Authentic Holdings, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

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: 000-52047

50 Division Street Somerset NJ 08873

(Address of principal executive offices)

(732) 695-4389

(Registrant’s telephone number, including area code)

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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

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). Yes ☒ ☐    No ☐

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

Securities registered pursuant to Section 12(b) of the Act: None

As of August 14, 2023, there were 1,978,087,926 shares outstanding of the registrant’s common stock.

AUTHENTIC HOLDINGS, INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AUTHENTIC HOLDINGS INC. 

Condensed Consolidated Balance Sheets  

As of June 30, 2023 and December 31, 2022

The accompanying notes are an integral part of these condensed consolidated financial statements.

AUTHENTIC HOLDINGS INC.

Condensed Consolidated Statement of Operations

For the Three and Six Months Ended June 30, 2023 and 2022

The accompanying notes are an integral part of these condensed consolidated financial statements.

AUTHENTIC HOLDINGS INC.

 Condensed Consolidated Statement of Stockholders' Deficit  

For the Three and Six Months Ended June 30 , 2023 and 2022

The accompanying notes are an integral part of these condensed consolidated financial statements.

AUTHENTIC HOLDINGS INC.

Condensed Consolidated Statement of Cash Flows

For the Six Months Ended June 30, 2023 and 2022

The accompanying notes are an integral part of these condensed consolidated financial statements.

AUTHENTIC HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

NOTE 1 – DESCRIPTION OF BUSINESS AND GOING CONCERN

Authentic Holdings Inc. (formerly Global Fiber Technologies, Inc.) was incorporated in Nevada on March 25, 2005 as “Premier Publishing Group, Inc.” Originally formed as a publishing company, the Company ceased its publishing operations in or around 2007.

After ceasing the publishing operations, the Company's operations consisted solely of utilizing the expertise of its board Members and outside agents to further the efforts of its advisory services business plan through a wholly owned subsidiary known as Trident Merchant Group, Inc.  On April 20, 2011 the Company filed an amendment with the Nevada Secretary of State for a name change to Premiere Opportunities Group, Inc.  which became official on June 29, 2011.

During the fourth quarter of 2013, the Company became involved in the manufacturing and global distribution of ladies’ apparel.  However, in 2014 the Company stopped developing a footprint in the apparel business due to cash restraints and logistics and ceased agreements with all third parties.  On August 4, 2014,  the Company filed an amendment to the articles of incorporation to change the name of the Company to Global Fashion Technologies, Inc. 

On January 11, 2017 the Company filed an amendment to change the name of the Company to Eco Tek 360, Inc.  In November 2018, the Company created a new subsidiary, Fiber Chain, Inc., for the purpose of operating as an intermediary providing an expedited trading platform for buyers and sellers to efficiently consummate fiber transactions. The Company owns 51% of ECO CHAIN 360, Inc. ECO CHAIN 360, Inc. has had no operations to date nor did it have assets or liabilities as of March 31, 2023 or 2022.

On April 18, 2019, the Company filed an amendment to change the name of the Company to Global Fiber Technologies, Inc.

On June 18, 2019, the Company completed its acquisition of assets from AH Originals, Inc. (“AHO”), a corporation controlled by the same owner group of Global Fiber Technologies, Inc., for the consideration of 6,400,000 shares of common stock of the Company to be issued and the issuance of a promissory note of $447,150 that bears 3% interest per annum and has a one-year term with eight options to extend the maturity date for three-month periods. In addition, the Company issued to AHO 200,000 common shares of Authentic Heroes, Inc. (“AHI”), a subsidiary created by the Company, to hold the purchased assets. AHI has commenced minimal operations.

The Company’s business plan is to operate three separate subsidiaries. Authentic Heroes is a company with proprietary know how and patented technology that is currently operating in the memorabilia industry. It has licenses with Universal Music Group artists RUN DMC, YUNGBLUD and is in discussions with several other music artists. Ecotek360 is a fiber rejuvenation technology company. It plans on offering branded fabrics, apparel and uniforms to the corporate, hotel, hospital and military markets and is still in the development stage but running testing in the joint venture with Fiber Conversion Inc a joint development partner in Broadalbin NY. Fiber Chain, Inc. is still in the development stage and its business plan is to operate as an intermediary providing an expedited trading platform for buyers and sellers to efficiently consummate fiber transactions.

