ONFO 10-Q
Onfolio Holdings, Inc (ONFO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________to ___________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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Warrants To Purchase Common Stock |
| ONFOW |
| Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 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, a 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 | ||
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| 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
Number of common stock outstanding as of November 14, 2024 was
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PART I. FINANCIAL INFORMATION |
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| Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
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| Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2024 and 2023 |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. You should not place undue reliance on these forward-looking statements.
Examples of forward-looking statements include, but are not limited to:
| ● | the anticipated timing of the development of future products or services; |
| ● | projections of costs, revenue, earnings, capital structure and other financial items; |
| ● | statements of our plans and objectives; |
| ● | statements regarding the capabilities of our business operations; |
| ● | statements of expected future economic performance; |
| ● | statements regarding competition in our market; and |
| ● | assumptions underlying statements regarding us or our business. |
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
| ● | our ability to manage our current and projected financial position and estimated cash burn rate, including our estimates regarding expenses, future revenues and capital requirements, and ultimately our ability to continue as a going concern; |
| ●
| our ability to raise additional capital or additional funding to further develop and expand our business to meet our long-term business objectives. We have limited revenues and we cannot predict when or if we will achieve significant revenues and sustained profitability; |
| ● | our ability to achieve significant revenues and sustained profitability; |
| ● | impairment of goodwill and long-lived assets; |
| ● | changes in customer demand; |
| ● | our ability to develop our brands cost-effectively, to attract new customers and retain customers on a cost-effective basis; |
| ● | our ability to compete in the markets in which our websites participate; |
| ● | our ability to make strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; |
| ● | our ability to continue to successfully manage our websites on a combined basis; |
| ● | security breaches, cybersecurity attacks and other significant disruptions in our information technology systems; |
| ● | developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards; |
| ● | the occurrence of hostilities, political instability or catastrophic events and wars; |
| ● | our ability to maintain the listing or trading of our common stock and warrants on the NASDAQ Capital Market and the potential impact on our business if we fail to do so; |
| ● | natural events such as severe weather, fires, floods and earthquakes, or man-made or other disruptions of our operating systems, structures or equipment; |
| ● | risks related to, and the costs associated with, environmental, social and governance (ESG) matters, including the scope and pace of related rulemaking activity; |
| ● | other risks to which our Company is subject; and |
| ● | other factors beyond the Company’s control. |
The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss our known material risks under Part I Item 1.A “Risk Factors” contained in our Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Part II, Item 1.A “Risk Factors” in this report on Form 10-Q. Many factors could cause our actual results to differ materially from the forward-looking statements. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
| 3 |
| Table of Contents |
ITEM 1. FINANCIAL STATEMENTS.
Onfolio Holdings, Inc. | ||||||||
Consolidated Balance Sheets | ||||||||
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Assets |
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Current Assets: |
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Cash |
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Accounts receivable, net |
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Inventory |
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Prepaids and other current assets |
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Total Current Assets |
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Intangible assets |
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Goodwill |
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Due from related party |
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Investment in unconsolidated joint ventures, cost method |
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Investment in unconsolidated joint ventures, equity method |
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Other assets |
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Total Assets |
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Liabilities and Stockholders' Equity |
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Current Liabilities: |
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Accounts payable and other current liabilities |
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Dividends payable |
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Notes payable, current |
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Contingent consideration |
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Deferred revenue |
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Total Current Liabilities |
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Notes payable |
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Notes payable - related parties |
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Total Liabilities |
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Commitments and Contingencies (Note 10) |
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Stockholders' Equity: |
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Preferred stock, $ |
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Series A Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Total Onfolio Inc. stockholders' equity |
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Non-Controlling Interests |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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The accompanying notes are an integral part of these unaudited consolidated financial statements | ||||||||
| 4 |
| Table of Contents |
Onfolio Holdings, Inc. | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(Unaudited) | ||||||||||||||||
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| For the Three Months Ended September 30, |
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Revenue, services |
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Revenue, product sales |
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Total Revenue |
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Cost of revenue, services |
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Cost of revenue, product sales |
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Total cost of revenue |
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Gross profit |
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Operating expenses |
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Selling, general and administrative |
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Professional fees |
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Acquisition costs |
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Impairment of goodwill and intangible assets |
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Total operating expenses |
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Loss from operations |
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Other income (expense) |
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Equity method income (loss) |
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Dividend income |
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Interest income (expense), net |
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Other income |
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Total other income (expense) |
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Loss before income taxes |
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Income tax (provision) benefit |
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Net loss |
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Net loss attributable to noncontrolling interest |
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Net loss attributable to Onfolio Holdings Inc. |
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Preferred Dividends |
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Net loss to common shareholders |
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Net loss per common shareholder |
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Basic and diluted |
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Weighted average shares outstanding |
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Basic and diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements | ||||||||||||||||
| 5 |
| Table of Contents |
Onfolio Holdings, Inc. | |||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||
For the Three and Nine Months Ended September 30, 2024 and 2023 | |||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
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| Accumulated Other |
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| Preferred Stock, $0.001 Par value |
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| Common Stock, $0.001 Par Value |
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| Additional |
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Balance, December 31, 2023 |
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Acquisition of Business |
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Sale of preferred stock for cash |
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Stock-based compensation |
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Preferred dividends |
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Net loss |
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Balance, March 31, 2024 |
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Acquisition of Business |
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Stock-based compensation |
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Common stock issued for exercise of options |
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|
|
|
|
|
|
| ||||||||||||||||
Preferred dividends |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
Foreign currency translation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Distribution to non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |||||||||||||
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
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| |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Proceeds from sale of Preferred Stock |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Cash received from exercise of options |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Preferred dividends |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
Foreign currency translation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) | |||||||||||||
