Eightco Holdings Inc. (NASDAQ:OCTO), a Delaware-based short-term business credit institution, has entered into an asset purchase agreement with Ferguson Containers, LLC and its owners, Edward and Derick Reichard. The agreement, dated November 22, 2024, involves the sale of certain assets from Eightco's wholly-owned subsidiary, Ferguson Containers, Inc.
Under the terms of the deal, the buyer will pay an aggregate of $557,835 in cash, issue a seller note for $2,500,000, and provide earnout consideration based on EBITDA milestones for 2024 and 2025. The seller note is set to bear interest at 9.75% per annum, with monthly installments starting January 1, 2025, and a maturity date of December 31, 2034.
The earnout provisions stipulate that if the Buying Parties achieve $1,000,000 of EBITDA for the respective years, an additional $250,000 will be paid for each milestone. There is a provision for a prorated amount if EBITDA falls between $900,000 and $1,000,000.
Completion of the transaction is subject to approval by Eightco Holdings Inc.'s stockholders, with a meeting expected to occur before the end of 2024. This strategic move is anticipated to reshape Eightco Holdings' business structure and reallocate resources within its portfolio.
The details of the transaction are outlined in the Purchase Agreement, which is filed as Exhibit 2.1 in the company's Form 8-K with the Securities and Exchange Commission. This report is based on a press release statement and aims to provide shareholders with transparent information regarding the agreement's terms and conditions.
In other recent news, Eightco Holdings Inc. reported a series of significant developments. The company has improved its financial health by eliminating $5.4 million in convertible notes, increasing shareholder equity by $23 million, and canceling nearly 5.9 million shares from warrants and convertible securities. Additionally, Eightco Holdings managed to increase its gross profit margin to 22%, a significant rise from the previous year's 12%.
The company has also expanded its at-the-market offering from $2 million to $2.75 million, a move formalized with the Securities and Exchange Commission. Eightco Holdings has successfully regained compliance with two NASDAQ requirements, maintaining a closing bid price above $1.00 for 20 consecutive trading days and reporting stockholders' equity surpassing NASDAQ's minimum requirement.
Moreover, Eightco Holdings executed a 1-for-5 reverse stock split, reducing the number of outstanding shares from approximately 8.9 million to around 1.75 million. The company has also switched its independent registered public accounting firm from Morison Cogen LLP to Stephano Slack LLC, following Morison Cogen's resignation.
InvestingPro Insights
As Eightco Holdings Inc. (NASDAQ:OCTO) navigates this strategic asset sale, InvestingPro data offers additional context for investors. The company's market capitalization stands at a modest $4.39 million, reflecting its small-cap status. This valuation should be considered in light of the company's recent financial performance and the potential impact of the Ferguson Containers asset sale.
InvestingPro Tips highlight some challenges facing OCTO. The company is "quickly burning through cash" and "not profitable over the last twelve months," which may explain the strategic decision to divest certain assets. Additionally, the stock "has taken a big hit over the last six months," with InvestingPro data showing a significant 46.18% price decline in that period.
These insights align with the company's reported financial metrics, including a negative operating income of $7.64 million for the last twelve months as of Q3 2024. The revenue growth has also been negative, with a 47.46% decline over the same period. These figures underscore the importance of the asset sale in potentially improving Eightco's financial position.
Investors considering OCTO should note that InvestingPro offers 10 additional tips for a more comprehensive analysis of the company's prospects in light of this transaction.
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