On April 26, 2023, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Maybacks Global Entertainment LLC, an Arizona limited liability company (“Maybacks”), and the members of Maybacks. As a result of the transaction, Maybacks became a wholly-owned subsidiary of the Company. In accordance with the terms of the Purchase Agreement, at the closing an aggregate of 100,000 shares of the Company’s newly created Series C Preferred Stock were issued to the holders of Maybacks in exchange for their membership interests of Maybacks.

The Purchase Agreement includes a funding obligation, which requires the Company to provide capital to fund the monthly expenses of Maybacks. 

On June 20, 2023, the Company closed an Asset Purchase Agreement (the “Asset Agreement”) with Goliath Motion Picture Promotions owned by Priscella Cooper (the “Seller”). On the Closing Date, pursuant to the Asset Agreement, the Company acquired various full-length motion pictures and serial television shows (the “Assets”). In exchange for the Assets, the Company issued to the Seller 100,000 shares of the Company’s Series D Preferred Stock, par value $0.001 with state value of $50 per share.

Management plans to raise additional debt or equity and continue to settle obligations by issuing stock, as well as grow other debt and equity until the Company generates positive cash flow from an operating company. However, the Company’s financial statements show an accumulated deficit of $37.7 million as of June 30, 2023, with a net working capital deficit of $5.6 million and limited cash resources. These factors raise doubts about the Company’s ability to continue as a going concern within the next year.

The Company's ability to continue as a going concern depends on its ability to repay or settle its current indebtedness, generate positive cash flow, and raise capital through equity and debt financing or other means on favorable terms. If the Company cannot obtain additional funds when required or on favorable terms, management may be necessary to restructure the Company or cease operations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in U.S. dollars. The Company uses the accrual basis of accounting and has adopted a December 31 fiscal year-end. 

Principles of Consolidation

The accompanying consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries, Trident Merchant Group, Inc. and Progressive Fashions Inc., and its majority-owned subsidiaries, Leading Edge Fashion, LLC, Pure361, LLC and ECO CHAIN 360, Inc., which are 51% owned. All significant intercompany accounts and transactions have been eliminated. As noted in Note 1, our 51% owned subsidiaries, Pure361, Leading Edge Fashions, LLC, and ECO CHAIN 360, Inc., had no operations, assets, or liabilities as of December 31, 2022, and 2021. Because of this, a non-controlling interest is not reflected in these financial statements. In addition, the Company has consolidated Authentic Heroes, Inc., of which the Company owns 80%.

The Company filed articles of Merger with the Secretary of State of Nevada to effectuate a merger with its wholly-owned subsidiary, Authentic Holdings, Inc. Shareholder approval was optional under Section 92A.180 of the Nevada Revised Statutes. As part of the merger, the Company’s board of directors authorized a change in our name to “Authentic Holdings, Inc.” The Company’s Articles of Incorporation have been amended to reflect this name change.

Reclassifications

Specific amounts in the prior period’s financial statements have been reclassified to conform to the current presentation. These reclassifications did not affect the reported consolidated net loss.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and investments in money market funds. The Company considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

Inventories

Inventories are stated at the lower cost (first-in, first-out method) or net realizable value.

On June 30, 2023, and December 31, 2022, the Company had no acquired inventories.

Equipment

Property and equipment are stated at cost. Costs of replacements and significant improvements are capitalized, and maintenance and repairs are charged to operations as incurred. Depreciation expense is provided primarily by the straight-line method over the estimated useful lives of the assets as follows:

Depreciation expenses amounted to $22,236 and $25,636 for the six months ended June 30, 2023 and 2022, respectively.

The long-lived assets of the Company are reviewed for impairment under ASC 360, “Property, Plant and Equipment” (“ASC 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the six months ended June 30, 2023, and 2022, no impairment losses have been identified.

Intangible Assets

The Company accounts for intangible assets (including trademarks and website) under ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including identifying reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include assessing future cash flows and determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to differ from such estimates materially and affect the determination of fair value and goodwill impairment at future reporting dates.

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology, and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.

We amortize the cost of our intangible assets over the 15-year estimated useful life on a straight-line basis.