Distribution to non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, September 30, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
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| |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Preferred dividends |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
Foreign currency translation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
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| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Preferred dividends |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
Foreign currency translation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Preferred dividends |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
Foreign currency translation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, September 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements | |||||||||||||||||||||||||||||||||||||||||||||
| 6 |
| Table of Contents |
Onfolio Holdings Inc. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
For the Nine Months Ended September 30, 2024 and 2023 | ||||||||
(Unaudited) | ||||||||
|
|
|
|
|
| |||
|
| 2024 |
|
| 2023 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
| ||
Equity method (income)/loss |
|
|
|
|
| ( | ) | |
Dividends received from equity method investment |
|
|
|
|
|
| ||
Amortization of intangible assets |
|
|
|
|
|
| ||
Impairment of intangible assets |
|
|
|
|
|
| ||
Net change in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
|
| |
Inventory |
|
|
|
|
| ( | ) | |
Prepaids and other current assets |
|
| ( | ) |
|
|
| |
Accounts payable and other current liabilities |
|
|
|
|
| ( | ) | |
Due to joint ventures |
|
|
|
|
| ( | ) | |
Deferred revenue |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Cash paid for cost method investments |
|
| ( | ) |
|
|
| |
Cash paid to acquire businesses |
|
| ( | ) |
|
| ( | ) |
Investments in cryptocurrency |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from sale of Series A preferred stock |
|
|
|
|
|
| ||
Proceeds from exercise of stock option |
|
|
|
|
|
|
| |
Payments of preferred dividends |
|
| ( | ) |
|
| ( | ) |
Distributions to non-controlling interest holders |
|
| ( | ) |
|
|
| |
Payments on acquisition note payable |
|
|
|
|
| ( | ) | |
Proceeds from notes payable |
|
|
|
|
|
| ||
Payments on note payables |
|
| ( | ) |
|
| ( | ) |
Proceeds from notes payable – related parties |
|
|
|
|
|
| ||
Payments on note payables – related parties |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net Change in Cash |
|
| ( | ) |
|
| ( | ) |
Cash, Beginning of Period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash, End of Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Cash Paid For: |
|
|
|
|
|
|
|
|
Income Taxes |
| $ |
|
| $ |
| ||
Interest |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Non-cash Disclosures |
|
|
|
|
|
|
|
|
Promissory notes issued for acquisitions |
| $ |
|
| $ |
| ||
Preferred stock issued for acquisitions |
| $ |
|
| $ |
| ||
Contingent consideration issued for acquisition |
| $ |
|
| $ |
| ||
Common stock options issued for acquisition |
| $ |
|
| $ |
| ||
Non-controlling interest issued for acquisitions |
| $ |
|
| $ |
| ||
Common stock issued for conversion of stock options |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements | ||||||||
| 7 |
| Table of Contents |
ONFOLIO HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS AND ORGANIZATION
Onfolio Holdings Inc. (“Company”) was incorporated on July 20, 2020 under the laws of Delaware to acquire and develop high-growth and profitable internet businesses. The Company primarily earns revenue through website management, advertising, and content placement on its websites, and product sales on certain sites. The Company owns multiple websites and manages websites on behalf of certain unconsolidated entities in which it holds equity interests.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). The Company’s fiscal year end is December 31. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the period presented. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024. The interim results for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
The consolidated financial statements of the Company include the accounts of its wholly-owned and majority owned subsidiaries and other controlled entities. The Company’s wholly-owned subsidiaries are Onfolio LLC, Vital Reaction, LLC, Mighty Deals LLC, Onfolio Assets, LLC, Onfolio Management, LLC, WP Folio, LLC, Proofread Anywhere, LLC, Contentellect, LLC, SEO Butler Limited, Eastern Standard LLC, and DealPipe, LLC. The Company also maintains majority ownership in DDS Rank, LLC and RevenueZen, LLC which are owned
Foreign Currency Translation
The Company, and the majority of its subsidiaries, maintain their accounting records in U.S. Dollars. The Company’s operating subsidiary, SEO Butler, is located in the United Kingdom and maintains its accounting records in British Pounds, which is its functional currency. Assets and liabilities of the subsidiary are translated into U.S. dollars at exchange rates at the balance sheet date, equity accounts are translated at historical exchange rate and revenues and expenses are translated by using the average exchange rates for the period. Translation adjustments are reported as a separate component of other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss. Foreign currency denominated transactions are translated at exchange rates approximating those in effect at the transaction dates.
| 8 |
| Table of Contents |
Investment in Unconsolidated Entities – Equity and Cost Method Investments
We account for our interests in entities in which we are able to exercise significant influence over operating and financial policies, generally
The current investment in unconsolidated affiliates accounted for under the equity method consists of a
Variable Interest Entities
Variable interest entities (“VIEs”) are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE. Management concluded that the joint ventures do not qualify as variable interest entities under the requirements of ASC 810, as the joint ventures 1) have sufficient equity to finance its activities; 2) have equity owners that as a group have the characteristics of a controlling financial interest in the business, through the ability to vote on a majority basis to change the managing member of the respective joint ventures, and 3) are structured with substantive voting rights. The Company accounts for its investments in the joint ventures under either the cost or equity method based on the equity ownership in each entity.
The Company, through its subsidiary Onfolio Management LLC, is the manager of Onfolio Agency SPV, LLC (“OA SPV”), and Onfolio Agency SPV 2, LLC (“OA SPV 2”), collectively referred to as “OA SPVs”. The Company does not hold any equity interest in OA SPVs, but will receive 10% of any cash distributions paid by OA SPV, and 20% of any cash distributions paid by OA SPV 2, to its members, when declared, as the management fee. The Company can be removed as manager of OA SPVs through a unanimous vote of the members. The Company determined that the fees it may receive for its role as manager do not constitute a variable interest in OA SPVs and will be accounted for as a revenue contract under ASC 606.
The Company, through its subsidiary RevenueZen, LLC, is the manager of CliAquire, LLC (“CliAquire”). The Company holds a 5% members interest in CliAquire and will receive profit distributions based on its membership interest. The Company can be removed as manager of CliAquire through a supermajority vote of the members. The Company determined that the investment in CliAquire will be accounted for as a cost method investment.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. The Company uses significant judgements when making estimates related to the assessment of control over variable interest entities, valuation of deferred tax assets and impairment of long lived assets. Actual results could differ from those estimates.
Cash and Cash Equivalent
Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less.
Inventories
Inventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the first-in, first-out (FIFO) method.
| 9 |
| Table of Contents |
Long-lived Assets
The Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests. In accordance with ASC 360 “Property Plant and Equipment,” the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment throughout the year or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Revenue Recognition
The Company follows the guidance of the FASB ASC 606, Revenue from Contracts with Customers to all contracts using the modified retrospective method.
Revenue is recognized based on the following five step model:
| - | Identification of the contract with a customer |
| - | Identification of the performance obligations in the contract |
| - | Determination of the transaction price |
| - | Allocation of the transaction price to the performance obligations in the contract |
| - | Recognition of revenue when, or as, the Company satisfies a performance obligation |
The Company primarily earns revenue through website management, digital services, advertising and content placement on its online businesses, product sales, and digital product sales. Management services revenue is earned and recognized on a monthly basis as the services are provided. Advertising and content revenue is earned and recognized once the content is presented on the Company’s sites in accordance with the customer requirements. Product sales are recognized at the time the product is shipped to the customer. In certain circumstances, products are shipped directly by a supplier to the end customer at the Company’s request. The Company determined that it is the primary obligor in these contracts due to being responsible for fulfilling the customer contract, establishing pricing with the customer, and taking on credit risk from the customer. The Company recognizes revenue from these contracts with customers on a gross basis. Digital product sales represent electronic content that is transferred to the customer at time of purchase. The Company also earns revenue from online course subscriptions that may have monthly or annual subscriptions. In circumstances when a customer purchases an annual subscription upfront, the Company defers the revenue until the performance obligation has been satisfied. As of September 30, 2024 and December 31, 2023, the Company had $
The following table presented disaggregated revenue information for the three months and nine months ended September 30, 2024 and 2023:
|
| For the Three Months ended September 30, |
|
| For the Nine Months ended September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Website management |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Advertising and content revenue |
|
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|
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|
|
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| ||||
Product sales |
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| ||||
Digital Product Sales |
|
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|
|
|
|
| ||||
Total revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The Company does not have any single customer that accounted for greater than
| 10 |
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Cost of Revenue
Cost of product revenue consists primarily of costs associated with the acquisition and shipment of products being sold through the Company’s online marketplaces, and the costs of its service revenue, which include website content creation costs including contract labor, domain and hosting costs and certain software costs related to website operations.
