversary Value”) (as may be adjusted for any reverse split). To the extent the Anniversary Value is lower than the public market value of the Company’s common stock, the Company will issue additional shares to BRU equal to the amount necessary for the total number of common stock and Additional Shares issued under the Agreement to equal the Anniversary Share Value that in no event will be less than $ per share, or, at the Company’s election, pay in cash the difference between the public market value of the Company’s common stock and the Anniversary Share Value.
NOTE 22: SUBSEQUENT EVENTS
Between July 1, 2024 and August 20, 2024, the Company issued shares of common stock in conversion of Series B Preferred shares; shares of common stock in conversion of convertible notes payable and accrued interest; and shares of common stock in settlement with a consultant.
On
July 16, 2024, the Company designated a new Series D Preferred Stock and authorized the issuance of up to shares of this new
series.
On
August 16, 2024, the company issued a Secured Promissory Note in the original principal amount of $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained herein. In addition to historical information, the following discussion contains forward looking statements based upon current expectations that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including, but not limited to, risks described in the section entitled “Risk Factors”.
General
Our executive offices are located at 101 W. Broadway, Suite 1450, San Diego, California 92101, telephone (786) 738-9012. Our corporate website address is www.humbl.com.
Overview
Following our merger with HUMBL LLC on December 3, 2020, we changed our name from Tesoro Enterprises, Inc. to HUMBL, Inc. and adopted the business of HUMBL to deliver a more seamless digital pairing experiences for consumers and merchants in the global economy.
HUMBL is a Web 3, digital commerce platform that was built to connect consumers, businesses and governments in the digital economy. HUMBL provides simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades. The Company through their product offerings are looking to simplify and package the digital economy for consumers, corporations and government.
The goal of HUMBL is to provide ready built tools, and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL is built on a patent-pending, decentralized technology stack that utilizes both core and partner technologies, to provide faster connections to the digital economy and each other.
The Company is organized into two divisions: a) HUMBL Consumer and b) HUMBL Commercial. These two divisions incorporate and expand the Company’s core products and services. The majority of the Company’s operations prior to 2023 were focused on the Consumer division.
Results of Operations for the Six Months Ended June 30, 2024 and 2023
The following table sets forth the summary operations for the six months ended June 30, 2024 and 2023:
| For the Six Months Ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Revenues | $ | 263,198 | $ | 197,653 | ||||
| Cost of Revenues | $ | 308,565 | $ | 180,546 | ||||
| Gross (Loss) Profit | $ | (45,367 | ) | $ | 17,107 | |||
| Development Costs | $ | 92,787 | $ | 161,980 | ||||
| Professional Fees | $ | 1,015,172 | $ | 871,234 | ||||
| Stock-based compensation | $ | 2,322,682 | $ | 4,040,627 | ||||
| Impairment – intangible assets including goodwill | $ | - | $ | - | ||||
| Impairment – digital assets | $ | - | $ | 151.409 | ||||
| General and Administrative Expenses | $ | 542,744 | $ | 1,204,967 | ||||
| Interest Expense | $ | (401,212 | ) | $ | (513,358 | ) | ||
| Gain on sale of HUMBL Financial assets | $ | 2,800,000 | $ | - | ||||
| Amortization of Debt Discounts | $ | (159,464 | ) | $ | (29,101 | ) | ||
| Change in fair value of derivative liabilities | $ | 30,204 | $ | 40,193 | ||||
| Derivative Expense | $ | - | $ | (79,351 | ) | |||
| Gain on Sale of Digital Assets | $ | - | $ | 24 | ||||
| (Loss) gain on conversion of convertible notes payable | $ | (967,261 | ) | $ | 371,833 | |||
| Provision for Income Taxes | $ | - | $ | - | ||||
| Net Loss from Continuing Operations | $ | (2,716,485 | ) | $ | (6,622,870 | ) | ||
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Revenues
Revenues for the six months ended June 30, 2024 were $263,198 as compared to $197,653 for the six months ended June 30, 2023, an increase of $65,545. The increase was due in large part to the sales of merchandise from our marketplace which included items from BM Authentics.
Cost of Revenues and Gross Profit
Cost of revenues for the six months ended June 30, 2024 were $308,565 as compared to $180,546 for the six months ended June 30, 2023, an increase of $128,019. The increase was primarily due to increases in our marketplace for BM Authentics.