The following table sets forth the amortization for the intangible assets on June 30, 2023 and December 31, 2022:

Amortization expenses amounted to $717 and $664 for the six months ended June 30, 2023 and 2022, respectively.

Prepaid interest and deposits

Interest and deposits include prepaid consulting fees, OTC market annual fees, and license agreements. Prepaid interest is amortized over the life of the related liability.

Revenue Recognition

The Company recognizes revenue from its customer contracts following ASC 606 – Revenue from Contracts with Customers. The Company recognizes revenues when satisfying the performance obligation of the associated contract that reflects the consideration expected to be received based on the terms of the contract.

Revenue related to contracts with customers is evaluated utilizing the following steps:

Accounts Receivable

Accounts receivables are recorded following ASC 310,” Receivables.” Accounts receivables are recorded at the invoiced amount and do not bear interest. The Company has no amount recorded as an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of probable credit losses in its existing accounts receivable. Based on management’s estimate and all charges being current, the Company has not deemed it necessary to reserve for doubtful accounts at this time.

Leases

Effective October 1, 2019, the Company adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), and additional ASUs issued to clarify and update the guidance in ASU 2016-02 (collectively, the “new leases standard”), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing essential information about leasing arrangements. The Company adopted the new lease standard utilizing the modified retrospective transition method, under which amounts in prior periods presented were not restated for contracts existing at the time of adoption. The Company currently does not have any operating lease over one year term to require accessing (i) whether any are or contain leases, (ii) lease classification, and (iii) initial direct costs.

Income Taxes

Income taxes are accounted for under the asset and liability method stipulated by ASC 740 “Income Taxes.” Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax bases and operating loss, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized using a valuation allowance. A valuation allowance is applied when in management's view, it is more likely than not that such deferred tax asset will be unable to be utilized.

The Company adopted specific provisions under ASC Topic 740, which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company’s adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes.

The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2017 through 2021. In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of June 30, 2023, and December 31, 2022, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities.

Stock-based Compensation

We account for stock-based awards at fair value on the grant date and recognize compensation over the service period they are expected to vest. Using the Black-Scholes option pricing model, we estimate the fair value of stock options and stock purchase warrants. The estimated value of the portion of a stock-based award that is ultimately expected to vest, considering estimated forfeitures, is recognized as expense over the requisite service periods. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of other comparative securities, equal to the weighted average life of the options. The estimate of stock awards that will ultimately vest requires judgment. To the extent that actual forfeitures differ from estimated forfeitures, such differences are accounted for as a cumulative adjustment to compensation expenses and recorded in the period that estimates are revised.

For the six months ended June 30, 2023, and 2022, the Company incurred no stock-based compensation.

Beneficial Conversion Feature

For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid-in capital and related debt discount.

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If the underlying debt is converted, a proportionate share of the unamortized amounts is immediately expensed.

Debt Issue Costs

The Company may pay debt issue costs in connection with raising funds through the issuance of debt, whether convertible or not, or with other considerations. These costs are recorded as debt discounts and are amortized over the life of the obligation to the statement of operations as amortization of debt discount.

Original Issue Discount

Suppose a debt is issued with an original issue discount. In that case, the original issue discount is recorded as a debt discount, reducing the face amount of the note. It is amortized over the life of the debt to the statement of operations as amortization of debt discount. If the underlying debt is converted, a proportionate share of the unamortized amounts is immediately expensed.

Use of Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the valuation of stock-based awards issued and derivatives embedded in financial instruments. Assessments are used to determine depreciation, the valuation of non-cash issuances of common stock, stock options, and warrants, and valuing convertible notes for beneficial conversion features, among others.

Fair Value

FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following Six categories:

Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs.

Level 2—Significant other observable inputs that observable market data can corroborate; and

Level 3—Significant unobservable inputs that observable market data cannot corroborate.

The following table summarizes fair value measurements by level on June 30, 2023 and December 31, 2022, measured at fair value on a recurring basis:

The concentration of Credit Risk

The carrying value of short-term financial instruments, including cash, restricted cash, trade accounts receivable, accounts payable, accrued expenses, and short-term debt, approximates the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate the market. The Company maintains cash balances at financial institutions insured by the FDIC. On June 30, 2023 and December 31, 2022, the Company had no amounts above the FDIC limit.

New Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 "Debt—Debt with Conversion and Other Options." The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has adopted this standard and determined no material impact on its financial statements.

NOTE 3 – CAPITAL STOCK

Preferred Stock

Series B Preferred Stock

In September 2014, the Company designated a "Series B Convertible Preferred Stock" (the "Series B Preferred").  The  Company had originally allocated 1,000,000 shares to the series, par value $0.001 per share, and features included super voting rights of 10,000 votes per share, non-cumulative dividends at 8% per annum, accrued daily, and a liquidation preference over the common stock, along with other features contained in the Certificate of Designation for the Series B Preferred Stock filed with the State of Nevada.

On June 20, 2023, the Board of Director and the outstanding shareholders of the Series B Preferred Stock consented to amend and restate the Certificate of Designation for the Series B Preferred Stock, to (i) reduce the number of authorized preferred stock designated to the Series B Preferred Stock to 400,000 shares, (ii) revise the liquidation preference of the Series B Preferred Stock from a preferred payout to a parity payout in any liquidation with the common stock and Series C Preferred Stock of the Company, and (iii) to change the language with respect to dividends, such that the Series B Preferred Stock shall have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legally available for that purpose.

Series C Preferred Stock

On April 26, 2023, the Board of Directors created, out of the available shares of preferred stock, par value $0.001 per share, a series of preferred stock known as “Series C Preferred Stock” consisting of 100,000 shares.

Under the terms of the Certificate of Designation for the Series C Preferred Stock, the shares shall not accrue nor pay dividends except as declared by the board of directors in its sole discretion. The Series C Preferred Stock shall rank pari passu with the Series B Preferred Stock and common stock in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.

The outstanding shares of Series C Preferred Stock shall automatically convert into shares of our common stock upon the following to occur:

In the event that the Company goes through a “Change of Control” event, the foregoing milestone achievements above shall be deemed accomplished and all rights to the shares of Common Stock shall immediately vest prior to the close of such Change of Control event.

Series D Preferred Stock

On June 20, 2023, the Board of Directors created, out of the available shares of preferred stock, par value $0.001 per share, a series of preferred stock known as “Series D Preferred Stock” consisting of 100,000 shares.

Under the terms of the Certificate of Designation for the Series D Preferred Stock, the shares shall not accrue nor pay dividends except as declared by the board of directors in its sole discretion. The Series D Preferred Stock shall not have voting rights except as it pertains to altering the rights associated with the Series D Preferred Stock. The Series D Preferred Stock shall have a stated value of $50 per share (the “Stated Value”) and each share shall be entitled to a preference over the common stock, the Series B Preferred Stock, and the Series C Preferred Stock of the Stated Value upon the liquidation, dissolution and winding up of the Company. Each share of Series D Preferred Stock shall be convertible, at any time after three years of issuance or immediately in the event of a change in control at the option of the Holder thereof, into that number of shares of common stock (subject to a beneficial ownership limitation of up to 9.99%) determined by dividing the Stated Value by the Conversion Price, which is closing price of the common stock of the Company on the OTC, on the day immediately prior to the conversion. The Company has the right to redeem the Series D Preferred Stock after five years by making a payment of cash equal to 106% of the sum of an amount equal to the total number of Series D Preferred Stock held by the Holder multiplied by the Stated Value. In the event of a change in control, the company shall redeem the outstanding shares of Series D Preferred Stock by making a payment in cash using the same formula.

Common Stock

As of June 30, 2023, and December 31, 2022, the Company had 1,875,685,127 and 1,557,397,662 shares of its $0.001 par value common stock issued and outstanding, respectively. 

During the six months ended June 30, 2023, the Company issued common shares as follows:

During the six months ended June 30, 2022, the Company had no issuance of shares.

Stock Options

No stock options were issued during the six months ended June 30, 2023, and 2022. All stock options issued previous to 2021 were either exercised or expired.

NOTE 4 – NOTES PAYABLE

Unsecured Notes Payable

On November 25, 2014, the Company issued an unsecured promissory note to an individual in the amount of $100,000 at 10% interest and due on April 1, 2015. On April 1, 2016, the Company entered into a forbearance agreement. The Company was granted an extension of the note through September 30, 2016, in consideration of 150,000 shares of common stock valued at $150,000 with interest accruing after March 29, 2016, at 12%. The lender was issued an additional 50,000 shares valued at $50,000 to extend the note to August 31, 2017. During the year ended December 31, 2019, the Company made a $15,000 repayment. The initial extension fee was amortized ratably over the extension period of 180 days.