Cost of Service revenue consists primarily of costs associated with the acquisition and shipment of products being sold through the Company’s online marketplaces, and the costs of its service revenue, which include website content creation costs including contract labor, domain and hosting costs and certain software costs related to website operations.
Net Income (Loss) Per Share
In accordance with ASC 260 “Earnings per Share,” basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares, including
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Fair Value of Financial Instruments
The carrying value of short-term instruments, including cash, accounts payable and accrued expenses, and notes payable approximate fair value due to the relatively short period to maturity for these instruments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value.
The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.
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Stock-Based Compensation
Accounting Standards Codification (“ASC”) 718, “Accounting for Stock-Based Compensation” established financial accounting and reporting standards for stock-based compensation plans. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The valuation of employee stock options is an inherently subjective process, since market values are generally not available for long-term, non-transferable employee stock options. Accordingly, the Black-Scholes option pricing model is utilized to derive an estimated fair value. The Black-Scholes pricing model requires the consideration of the following six variables for purposes of estimating fair value.
Expected Dividends. - We have never declared or paid any cash dividends on our common stock and do not expect to do so in the foreseeable future. Accordingly, we use an expected dividend yield of zero to calculate the grant-date fair value of a stock option.
Expected Volatility. - The expected volatility is a measure of the amount by which our stock price is expected to fluctuate during the expected term of options granted. We determine the expected volatility solely based upon the historical volatility of a peer group of companies of similar size and with similar operations.
Risk-Free Interest Rate. - The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.
Expected Term. - The expected life of stock options granted is based on the actual vesting date and the end of the contractual term.
Stock Option Exercise Price and Grant Date Price of Common Stock. - Currently the Company utilizes the most recent cash sale closing price of its common stock as the most reasonable indication of fair value.
The Company accounts for compensation cost for stock option plans and for share based payments to non-employees in accordance with ASC 505, “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. Share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value.
Segment Reporting
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company at the consolidated level using information about its revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
NOTE 3 – GOING CONCERN
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2024, the Company had not yet achieved consistent profitable operations and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity or debt financing and/or related party advances. However, there is no assurance of additional funding being available.
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NOTE 4 – BUSINESS ACQUISITIONS
RevenueZen
On December 31, 2023, RevenueZen (the “Acquired Business”) and the Company and RevenueZen LLC, a Delaware limited liability company ("RevenueZen Delaware") a subsidiary of the Company, entered into and closed an asset purchase agreement (the "RevenueZen Asset Purchase Agreement"), for the purchase by the Company of the Acquired Business.
Pursuant to the RevenueZen Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, RevenueZen agreed to sell to the Company the Acquired Business, all as more fully described in the RevenueZen Asset Purchase Agreement. The aggregate purchase price for the Acquired Business was $
The earn-out formula specifies for a period of one year, if the SDE (defined in Note 10 below) of the RevenueZen business exceeds $
The transaction closed on January 4, 2024, when consideration was transferred by the Company and control was obtained by the Company and was accounted for as a business combination under ASC 805. The earn-out agreement is accounted for as a contingent consideration liability under ASC 805, which changes in fair value of the potential earn-out amount recognized in current earnings.
The aggregate fair value of consideration for the RevenueZen acquisition was as follows:
Schedule of preliminary fair value of consideration transferred |
|
| ||
|
|
|
| |
|
| Amount |
| |
Cash paid to seller |
| $ |
| |
Notes payable issued to seller |
|
|
| |
Options to purchase common shares issued to seller |
|
|
| |
Estimated fair value of additional earn-out payments |
|
|
| |
Series A Preferred Shares issued to seller |
|
|
| |
Fair value of 12% equity interest in RevenueZen retained by Sellers |
|
|
| |
Total preliminary consideration transferred |
| $ |
| |
| 13 |
| Table of Contents |
The following information summarizes the preliminary allocation of the fair values assigned to the assets acquired at the acquisition date:
Preliminary Schedule of Recognized Identified Assets Acquired and Liabilities |
|
|
| |
Developed technology |
| $ |
| |
Customer relationships |
|
|
| |
Trademarks and Trade Names |
|
|
| |
Non-Compete agreement |
|
|
| |
Goodwill |
|
|
| |
Preliminary net assets acquired |
| $ |
| |
From the period of acquisition of the RevenueZen Business through September 30, 2024, the Company generated total revenue and net loss of $
DDS Rank
On June 6, 2024, SEO Marketing, Inc (dba DDS Rank) (“DDS Rank” or the “Acquired Business”) and DDS Rank LLC (“DDS Rank Delaware”), a subsidiary of the Company entered into and closed an asset purchase agreement (the "DDS Asset Purchase Agreement"), for the purchase by the Company of the Acquired Business.
Pursuant to the DDS Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, DDS Rank agreed to sell to the Company the Acquired Business, all as more fully described in the DDS Asset Purchase Agreement. The aggregate purchase price for the Acquired Business was $
The transaction closed on June 24, 2024, when consideration was transferred by the Company and control was obtained by the Company and was accounted for as a business combination under ASC 805.
The aggregate fair value of consideration for the DDS Rank acquisition was as follows:
Schedule of preliminary fair value of consideration transferred |
|
| ||
|
|
|
| |
|
| Amount |
| |
Cash paid to seller |
|
|
| |
Notes payable issued to seller |
|
|
| |
Series A Preferred Shares issued to seller |
|
|
| |
Total preliminary consideration transferred |
| $ |
| |
The following information summarizes the allocation of the fair values assigned to the assets acquired at the acquisition date:
Preliminary Schedule of Recognized Identified Assets Acquired and Liabilities |
|
|
| |
|
|
|
|
|
Developed technology |
| $ |
| |
Customer relationships |
|
|
| |
Trademarks and Trade Names |
|
|
| |
Non-Compete agreement |
|
|
| |
Preliminary net assets acquired |
| $ |
| |
From the period of acquisition of the DDS Rank Business through September 30, 2024, the Company generated total revenue and net loss of $
| 14 |
| Table of Contents |
Unaudited Pro Forma Financial Information
The following table sets forth the pro-forma consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 as if the RevenueZen and DDS Rank acquisitions occurred on January 1, 2023. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisitions had taken place on the dates noted above, or of results that may occur in the future.
|
| Three Months ended September 30, |
|
| Nine Months ended September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Operating loss |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net loss |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net loss attributable to common shareholders |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net loss per common share |
| $ | ( | ) |
| $ | ( | ) |
|
| ( | ) |
|
| ( | ) |
Weighted Average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
| ||||
NOTE 5 – INVESTMENTS IN JOINT VENTURES
The Company holds various investments in certain joint ventures as described below.