Operating Expenses
Operating expenses for the six months ended June 30, 2024 were $3,973,385 as compared to $6,430,217 for the six months ended June 30, 2023, a decrease of $2,456,832. Operating expenses consists of development costs, professional fees and general and administrative expenses and non-cash charges for impairment expenses and stock-based compensation as fully described below. We expect our development costs and professional fees to continue to decrease in our next 12 months as we look to scale back on outside contract labor. Our non-cash charges have already declined from levels in 2023 as our stock-based compensation has decreased sharply.
Development Costs
Development costs which consist of salaried and outsourced technical consultants for the six months ended June 30, 2024 were $92,787 compared with $161,980 for the six months ended June 30, 2023. The decrease of development costs related to the roll out of various projects such as the HUMBL Wallet and Social in 2023 which reduced significantly in 2024.
Professional Fees
Professional fees which consist of contracted individuals and companies, legal, audit and accounting costs for the six months ended June 30, 2024 were $1,015,172 compared to $871,234 for the six months ended June 30, 2023. The increase in professional fees related to the professional fees incurred in regulatory filings including OTC compliance and reporting as well as increases in consultant costs in 2023 versus 2024. We expect that these costs will stabilize during 2024 and beyond.
Stock-Based Compensation
The Company incurred $2,322,682 in stock-based compensation expenses for the six months ended June 30, 2024 compared to $4,040,627 for the six months ended June 30, 2023 related to agreements with consultants, advisors, and directors for services rendered. We expect our stock-based compensation expenses to decline in the next 12 months due to the vesting terms of such grants. The awards provided were valued in accordance with ASC 718 at fair value.
Impairment of Digital Assets
The Company incurred $0 and $151,409 in impairment of our digital assets in the six months ended June 30, 2024 and 2023. The impairment of the digital assets was based on the valuation changes in the digital assets we held. Effective June 30, 2023, we held no digital assets.
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General and Administrative
General and administrative expenses for the six months ended June 30, 2024 were $542,744 compared with $1,204,967 for the six months ended June 30, 2023. The decrease in general and administrative expenses of $662,223 is related to the following approximate reductions in salaries and wages, advertising, business development expenses, insurance, rent, and security.
Other Income (Expense)
In the six months ended June 30, 2024 we incurred $1,302,267 in other income, compared to $209,760 in other expenses in the six months ended June 30, 2023, an increase of $1,512,027. The main contributing factors of this increase was the $2,800,000 gain on the sale of HUMBL Financial assets for the 10% ownership in Avrio and decreases in other expenses from 2023 to 2024 mostly related to interest expense, and the loss on the conversion of convertible debt. We expect to incur additional other income (expense) in the next 12 months related to our debt.
Net Loss from Continuing Operations
Net loss from operations from continuing operations for the six months ended June 30, 2024 was ($2,716,485) as compared to a net loss of ($6,622,870) for the six months ended June 30, 2023. The $3,906,385 decrease in the net loss was due to the changes noted herein.
Results of Operations for the Three Months Ended June 30, 2024 and 2023
The following table sets forth the summary operations for the three months ended June 30, 2024 and 2023:
| For the Three Months Ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Revenues | $ | 156,857 | $ | 118,578 | ||||
| Cost of Revenues | $ | 162,165 | $ | 82,386 | ||||
| Gross (Loss) Profit | $ | (5,308 | ) | $ | 36,192 | |||
| Development Costs | $ | 20,861 | $ | 95,135 | ||||
| Professional Fees | $ | 491,382 | $ | 464,643 | ||||
| Stock-based compensation | $ | 1,310,197 | $ | 1,509,108 | ||||
| Impairment – digital assets | $ | - | $ | 149,414 | ||||
| General and Administrative Expenses | $ | 75,592 | $ | 488,879 | ||||
| Interest Expense | $ | (304,514 | ) | $ | (243,639 | ) | ||
| Amortization of Debt Discounts | $ | (91,712 | ) | $ | (16,693 | ) | ||
| Change in fair value of derivative liabilities | $ | 9 | $ | 4,940 | ||||
| Derivative Expense | $ | - | $ | (9,133 | ) | |||
| Gain on Sale of Digital Assets | $ | - | $ | - | ||||
| (Loss) gain on conversion of convertible notes payable | $ | (635,355 | ) | $ | 799,573 | |||
| Provision for Income Taxes | $ | - | $ | - | ||||
| Net Loss from Continuing Operations | $ | (2,934,912 | ) | $ | (2,135,939 | ) | ||
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Revenues
Revenues for the three months ended June 30, 2024 were $156,857 as compared to $118,578 for the three months ended June 30, 2023, an increase of $38,279. The increase was due in large part to the sales of merchandise from our marketplace which included items from BM Authentics.