The unsecured note and accrued interest were $306,303 as of June 30, 2023 and $250,464 as of December 31, 2022. The note is currently in default.

Convertible Notes Payable

As of June 30, 2023, and December 31, 2022, convertible notes outstanding are $1,022,359 and $1,243,243 respectively.

The following table summarizes the convertible notes included in the balance sheet on June 30, 2023 and December 31, 2022:

NOTE 5 – DERIVATIVE LIABILITIES

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, "Derivatives and Hedging," and determined that the convertible notes should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company accounts for convertible notes and warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.

The following table summarizes the derivative liabilities included in the balance sheet at June 30, 2023:

 Fair Value Measurements Using Significant Observable Inputs (Level 3)

NOTE 6 – RELATED PARTY TRANSACTIONS

During the six months that ended June 30, 2023, and 2022, net cash proceeds of $33,388 and $33,439, respectively, were received from related parties for operating expenses. Advances from related parties accumulated balances as of June 30, 2023, and December 31, 2022, were $417,054 and $383,686, respectively.

Promissory Notes Payable – related party

On June 18, 2019, the Company issued a promissory note at a principal amount of $447,150 as part of the consideration for the acquisition of assets from AH Originals, Inc., a corporation controlled by the same owner group of Authentic Holdings Inc., formerly Global Fiber Technologies, Inc. The promissory note bears 3% interest per annum and has a one-year term with eight options to extend the maturity date for six-month periods.

Convertible Notes Payable – related party

In August 2015, the Company issued an unsecured promissory note to an investor in the amount of $50,000, convertible to common stock at $1.00 per share. The note bears an interest rate of 8% per annum and matured on August 8, 2016. The note is currently unpaid and in default. The note does not contain a beneficial conversion feature. As of June 30, 2023 the note have an accumulated interest of $32,568.

Related Party Loans

During 2016, the Company received loans from the CEO and board of directors totaling $284,900. In the year ended December 31, 2017, the Company received additional loans from these individuals of $160,650. The loans bear interest at 5% per annum and matured on June 30, 2017, and September 30, 2017. During the year ended December 31, 2017, $241,059 of the notes and interest was converted at approximately $0.19 for 580,000 common shares. The conversion of debt resulted in a gain on extinguishment of debt in the amount of $130,859 in the year ended December 31, 2017.

Balances of all loans due to related parties as of June 30, 2023:

NOTE 7 – LEASES

The Company’s right-of-use assets under the operating lease for an office premise had expired on October 1 and the lease was not renewed. There are no lease liabilities balances as of June 30, 2023.

The company currently does not have any long-term operating lease. Our operating lease expenses of $0 for the six months ended June 30, 2023 and $1,601 for the year ended December 31, 2022.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company is a party to six pending litigation matters. The Company does not believe it has any liability, nor has it accrued any liability as of June 30, 2023 and December 31, 2022, for the following:

One matter is entitled Randazzo LLC v. Avani Holdings LLC & Global Fashion Technologies, Inc. The plaintiff initiated this litigation to evict Avani Holdings LLC from its rented premises in California and to recover unpaid rent. The Company does not operate outside the premises and has never signed any leases or other documents with the plaintiff. A judgment of eviction was entered, but the Company does not operate out of the premises in question and therefore did not appear in the matter to oppose the judgment of eviction. The plaintiff is also seeking unpaid rent in the amount of $26,595

The second matter is entitled Patricia Witthuhn v. Global Fashion Technologies, Inc. The plaintiff initiated this litigation to collect wages allegedly due pursuant to her employment with Avani Holdings LLC. The Company never hired Ms. Witthuhn and never acquired Avani Holdings, LLC. Consequently, there is no legitimate cause of action against the Company. However, the Company cannot hire outside counsel for this litigation due to cash flow constraints. The amount being sought by the plaintiff is approximately $15,000.