Cost method investments
OnFolio JV I, LLC (“JV I”) was formed on October 11, 2019 under the laws of Delaware. OnFolio LLC is the managing member of JV I and has operational and financial decision-making authority. The manager of JV I can be removed by a majority vote of the equity holders of JV I. On August 1, 2020, the Company received an investment of
OnFolio JV II, LLC (“JV II”) was formed on November 8, 2019 under the laws of Delaware. OnFolio LLC is the managing member of JV II and has operational and financial decision-making authority. The manager of JV II can be removed by a majority vote of the equity holders of JV II. On August 1, 2020, the Company received an investment of approximately
OnFolio JV III, LLC (“JV III”) was formed on January 3, 2020 under the laws of Delaware. OnFolio LLC is the managing member of JV III and has operational and financial decision-making authority. The manager of JV III can be removed by a majority vote of the equity holders of JV III. On August 1, 2020, the Company received an investment of approximately
| 15 |
| Table of Contents |
OnFolio Groupbuild 1 LLC (“Groupbuild”) was formed on April 22, 2020 under the laws of Delaware.
On March 4, 2024, the Company invested $
On May 31, 2024, the Company, through its subsidiary Revenue Zen LLC, invested $
Equity Method Investments
OnFolio JV IV, LLC (“JV IV”) was formed on January 3, 2020 under the laws of Delaware. The Company holds an equity interest of
The balance sheet of JV IV at September 30, 2024 included total assets of $
|
| Three Months ended September 30, |
|
| Nine Months ended September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Net income (loss) |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
The Company recognized equity method income (loss) of $(
NOTE 6 – INTANGIBLE ASSETS
On April 1, 2024, the Company, through its subsidiary Revenue Zen LLC, acquired certain assets from First Page LLC, for a purchase price of $
| 16 |
| Table of Contents |
The following table represents the balances of intangible assets as of September 30, 2024 and December 31, 2023:
|
| Estimated life |
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Website Domains |
| Indefinite |
| $ |
|
| $ |
| ||
Website Domains |
|
|
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|
| |||
Customer relationships |
| |
|
|
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|
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| ||
Trademarks and Tradenames |
| |
|
|
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| ||
Non-compete agreements |
| |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
Accumulated Amortization - Website domains |
|
|
|
| ( | ) |
|
| ( | ) |
Accumulated Amortization - Customer Relationships |
|
|
|
| ( | ) |
|
| ( | ) |
Accumulated Amortization - Trademarks / Tradenames |
|
|
|
| ( | ) |
|
| ( | ) |
Accumulated Amortization - Non-Compete |
|
|
|
| ( | ) |
|
| ( | ) |
Net Intangible |
|
|
| $ |
|
| $ |
| ||
On January 1, 2024, the Company closed on its acquisition of the RevenueZen LLC. As part of the acquisition, the Company acquired assets related to the websites operated by RevenueZen. Pursuant to the purchase price allocation as further described in Note 4, the Company allocated $
On June 24, 2024, the Company closed on its acquisition of the DDS Rank LLC. As part of the acquisition, the Company acquired assets related to the websites operated by DDS Rank. Pursuant to the purchase price allocation as further described in Note 4, the Company allocated $
For the three months ended September 30, 2024 and 2023, the Company recognized $
The following is an amortization analysis of the annual amortization of intangible assets on a fiscal year basis as of September 30, 2024:
For the year ended December 31, |
| Amount |
| |
2024 (3 months remaining) |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
Total remaining intangibles amortization |
|
|
| |
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred stock
The Company’s authorized preferred stock consists of
On January 4, 2024, in connection with the RevenueZen Acquisition as discussed in Note 4, the Company issued
On June 24, 2024, in connection with the DDS Rank Acquisition as discussed in Note 4, the Company issued
During the nine months ended September 30, 2024, the Company sold
| 17 |
| Table of Contents |
During the nine months ended September 30, 2024 and 2023, the Company recognized $
As of September 30, 2024 and December 31, 2023, there were
Common stock
Company’s authorized common stock consists of
Stock Options
On January 4, 2024, the Company awarded an aggregate of
A summary of stock option information is as follows:
|
| Outstanding Awards |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Exercise price |
| |||
Outstanding at December 31, 2023 |
|
|
|
| $ |
|
| $ |
| |||
Granted |
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Forfeited and cancelled |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Outstanding at September 30, 2024 |
|
|
|
| $ |
|
| $ |
| |||
Exercisable at September 30, 2024 |
|
|
|
| $ |
|
| $ |
| |||
The weighted average remaining contractual life is approximately
| 18 |
| Table of Contents |
Common Stock Warrants
A summary of stock warrant information is as follows:
|
| Outstanding Awards |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Exercise price |
| |||
Outstanding at December 31, 2023 |
|
|
|
| $ |
|
| $ |
| |||
Granted |
|
| - |
|
|
|
|
|
| - |
| |
Exercised |
|
| - |
|
|
|
|
|
| - |
| |
Forfeited and cancelled |
|
| - |
|
|
|
|
|
| - |
| |
Outstanding at September 30, 2024 |
|
|
|
| $ |
|
| $ |
| |||
Exercisable at September 30, 2024 |
|
|
|
| $ |
|
| $ |
| |||
The weighted average remaining contractual life is approximately
NOTE 8 – RELATED PARTY TRANSACTIONS
From time to time, the Company pays expenses directly on behalf of the Joint Ventures that it manages and receives funds on behalf of the joint ventures. As of September 30, 2024 and December 31, 2023 the balances due from the joint ventures were $
From time to time, the Company’s CEO paid expenses on behalf of the Company, and the Company funded certain expenses to the CEO. Additionally, the Company received its investments in JV I, JV II and JV III from the CEO. As of September 30, 2024 and December 31, 2023, the Company was owed $
No member of management has benefited from the transactions with related parties.