Cost of Revenues and Gross Profit
Cost of revenues for the three months ended June 30, 2024 were $162,165 as compared to $82,386 for the three months ended June 30, 2023, an increase of $79,779. The increase was primarily due to increases in our marketplace for BM Authentics.
Operating Expenses
Operating expenses for the three months ended June 30, 2024 were $1,898,032 as compared to $2,707,179 for the three months ended June 30, 2023, a decrease of $809,147. Operating expenses consists of development costs, professional fees and general and administrative expenses and non-cash charges for impairment expenses and stock-based compensation as fully described below. We expect our development costs and professional fees to continue to decrease in our next 12 months as we look to scale back on outside contract labor. Our non-cash charges have already declined from levels in 2023 as our stock-based compensation has decreased sharply.
Development Costs
Development costs which consist of salaried and outsourced technical consultants for the three months ended June 30, 2024 were $20,861 compared with $95,135 for the three months ended June 30, 2023. The decrease of development costs related to the roll out of various projects such as the HUMBL Wallet and Social.
Professional Fees
Professional fees which consist of contracted individuals and companies, legal, audit and accounting costs for the three months ended June 30, 2024 were $491,382 compared to $464,643 for the three months ended June 30, 2023. The increase in professional fees related to the professional fees incurred in regulatory filings including OTC compliance and reporting as well as increases in consultant costs in 2023 versus 2024. We expect that these costs will stabilize during 2024.
Stock-Based Compensation
The Company incurred $1,310,197 in stock-based compensation expenses for the three months ended June 30, 2024 compared to $1,509,108 for the three months ended June 30, 2023 related to agreements with consultants, advisors, and directors for services rendered. We expect our stock-based compensation expenses to decline in the next 12 months due to the vesting terms of such grants. The awards provided were valued in accordance with ASC 718 at fair value.
Impairment of Digital Assets
The Company incurred $0 and $149,414 in impairment of our digital assets in the three months ended June 30, 2024 and 2023. The impairment of the digital assets was based on the valuation changes in the digital as81sets we held. Effective June 30, 2023, we held no digital assets.
General and Administrative
General and administrative expenses for the three months ended June 30, 2024 were $75,592 compared with $488,879 for the three months ended June 30, 2023. The decrease in general and administrative expenses of $413,287 is related to the following approximate reductions in salaries and wages, advertising, business development expenses, insurance, rent, and security.
Other Income (Expense)
In the three months ended June 30, 2024 we incurred $1,031,572 in other expenses, compared to $535,048 in other income in the three months ended June 30, 2023, a decrease of $1,566,620. The main contributing factors of this increase from 2023 to 2024 mostly related to interest expense, and the gain on the conversion of convertible debt. We expect to incur additional other income (expense) in the next 12 months related to our debt.
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Net Loss from Continuing Operations
Net loss from operations from continuing operations for the three months ended June 30, 2024 was ($2,934,912) as compared to a net loss of ($2,135,939) for the three months ended June 30, 2023. The $798,973 increase in the net loss was due to the changes noted herein.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
During the past two years, we devoted a substantial amount of capital to build out our platform and as a result our working capital deficit and accumulated deficit have increased significantly. In addition, we have incurred significant debt from both unrelated and related parties to assist in supporting our operations.
As of June 30, 2024, we had $12,053 in cash. During the last two years we built our platform and grew our operations by acquiring companies to support what we have just recently consolidated into HUMBL.com.
We had a working capital deficit of $1,574,777 and $4,690,800 as of June 30, 2024 and December 31, 2023, respectively. The majority of our current liabilities is in the form of long-term debt and notes payable, and accounts payable and accrued expenses. The decrease in working capital is the direct result of reductions of notes payable, accrued interest and accrued expenses as well as the change in the contingent consideration. A majority of the Company’s operating expenses in the past two years was the result of non-cash charges such as impairment of intangible assets including goodwill, settlement and stock-based compensation. The actual monthly cash burn of the Company is approximately $225,000 per month at this time and as our core products come online, this is likely to decrease upon our technology being completed. The Company in the six months ended June 30, 2024 received net proceeds of approximately $1,209,000 from various debt and warrant financings. However, as a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.
In January 2023 and June 2023, we recognized a gain on disposal of $13,685,645 when we settled all claims with the former owners of Tickeri and Monster and sold them back their companies.
Net cash used in operating activities was $1,338,287 and $2,101,421 for the six months ended June 30, 2024 and 2023, respectively. The $763,134 decrease in net cash used in operating activities was primarily a result of the change in the net loss and the non-cash charges impacting our net loss from 2023 to 2024, such as the gain on the sale of HUMBL Financial assets, and decreases in our stock-based compensation. Additionally, our changes in assets and liabilities increased by approximately $54,000.