The third matter is entitled William Corso v. Global Fashion Technologies, Inc. The plaintiff initiated this litigation to collect wages allegedly due pursuant to his employment with Avani Holdings LLC. The Company never hired Mr. Corso and never acquired Avani Holdings, LLC. Consequently, there is no legitimate cause of action against the Company. However, the Company cannot hire outside counsel for this litigation due to cash flow constraints. The amount being sought by the plaintiff is approximately $40,000.

NOTE 9 – NET LOSS PER SHARE

Potentially dilutive securities are excluded from the calculation of net loss per share when their effect would be anti-dilutive. For all periods presented in the consolidated financial statements, all potentially dilutive securities have been excluded from the diluted share calculations as they were anti-dilutive as a result of the net losses incurred for the respective periods. Accordingly, basic shares equal diluted shares for all periods presented.

Potentially dilutive securities were comprised of the following:

NOTE 10 – SUBSEQUENT EVENTS

Subsequent to the reporting period, the Company issued 102,402,799 shares for conversion of notes valued at $61,441. 

The Company had evaluated subsequent events for recognition and disclosure as of August 21, 2023, when the financial statements were available to be issued. No other matters were identified affecting the accompanying financial statements and related disclosures.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, market acceptance of our products and services, successful training and educational seminars, availability of capital, interest rates, competition, cybersecurity, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further, information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

Authentic Holdings Inc. formerly Global Fiber Technologies, Inc. was incorporated in Nevada on March 25, 2005 as “Premier Publishing Group, Inc.”. Originally formed as a publishing company, the Company ceased its publishing operations in or around 2007.

The Company created subsidiary, ECO CHAIN 360, Inc. in November 2018 for the purpose of operating as an intermediary providing an expedited trading platform for buyers and sellers to efficiently consummate fiber transactions. The Company owns 51% of ECO CHAIN 360, Inc. ECO CHAIN 360, Inc. has had no operations to date nor did it have assets or liabilities as of June 30, 2023 or 2022.

On June 18, 2019, the Company completed its acquisition of assets from AH Originals, Inc. (“AHO”), a corporation controlled by the same owner group of Authentic Holdings Inc. formerly Global Fiber Technologies, Inc. for the consideration of 6,400,000 shares of common stock of the Company to be issued and the issuance of a promissory note of $447,150 that bears 3% interest per annum and has a one-year term with eight options to extend the maturity date for Six-month periods. In addition, the Company issued to AHO 200,000 common shares of Authentic Heroes, Inc. (“AHI”), a subsidiary created by the Company, to hold the purchased assets.

The Authentic Heroes, Inc. subsidiary has patented technology that takes the original event worn apparel from an iconic individual and creates “Fan-wear” collectibles containing fibers from that original. All of the Fan-Wear items have an embedded QR Code that registers the items on our Blockchain for its provenance and immutability.

The Authentic Heroes subsidiary is also in the business of creating vinyl records for distribution into retail department stores and online sales and has pressed 100,000 vinyls to date under the heading of “Old is Gold” Christmas.

The Authentic Heroes subsidiary also has completed an NFT Platform on the Etherium Blockchain capable of housing millions of NFTs. The NFT platform has minted 500,000 NFTs as part of free music NFT given away with its “Old is Gold” Christmas album.

On April 26, 2023, the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Maybacks Global Entertainment LLC, an Arizona limited liability company (“Maybacks”), and the members of Maybacks. As a result of the transaction, Maybacks became a wholly-owned subsidiary of the Company.

Maybacks is an Over the Air and Platform driven television network with 25 channels of various programs that include movies, sports, talk shows and live events. Many of those programs being proprietary content. Maybacks generates revenue through the placement of insert advertisements, revenue share programs, channel access fees and barter. Maybacks has agreements with “Local Now” Byron Allen’s National Network and several other networks looking to carry Maybacks programing.

Maybacks is looking to capitalize on the “cutting the cord” phenomenon and take advantage of its low operating costs and ability to offer free TV and channel access for established organizations at a fraction of what cable and satellite dish companies charge. 

There are many Over the Air and platform driven television networks with greater financial resources and experience in running such as Sling TV which is owned by DISH Network as well as many other independent networks. We will compete with many firms, including corporations with large divisions, many of these companies have great financial, technical or marketing resources, longer operating histories, greater brand recognition or larger customer bases than we do and may be able to respond more effectively to changing business and economic conditions than we can.