NOTE 9 – NOTES PAYABLE
On January 4, 2024, the Company entered into the RevenueZen Note as part of the acquisition of RevenueZen. The RevenueZen Note has
In January 2024, the Company entered into three separate promissory notes for aggregate principal of $
On June 6, 2024, the Company entered into the DDS Rank Note as part of the acquisition of DDS Rank. The DDS Rank Note has the principal sum of $
| 19 |
| Table of Contents |
During the nine months ended September 30, 2024, the Company received proceeds of $
At various times the Company enters into short term financing agreements with payment service providers who provide cash proceeds. The Company will repay the principal balance based on a percentage of its daily sales processed through the service provider until the total principal is repaid, based on the repayment terms in the agreement which is generally less than one year. The following table shows the outstanding balances of these lenders as of September 30, 2024:
Entity |
| Origination Date |
|
| Interest rate |
|
|
| Original cash advanced |
|
|
| Balance as of September 30, 2024 |
|
Proofread Anywhere |
|
|
| % |
| $ |
|
| $ |
| ||||
WPFolio |
|
|
| % |
| $ |
|
| $ |
| ||||
Contentellect |
|
|
| % |
| $ |
|
| $ |
| ||||
Onfolio Assets |
|
|
| % |
| $ |
|
|
|
| ||||
Onfolio Assets |
|
|
| % |
| $ |
|
| $ |
| ||||
Proofread Anywhere |
|
|
| % |
| $ |
|
| $ |
| ||||
Onfolio Holdings |
|
|
| % |
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total balance as of September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
| $ |
|
NOTE 10 – COMMITMENTS AND CONTINGENCIES
On October 3, 2022, the Company entered into an Asset Purchase Agreement (“Hoang Asset Purchase Agreement”) with Hoang Huu Thinh, an individual (“Hoang”) for the purchase of the BWPS business. Pursuant to the Hoang Asset Purchase Agreement,
Pursuant to the RevenueZen acquisition as described above in Note 4, the Company granted earn-out payments that could be paid to RevenueZen pursuant to the earn-out formula described in the RevenueZen Asset Purchase Agreement. The earn-out formula specifies for a period of one year, if the SDE of the RevenueZen business exceeds $
| 20 |
| Table of Contents |
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated events through November 14, 2024, the date these financial statements were available for issuance, and noted the following events requiring disclosures:
On September 20, 2024, Eastern Standard LLC (“Eastern Standard Delaware”), a Delaware limited liability company and the Company’s majority owned subsidiary, entered into an Asset Purchase Agreement (“Eastern Standard Asset Purchase Agreement”) with Eastern Standard, LLC (the “Eastern Standard Pennsylvania”), a Pennsylvania limited liability company, Mark Gisi, James Keller and Vincent Giordano. Pursuant to the Eastern Standard Asset Purchase Agreement, Eastern Standard Delaware will purchase from Eastern Standard Pennsylvania all of Eastern Standard Pennsylvania’s assets utilized in the operation of its business of providing digital marketing services, including integrated branding, and digital customer experiences (the “ES Business Assets”).
Pursuant to the Eastern Standard Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, Eastern Standard Pennsylvania agreed to sell to Eastern Standard Delaware the ES Business Assets, all as more fully described in the Eastern Standard Asset Purchase Agreement. The aggregate purchase price for the ES Business Assets was $
The secured promissory notes consist of: (i) a $
Due to the limited time since the closing of the acquisition, the valuation efforts and related acquisition accounting is incomplete at the time of the filing of these unaudited consolidated financial statements. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired, including goodwill and other intangible assets. In addition, because the acquisition accounting is incomplete, the Company is unable to provide the supplemental pro forma revenue and earnings for the combined entity, as the pro forma adjustments are expected to primarily consist of estimates for the amortization of identifiable intangible assets acquired and related income tax effects, which will result from the purchase price allocation and determination of the fair values for the assets acquired and liabilities assumed.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our consolidated financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical consolidated financial statements which are included in our Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on April 1, 2024.
Overview
Onfolio Holdings Inc. acquires controlling interests in and actively manages online businesses that we believe (i) operate in sectors with long-term growth opportunities, (ii) have positive and stable cash flows, (iii) face minimal threats of technological or competitive obsolescence and (iv) can be managed by our existing team or have strong management teams largely in place. Through the acquisition and growth of a diversified group of websites with these characteristics, we believe we offer investors in our shares an opportunity to diversify their own portfolio risk.
Onfolio Holdings Inc. was incorporated on July 20, 2020 under the laws of Delaware to acquire and develop high-growth and profitable websites. Unless the context otherwise requires, all references to "our Company,” "we,” "our” or "us” and other similar terms means Onfolio Holdings Inc., a Delaware corporation, and our wholly- and majority-owned subsidiaries.
The first nine months of 2024 reflected significant improvements in our revenue, and net loss. Our cash used in operations for the nine months decreased to $696,715, marking the lowest use of cash for operating activities since our initial public offering in August 2022, compared to $2,160,796 during the same period in 2023.
Notably, our net loss roughly halved year-over-year, improving from a net loss of $7,311,359 for the nine months ended September 30, 2023 (which included an impairment loss of $3,952,516), to a net loss of $1,909,993 in the same period of 2024.
In Q3, we saw further gains towards profitability, through increased organic revenue growth, expense reduction, and an acquisition (Eastern Standard, detailed in Recent Developments below) that will contribute to our revenue from Q4 onwards. Quarterly revenue rose 53% year-over-year year, and 16.5% quarter-over-quarter, while total loss from operations decreased to $485,478, down from $4,740,623 in Q3 2023 (which included the impairment loss described above) and $759,119 in Q2 2024.
Operational improvements made in Q2 within several portfolio companies yielded substantial cost savings, with impacts most noticeable in August and September 2024. September 2024 marked a milestone with revenues exceeding $700,000 for the first time, and while the net loss for the month was $352,714, non-cash expenses such as amortization made up $346,802 of this loss.
Moving into Q4, the acquisition of Eastern Standard will contribute to our consolidated results. We continue to explore organic growth opportunities, operational efficiencies, and further accretive acquisitions assisted by OA SPVs (described in Note 2) and our joint-venture investors.
We continue to maintain a strong acquisition pipeline and are actively working towards completing these transactions.
Management remains committed to continuous improvement and achieving profitability by focusing on optimizing our financial position and completing accretive acquisitions.
Recent Developments
In October 2024, we acquired Eastern Standard, a premier digital agency specializing in brand strategy, website development, and digital marketing. Eastern Standard provides tailored solutions across various industries, helping clients enhance their online presence through strategic branding, search engine optimization (SEO), and user-focused design. Our Company holds a 70% ownership stake in Eastern Standard, while the OA SPVs maintain a 20% equity interest, and the Eastern Standard founders maintain a 10% roll-over equity interest and continue to serve in leadership roles on the Eastern Standard team.
On September 20, 2024, Eastern Standard LLC (“Eastern Standard Delaware”), a Delaware limited liability company and the Company’s majority owned subsidiary, entered into an Asset Purchase Agreement (“Eastern Standard Asset Purchase Agreement”) with Eastern Standard, LLC (“Eastern Standard Pennsylvania”), a Pennsylvania limited liability company, Mark Gisi, James Keller and Vincent Giordano. Pursuant to the Eastern Standard Asset Purchase Agreement, Eastern Standard Delaware will purchase from Eastern Standard Pennsylvania all of Eastern Standard Pennsylvania’s assets utilized in the operation of its business of providing digital marketing services, including integrated branding, and digital customer experiences (the “ES Business Assets”).
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Pursuant to the Eastern Standard Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, Eastern Standard Pennsylvania agreed to sell to Eastern Standard Delaware the ES Business Assets, all as more fully described in the Eastern Standard Asset Purchase Agreement. The aggregate purchase price for the ES Business Assets was $2,160,000. As of the closing, the Company owns 70% of Eastern Standard Delaware in exchange for $1,250,000 payable pursuant to two secured promissory notes which are guaranteed by the Company, and $410,000 of the Company’s Series A Preferred Shares. The entities comprising the Company’s special purpose vehicle funding program owns an aggregate of 20% of Eastern Standard Delaware in exchange for $500,000 payable in cash. Eastern Standard Pennsylvania owns a 10% roll-over equity interest in Eastern Standard Delaware. The acquisition closed on October 18, 2024.