We had no activities from investing activities in the six months ended June 30, 2024 and 2023, respectively.
Cash provided by financing activities was $987,086 and $1,722,621 for the six months ended June 30, 2024 and 2023, respectively. In 2024, the Company raised $1,025,487 from the proceeds from convertible notes as well as repayments of convertible notes payable of $221,901 and raised $111,000 from the sale of warrants. In 2023, we raised $360,050 from the sale of stock, $1,040,000 from proceeds of convertible notes payable and $700,000 from related party notes payable and $50,000 from a contribution of capital by our CEO and $50,000 from notes payable. We also repaid $477,429 of notes payable.
We expect that the consolidation of our platform into HUMBL.com as well as our arrangement with the AFL will bring about revenue producing operations to improve the liquidity of the Company moving forward. However, going forward, the effect of our industry on the capital markets may limit our ability to raise additional capital on the terms acceptable to us at the time we need it, if at all. The additional post-COVID challenges related to remote work and travel restrictions that we as a smaller company have faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our employees have impacted, and may continue to further impact, our ability to raise additional capital.
The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.
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Off-Balance Sheet Arrangements
As June 30, 2024 and December 31, 2023, we had no off-balance sheet arrangements.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results could differ from those estimates.
Inventory
Inventory is valued at the lower of cost or net realizable value, with cost determined using the first-in first-out method. The carrying value of inventory is evaluated periodically for excess quantities and obsolescence. Management evaluates quantities on hand and physical condition as these characteristics may be impacted by anticipated customer demand for current products. The allowance is adjusted based on such evaluation, with a corresponding provision included in cost of sales.
Fair Value of Financial Instruments
ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Revenue Recognition
The Company accounts for a contract with a customer that is within the scope of ASC 606 only when the five steps of revenue recognition under ASC 606 are met.
We account for revenues based on the verticals in which they were earned, the three principal verticals being (1) HUMBL Wallet, (2) HUMBL Marketplace, and (3) HBS – Commercial division. See “Revenue Recognition” in Note 2 of our Financial Statements.
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The Company has a core revenue focus on:
| 1. | HUMBL Wallet | |
| 2. | HUMBL.com – Web Platform | |
| 3. | HBS Commercial Division - (“Powered by HUMBL”) |
The Company plans to drive its revenues through the following channels:
HUMBL Wallet
| ● | The Company will drive consumer acquisition primarily through the digital wallet. Consumers can be monetized inside a digital wallet through the delivery of search advertising, social media advertising, loyalty advertising, credit card payment transactions, ticketing sales, certificates of authenticity and more. |
HUMBL Web Platform
| ● | The Company has developed one of the first digital wallet and web platforms that are connected together. This means that any verified customers using the HUMBL.com web platform, are also connected to a digital wallet for consumer and merchant transactions. | |
| ● | The HUMBL.com platform can be used to drive search advertising, social media advertising, loyalty advertising, credit card payment transactions, ticketing sales, certificates of authenticity, authentic merchandise purchases and more. |
HBS Commercial Services (“Powered by HUMBL”)
| ● | HUMBL also packages its digital wallet and web platform for white-labeling by clients. | |
| ● | Government – HUMBL has secured approval to build a digital wallet for the County of Santa Cruz, CA. This digital wallet will be built in a modular way, that can be replicated for other cities, counties, states and national government transactions and record keeping in areas such as licensing, renewals and certificates. Once built, HUMBL will offer these digital wallets for government in exchange for flat fee, a percentage of transactions, or a mix of both. | |
| ● | Stadiums, Arenas and Leagues – HUMBL has secured approval to serve as the “Official Technology Platform” of the Arena Football League (AFL), which is currently comprised of 16 teams through the 2028 season. HUMBL will deliver digital wallet and web platform services, with the goal of maximizing ticket revenues, merchandise sales and advertising programs across league digital properties. HUMBL will be paid a percentage on every ticket sold by the league, with annual escalators through the end of the 2028 season. HUMBL will seek to replicate this model across other teams, sports leagues, stadiums, arenas and festivals. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of June 30, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 19, 2022, we were named as a defendant in a putative shareholder derivative class action lawsuit filed in the United States District Court for the Southern District of California styled Matt Pasquinelli and Bryan Paysen v. HUMBL, LLC, Brian Foote, Jeffrey Hinshaw and George Sharp, Case No. 22CV0723 AJB BLM. The complaint alleges federal securities law violations by the Company, including false or misleading statements regarding our business and operations, that the HUMBL Pay App did not have the functionality that it promised to investors and that several international business partnerships had a low chance of contributing material revenues to our bottom line, and sales of unregistered securities through our BLOCK Exchange Traded Index products, which plaintiffs allege caused a decline in the market value of our shares of common stock. Plaintiffs seek unspecified monetary damages. On July 7, 2023, the United States District Court for the Southern District of California granted our Motion to Transfer Venue and transferred the case to the District Court of Delaware. On October 30, 2023, we filed a Motion to Dismiss the lawsuit with the District Court of Delaware which the parties have fully briefed and which motion is presently pending for resolution before the court. We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims.