The secured promissory notes consist of: (i) a $400,000 promissory note made by Eastern Standard Delaware in favor of Eastern Standard Pennsylvania with an interest at 8% per annum providing for interest only payments with a balloon payment of principal and interest at the end of one hundred twenty (120) days (“Short Term ES Promissory Note”); (ii) an $850,000 promissory note made by Eastern Standard Delaware in favor of Eastern Standard Pennsylvania with an interest rate at 8% per annum providing for interest only payments with a balloon payment of principal and interest at the end of two years (“ES Promissory Note”); and (iii) a Guaranty Agreement made by the Company to secure the payment of Eastern Standard Delaware pursuant to the Short Term ES Promissory Note, the ES Promissory Note and the other obligations of the Company and Eastern Standard Delaware under the Eastern Standard Asset Purchase Agreement.
Emerging Growth Company
We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
| · | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; |
| ·
| comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); |
| · | submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” |
| · | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors at a portfolio company level:
| · | our ability to acquire new customers or retain existing customers and grow revenue; |
| · | our ability to offer competitive product pricing and control expenses; |
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| · | our ability to broaden product offerings; |
| · | industry demand and competition; |
| · | our ability to leverage technology and use and develop efficient processes; |
| · | our ability to attract and retain talented employees; |
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|
| · | our ability to identify and acquire companies at reasonable prices and terms; |
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|
| · | our ability to reduce and control corporate overhead; and |
| · | market conditions and our market position. |
Results of Operations
Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023
The Company reported a net loss of $497,759 for the three months ended September 30, 2024 compared to a net loss of $4,733,159 for the three months ended September 30, 2023. The components of the decrease in net loss for the current period are as follows:
Revenues
|
| For the Quarter Ended September 30, |
|
| $ Change from prior |
|
| % Change from prior |
| |||||||
|
| 2024 |
|
| 2023 |
|
| Year |
|
| year |
| ||||
Revenue, services |
| $ | 919,044 |
|
| $ | 433,490 |
|
| $ | 485,554 |
|
|
| 112 | % |
Revenue, product sales |
|
| 1,092,728 |
|
|
| 879,821 |
|
|
| 212,907 |
|
|
| 24 | % |
Total Revenue |
| $ | 2,011,772 |
|
| $ | 1,313,311 |
|
|
| 698,461 |
|
|
| 53 | % |
Revenue increased by $698,461, or 53% for the three months ended September 30, 2024 compared to 2023. The increase is primarily due to revenue from our RevenueZen acquisition completed during the first quarter of fiscal 2024 which increased revenue by approximately $621,000 and our DDS Rank acquisition completed at the end of the second quarter of fiscal 2024, which increased revenue by approximately $71,000. This increase was partially offset by a decline in website management revenue, and a decline in digital product sales within the Company’s Mighty Deals subsidiary and a decline in revenue from its SEO Butler subsidiary.
Cost of Revenue
|
| For the Quarter Ended September 30, |
|
| $ Change from |
|
| % Change from |
| |||||||
|
| 2024 |
|
| 2023 |
|
| prior year |
|
| prior year |
| ||||
Cost of revenue, services |
| $ | 625,676 |
|
| $ | 218,063 |
|
| $ | 407,613 |
|
|
| 187 | % |
Cost of revenue, product sales |
|
| 180,421 |
|
|
| 247,533 |
|
|
| (67,112 | ) |
|
| (27 | )% |
Total Cost of Revenue |
|
| 806,097 |
|
|
| 465,596 |
|
|
| 340,501 |
|
|
| 73 | % |
Cost of revenue increased by $340,501, or 73% due to the Company’s recent acquisition offset by the decrease in digital product sales within the Company’s Mighty Deals subsidiary. The Company’s gross profit margins decreased slightly in the current period compared to the prior period. The components most significant to the Company’s cost of revenue are the costs of labor for service fulfillment, content creation, website hosting and maintenance costs and the costs of acquiring new inventory products for physical product sales.
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Operating Expenses
Selling, General and Administrative
General and Administrative expenses decreased by $58,267, or 4% during the three months ended September 30, 2024 compared to 2023. The decrease was primarily due to a decrease in advertising and marketing costs of $88,000, and a decrease in stock-based compensation expense of $80,000 and decrease in contractor and compensation costs of $84,000, offset by an increase in other general and administrative costs of $44,000, including travel and merchant fees, and an increase in amortization expenses of $147,000 associated with the acquired intangible assets not present in the comparable period.
Our general and administrative expenses consist primarily of consulting related expenses paid to contractors, stock-based compensation, advertising and marketing costs, and other expenses. In the near future, we expect our general and administrative expenses to continue to increase to support business growth. Over the long term, we expect general and administrative expenses to decrease as a percentage of revenue.
Professional Fees and Acquisition Costs
Professional fees decreased by $22,471, or 10% during the three months ended September 30, 2024 compared to 2023 primarily due to decreased legal and accounting costs associated with the Company’s compliance requirements as a public company. The Company also incurred $18,979 in acquisition costs during the three months ended September 30, 2024 compared to $77,525 during the three months ended September 30, 2023, which included due diligence, audit, legal and other professional fees related to acquisitions and potential acquisitions. We expect acquisition costs to remain significant as we continue to grow based on acquisitions.
Other Income and expense
Total other expense was $12,281 during the three months ended September 30, 2024 compared to other income of $7,464 during the three months ended September 30, 2023. The decrease in other income was driven by lower equity method income and decrease in interest income from decreased cash balances.
Nine Months Ended September 30, 2024 compared to the Nine Months Ended September 30, 2023
The Company reported a net loss of $1,909,993 for the nine months ended September 30, 2024 compared to a net loss of $7,311,359 for the nine months ended September 30, 2023. The components of the decrease in net loss for the current period are as follows:
Revenues
|
| For the Nine Months Ended September 30, |
|
| $ Change from prior |
|
| % Change from prior |
| |||||||
|
| 2024 |
|
| 2023 |
|
| Year |
|
| year |
| ||||
Revenue, services |
| $ | 2,635,761 |
|
| $ | 1,121,641 |
|
| $ | 1,514,120 |
|
|
| 135 | % |
Revenue, product sales |
|
| 2,689,512 |
|
|
| 2,853,447 |
|
|
| (163,935 | ) |
|
| (6 | )% |
Total Revenue |
| $ | 5,325,273 |
|
| $ | 3,975,088 |
|
|
| 1,350,185 |
|
|
| 34 | % |
Revenue increased by $1,350,185, or 34% for the nine months ended September 30, 2024 compared to 2023. The increase is primarily due to revenue from our RevenueZen acquisition completed during the first quarter of fiscal 2024 which increased revenue by approximately $989,000 and our DDS Rank acquisition completed at the end of the second quarter of fiscal 2024, which increased revenue by approximately $71,000. This increase was partially offset by a decline in website management revenue, and a decline in digital product sales within the Company’s Mighty Deals subsidiary and a decline in revenue from its SEO Butler subsidiary.
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Cost of Revenue
|
| For the Nine Months Ended September 30, |
|
| $ Change from |
|
| % Change from |
| |||||||
|
| 2024 |
|
| 2023 |
|
| prior year |
|
| prior year |
| ||||
Cost of revenue, services |
| $ | 1,549,900 |
|
| $ | 651,849 |
|
| $ | 898,051 |
|
|
| 138 | % |
Cost of revenue, product sales |
|
| 589,931 |
|
|
| 916,740 |
|
|
| (326,809 | ) |
|
| (36 | )% |
Total Cost of Revenue |
|
| 2,139,831 |
|
|
| 1,568,589 |
|
|
| 571,242 |
|
|
| 36 | % |
Cost of revenue increased by $571,242, or 36% due to the Company’s recent acquisition, offset by the decrease in digital product sales within the Company’s Mighty Deals subsidiary. The Company’s gross profit margins remained about the same in the current period compared to the prior period despite the increase in agency service revenue due to the Company’s efforts to streamline operations and create efficiencies. The components most significant to the Company’s cost of revenue are the costs of labor for service fulfillment, content creation, website hosting and maintenance costs and the costs of acquiring new inventory products for physical product sales.
Operating Expenses
Selling, General and Administrative
General and Administrative expenses decreased by $408,268, or 9% during the nine months September 30, 2024 compared to 2023. The decrease was primarily due to a decrease in advertising and marketing costs of $332,000, and a decrease in stock-based compensation expense of $518,000, offset by a $30,000 increase in other general and administrative costs including travel and merchant fees, an increase in amortization expense of $341,000 associated with the acquired intangible assets not present in the comparable period. Contractor and payroll costs were flat compared to the prior period despite the overall increase in the business, as a result of the Company’s efficiency efforts.
Our general and administrative expenses consist primarily of consulting related expenses paid to contractors, stock-based compensation, advertising and marketing costs, and other expenses. In the near future, we expect our general and administrative expenses to continue to increase to support business growth. Over the long term, we expect general and administrative expenses to decrease as a percentage of revenue.
Professional Fees and Acquisition Costs
Professional fees decreased by $248,854, or 29% during the nine months September 30, 2024 compared to 2023 primarily due to decreased legal and accounting costs associated with the Company’s compliance requirements as a public company. The Company also incurred $122,266 in acquisition costs during the nine months ended September 30, 2024 compared to $285,532 during the nine months ended September 30, 2023, which included due diligence, audit, legal and other professional fees related to acquisitions and potential acquisitions. We expect acquisition costs to remain significant as we continue to grow based on acquisitions.
Other Income and expense
Total other expense was $57,346 during the nine months September 30, 2024 compared to other income of $88,457 during the nine months September 30, 2023. The decrease in other income was driven by lower equity method income and decrease in interest income from decreased cash balances.
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Liquidity and Capital Resources
As of September 30, 2024, our principal sources of liquidity consisted of cash and cash equivalents of $363,244 which was mainly on account of raising capital from sale of common stock and warrants in our IPO of $12,255,470. In addition, the Company has raised $600,000 pursuant to a private offering of Series A preferred stock, $618,000 in notes payable and repaid $2,164,498 on its acquisition notes.
Our Company’s recurring losses from operations and negative cash flows from operations and our need to raise additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. Accordingly, management and our auditor have concluded that substantial doubt exists regarding our ability to continue as a going concern. Our audited financial statements contained in our Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on April 1, 2024 were prepared on a going concern basis, and contemplated the realization of assets and satisfaction of liabilities in the ordinary course of business. We believe that our cash and cash equivalents as of September 30, 2024, and the future operating cash flows of the entity may not provide adequate resources to fund ongoing cash requirements for the next twelve months. If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we may be required to obtain additional sources of funds through additional operational improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern.
Cash used in operating activities
Net cash used in operating activities was $696,715 and $2,160,796 for the nine months ended September 30, 2024 and 2023, respectively. The decrease was primarily from the increase in revenues and decreased general and administrative costs as the Company expanded its operations through its business acquisitions in the past year.
Cash used in investing activities
Net cash used in investing activities was $304,000 and $850,000 for the nine months ended September 30, 2024 and 2023, respectively. The cash used in investing activities was primarily for the purchase of businesses in both periods and additional cost method investments.
Cash provided by financing activities
Cash flows provided by financing activities was $480,218 for the nine months ended September 30, 2024 compared to cash used in financing activities of $269,522 during the nine months ended September 30, 2023. During the 2024 period, we received $732,300 in proceeds from notes payable and we paid $234,596 in dividends to preferred stockholders and made payments totaling $238,046 on notes payable. During the 2023 period, we paid $160,563 in dividends to preferred stockholders and made payments totaling $68,959 on notes payable.
Critical Accounting Policies
The following are the Company’s critical accounting policies:
Investment in Unconsolidated Entities – Equity and Cost Method Investments
We account for our interests in entities in which we are able to exercise significant influence over operating and financial policies, generally 50% or less ownership interest, under the equity method of accounting. In such cases, our original investments are recorded at cost and adjusted for our share of earnings, losses and distributions. We account for our interests in entities where we have virtually no influence over operating and financial policies under the cost method of accounting. In such cases, our original investments are recorded at cost and any distributions received are recorded as income. Our investments in OnFolio JV I, LLC (“JV I”), OnFolio JVII, LLC (“JVII”) and OnFolio JVIII, LLC (“JVIII”) are accounted for under the cost method. All investments are subject to our impairment review policy.
The current investment in unconsolidated affiliates accounted for under the equity method consists of a 35.8% interest in OnFolio JV IV, LLC (“JV IV”), which is involved in the acquisition, development and operation of websites to produce adverting revenue.
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Variable Interest Entities
Variable interest entities (“VIEs”) are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE. Management concluded that the joint ventures do not qualify as variable interest entities under the requirements of ASC 810. The Company accounts for its investments in the joint ventures under either the cost or equity method based on the equity ownership in each entity.
Revenue Recognition
The Company primarily earns revenue through website management, digital services, advertising and content placement on its websites, product sales, and digital product sales. Management services revenue is earned and recognized on a monthly basis as the services are provided. Advertising and content revenue is earned and recognized once the content is presented on the Company's sites in accordance with the customer requirements. Product sales are recognized at the time the product is shipped to the customer. In certain circumstances, products are shipped directly by a supplier to the end customer at the Company's request. The Company determined that it is the primary obligor in these contracts due to being responsible for fulfilling the customer contract, establishing pricing with the customer, and taking on credit risk from the customer. The Company recognizes revenue from these contracts with customers on a gross basis. Digital product sales represent electronic content that is transferred to the customer at time of purchase. The Company also earns revenue from online course subscriptions that may have monthly or annual subscriptions. In circumstances when a customer purchases an annual subscription upfront, the Company defers the revenue until the performance obligation has been satisfied.
Revenue is recognized based on the following five step model:
| - | Identification of the contract with a customer |
| - | Identification of the performance obligations in the contract |
| - | Determination of the transaction price |
| - | Allocation of the transaction price to the performance obligations in the contract |
| - | Recognition of revenue when, or as, the Company satisfies a performance obligation |
The Company amortizes acquired definite-lived intangible assets over their estimated useful lives. Other indefinite-lived intangible assets are not amortized but subject to annual impairment tests.