On July 14, 2022, we were named as ae defendant in a putative shareholder derivative class action lawsuit filed in the Delaware Chancery Court styled Mike Armstrong, derivatively on behalf of HUMBL, Inc. v. Brian Foote, Jeffrey Hinshaw, George Sharp, Michele Rivera, and William B. Hoagland (Case No. 2022-0620). This case alleges the same claims as the Pasquinelli litigation described above and also seeks unspecified monetary damages. The case is currently stayed by agreement of the parties. We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims.
Pacific Lion failed to purchase over $1,000,000 in Series C Preferred Stock that it agreed to purchase under its Stock Purchase Agreement (the “SPA”) with HUMBL and is currently in default under the SPA. In addition, Pacific Lion converted a portion of a note issued by the Company to a third party that it purportedly purchased from the third party but had not actually paid the purchase price for. On March 13, 2024, HUMBL filed a lawsuit in the U.S. District Court in San Diego, California against Pacific Lion to enforce its rights under the SPA. On March 27, 2024, Pacific Lion filed a Motion to Transfer Venue requesting that the litigation be moved from San Diego to Orange County, California. On May 6, 2024, the court granted Pacific Lion’s motion and the case was transferred from U.S. District Court, Southern District of California to U.S. District Court, Central District of California, Southern Division.
On March 11, 2024, Pacific Lion filed a lawsuit against the Company in Pinellas County, Florida alleging breaches of the contracts entered into in connection with certain loans made by Pacific Lion to the Company and certain related claims. On March 13, 2023, Pacific Lion also filed a lawsuit against the Company in Orange County, California alleging breach of the SPA and the other contracts entered in connection with Pacific Lion’s purchase of Series C Preferred Stock from the Company and certain related claims.
On July 20, 2024, Pacific Lion entered into a settlement agreement pursuant to which the Company dismissed its lawsuit against Pacific Lion and Pacific Lion released its two lawsuits against the Company. Pursuant to the settlement agreement, Pacific Lion also agreed to purchase additional shares of Series C Preferred Stock and to make certain required payments thereunder but to date has not made any payments.
On May 16, 2024, Robert Hymers III filed a lawsuit against the Company in Maricopa County, Arizona alleging breach of a consulting agreement. On July 2, 2024, the Company and Mr. Hymers entered into a settlement agreement pursuant to which the Company issued Mr. Hymers 700,000,000 shares for work performed under the consulting agreement and Mr. Hymers agreed to dismiss his lawsuit against the Company.
ITEM 1A. RISK FACTORS
Not applicable as we are a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On May 22, 2024, the Company issued a Warrant to Purchase Shares of Common Stock for 500,000,000 shares. The warrant is exercisable for five years and has an exercise price of $0.0006.
On May 24, 2024, the Company issued a Warrant to Purchase Shares of Common Stock for 45,000,000 shares. The warrant is exercisable for five years and has an exercise price of $0.00075.
All proceeds received in connection with the sales of the equity securities above were used for general operating expenses.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| Exhibit | Incorporated by Reference | Filed or Furnished | ||||||||
| No. | Exhibit Description | Form | Date | Number | Herewith | |||||
| 31.1 | Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | Filed | ||||||||
| 31.2 | Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | Filed | ||||||||
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished** | ||||||||
| 32.1 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished** | ||||||||
| 101.INS | Inline XBRL Instance Document | Filed | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||||
| * | Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish to the SEC a copy of any omitted schedule and/or exhibit upon request. |
| ** | This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. |
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at HUMBL Inc., 101 W. Broadway, Suite 1450, San Diego, California 92101, telephone (786) 738-9012.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HUMBL, Inc. | ||
| Date: August 19, 2024 | By: | /s/ BRIAN FOOTE |
| Brian Foote | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 19, 2024 | By: | /s/ JEFFREY HINSHAW |
| Jeffrey Hinshaw | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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