Long-lived Assets
Property and equipment are stated on the basis of historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Major renewals and improvements are capitalized, while minor replacements, maintenance and repairs are charged to current operations.
In accordance with ASC 360 “Property Plant and Equipment,” the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual commitments
The Company has entered into two asset purchase agreements which includes contingent earn-out payments based on specific performance criteria.
BWPS Business Acquisition: The Company may be required to pay up to $60,000 to Hoang Huu Thinh, contingent upon the BWPS business meeting certain monthly gross revenue targets within three years from the closing date. No earn-out payments have been made as of September 30, 2024. (See Note 10 for further details.)
RevenueZen Acquisition: The Company may be obligated to pay up to $1,869,000 to the sellers of RevenueZen, contingent upon the business achieving a specified gross profit threshold within one year. As of September 30, 2024, no earn-out payments have been made. (See Note 10 for further details.)
Also, see Note 11 – Subsequent Events for additional contractual commitments.
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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 principal executive officer and principal financial officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our management, with the participation of our principal executive officer and principal financial officer has concluded that, based on such evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective due to the material weakness described below. However, our management, including our principal executive officer and principal financial officer, has concluded that, notwithstanding the identified material weakness in our internal control over financial reporting, the financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Material Weakness in Internal Controls Over Financial Reporting
We identified a material weakness in our internal control over financial reporting that exists as of September 30, 2024. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We determined that we had a material weakness because, due to our small size, and our limited number of personnel, we did not have in place an effective internal control environment with formal processes and procedures, including journal entry processing and review, to allow for a detailed review of accounting transactions that would identify errors in a timely manner.
Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
Management’s Plan to Remediate the Material Weakness
With the oversight of senior management, management is working towards remediation of these weaknesses in 2024 including addition of accounting personnel and to evaluate and implement procedures that will strengthen our internal controls. While we believe these measures will remediate the material weakness identified and strengthen our internal control over financial reporting, there is no assurance that we will demonstrate sufficient improvement that the material weakness will be remediated. We are committed to continuing to improve our internal control processes and will continue to diligently review our financial reporting controls and procedures.
Changes in Internal Control
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS.
In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors in our 2023 Form 10-K, as filed with the SEC on April 1, 2024, which could materially affect our business, financial condition or future results. The risks described in this Form 10-Q and in our 2023 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or future results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
We have incurred operating losses since our inception and we may continue to incur substantial operating losses for the foreseeable future.
We were incorporated on July 20, 2020, and have conducted operations since May 2019. We have incurred operating losses and experienced negative cash flow since our inception. We incurred a net loss of $8,144,821 for the year ended December 31, 2023 and 1,909,993 for the nine months ended September 30, 2024. We anticipate that we will continue to incur operating losses through at least 2024.
We may not be able to generate sufficient revenue from owning and/or managing our online businesses to achieve profitability. We expect to continue to make significant operating and capital expenditures for acquisitions of online businesses, technologies, or other assets; and for marketing, working capital and general corporate purposes. As a result, we will need to generate significant revenue to achieve profitability. We cannot assure you that we will ever achieve profitability.
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Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
As described in Note 3 of our audited financial statements contained in our Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on April 1, 2024, our auditors have issued a going concern opinion on our December 31, 2023 financial statements, expressing substantial doubt that we can continue as an ongoing business for the next twelve months after issuance of their report based on our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing, debt financing and/or related party advances, however there is no assurance of additional funding being available. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we cannot raise the necessary capital to continue as a viable entity, we could experience a material adverse effect on our business and our stockholders may lose some or all of their investment in us.
We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative and acquisition activities are forward-looking statements and involve risks and uncertainties.
If we do not succeed in raising additional funds on acceptable terms, we could be forced to delay or curtail potential website acquisitions, forego sales and marketing efforts, and forego potential attractive business opportunities. Unless we secure additional financing, we will be unable to continue to execute on our business plan.
We require additional capital to support our present business plans and our anticipated business growth, and such capital may not be available on acceptable terms, or at all, which would adversely affect our ability to operate.
We will require additional funds to further develop our business plan. Based on our current operating plans, we believe we need to make additional acquisitions of online businesses, technologies, or other assets to generate enough cashflow to carry our overhead costs. We may choose to raise additional capital in order to expedite and propel growth more rapidly. We can give no assurance that we will be successful in raising any additional funds. Additionally, if we are unable to generate sufficient revenues from our sales and operating activities, we may need to raise additional funds, doing so through debt and equity offerings, in order to meet our expected future liquidity and capital requirements, including capital required for operations. Any such financing that we undertake will likely be dilutive to current stockholders.
We intend to continue to make investments to support our business growth, including acquiring additional online businesses. In addition, we may also need additional funds to respond to other business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, satisfying debt and series A preferred stock payment obligations, and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek to raise additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all our business plans.
We cannot predict our future capital needs and we may not be able to secure additional financing.
We will need to raise additional funds in the future to fund our working capital needs and to fund further expansion of our business. We may require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, we may have to delay or scale back our growth plans.
We may not be able to maintain a listing of our common stock and publicly-traded warrants on Nasdaq.
Although our common stock and publicly-traded warrants are listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our common stock and publicly-traded warrants may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock and publicly-traded warrants from Nasdaq may materially impair our shareholders’ ability to buy and sell our common stock and publicly-traded warrants and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock and warrants. The delisting of our common stock and publicly-traded warrants could significantly impair our ability to raise capital and the value of your investment.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following is a summary of all securities that we have sold during the period covered by this report without registration under the Securities Act of 1933, as amended (the “Securities Act”):
During the three months ended September 30, 2024, our Company sold 400 shares of Series A Preferred Stock at $25 per share for total consideration of $10,000.
All of the securities were offered and sold in reliance upon exemptions from registration under Section 4(a)(2) of the Securities Act and/or (i) Rule 506 of Regulation D promulgated thereunder; or (ii) Regulation S promulgated thereunder. No underwriters were utilized, and no commissions or fees were paid with respect to any of the above transactions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Trading Arrangements
During the nine months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5- 1(c) under the Exchange Act or any “non-Rule 10b5-1 arrangement” as defined in Item 408(c) of Regulation S-K.
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ITEM 6. EXHIBITS.
The following exhibits are included herein:
Exhibit No. |
| Description of Exhibit |
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| Form of Corporate Guarantee (Incorporated by reference to our Form 8-K filed on 10/22/2024) | |
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101.INS* |
| Inline XBRL Instance Document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
**Furnished herewith.
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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.
| ONFOLIO HOLDINGS INC. |
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Date: November 14, 2024 | By: | /s/ Dominic Wells |
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| Dominic Wells Chief Executive Officer (Principal Executive Officer) |
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Date: November 14, 2024 | By: | /s/ Esbe van Heerden |
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| Esbe van Heerden Chief Financial Officer (Principal Financial Officer) |
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