On June 20, 2023, the Company closed an Asset Purchase Agreement (the “Asset Agreement”) with Goliath Motion Picture Promotions owned by Priscella Cooper (the “Seller”). On the Closing Date, pursuant to the Asset Agreement, the Company acquired various full-length motion pictures and serial television shows (the “Assets”).

As a result of the Asset Agreement and the acquisition of the Assets, the Company plans to “tokenize” all the titles, namely 14,000 plus full-length motion pictures and serial television shows. The Company is currently using the non-tokenized library for content distribution on its own TV Network known as Maybacks. It is the Company’s intention to start the tokenization process within thirty (30) days of this filing and have the “Alpha” version completed within 90 days from its start date. Once the first 1000 movies are tokenized it is the Company’s intention to market those movies on its own Video on Demand and Linear Television platforms. In addition, the Company plans to aggressively market its tokenized platform to other TV networks as well as major film production and distribution companies.

Management plans to raise additional debt or equity and continue to settle obligations by issuing stock, as well as grow other debt and equity until the Company generates positive cash flow from an operating company. However, the Company’s financial statements show an accumulated deficit of $37.7 million as of June 30, 2023, with a net working capital deficit of $5.6 million and limited cash resources. These factors raise doubts about the Company’s ability to continue as a going concern within the next year.

The Company's ability to continue as a going concern depends on its ability to repay or settle its current indebtedness, generate positive cash flow, and raise capital through equity and debt financing or other means on favorable terms. If the Company cannot obtain additional funds when required or on favorable terms, management may be necessary to restructure the Company or cease operations.

Our address is 50 Division Street Suite 500, Somerset NJ 08873. Our corporate website is http://globalfibertechnologies.com/.

We have never declared bankruptcy or been in receivership. We have earned minimal revenues and have limited cash on hand. We have sustained losses since inception and have primarily relied upon the sale of our securities and loans from related parties for funding.

Results of Operations for the Six Months Ended June 30, 2023 and 2022.

Below is a summary of the results of operations for the six months ended June 30, 2023 and 2022.

Revenue

We had no revenue for the six months ended June 30, 2023, and 2022. We expect that revenue will increase in future quarters as we are currently re-building a more fortified, secure, and user-friendly platform for storing and claiming our future NFTs. We are also building a landing platform on top of our current NFT platform, which will be industry-first. This platform’s purpose is to help NFT investors recapture the losses incurred on certain types of projects. In the process, it will create substantial opportunities for us and give us tremendous credibility in the Blockchain and NFT community. We expect to announce the completion of that project in late June and potentially launch it in late August.

We will also start work shortly on a project which will have its roots in the music industry that will include many artists and will be a game-driven project with prizes awarded at the end of each contest period, which could include free concert tickets, backstage passes, airfare to and from the concert. The future looks bright for our NFT platform, and we fully expect it to become an integral part of our company. 

Operating expenses

Operating expenses increased by 39% in the amount of $64,544 for the six months ended June 30, 2023, compared to the same period in 2022. Listed below are the major changes to operating expenses:

General and administrative expenses increased by$19,362 or 37% for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to an increase in advertising and promotion expenses by $23,041 or 250% compared to the previous year advertising and promotional expenses.

Depreciation and amortization decreased by $36,017 for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to $33,334 amortization of right of use asset as a result of the expiration of long-term lease.

Professional and legal fees increased by $39,348 for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to $19,700 in other consulting fees.

Research and development increased by $41,850, for the six months that ended June 30, 2023, compared to the same period in 2022, primarily due to the development of blockchain built put and NFT platform service product lines during the first quarter of 2023.

Other Income (Expenses)

Other expenses was $389,323 for the six months ended June 30, 2023, compared to other income of $352,924 for the same period in 2022, primarily as a result of the loss in the valuation of derivative liabilities $214,483,  and loss in a  joint venture of $50,000

Net Loss

We recorded a net loss of $227,532 for the six months ending June 30, 2023, compared with net income of  $190,324 for the same period in 2022.

Liquidity and Capital Resources

Since its inception, the Company has financed its operations through private placements and convertible notes. The following is a summary of the cash and cash equivalents as of June 30, 2023 and December 31, 2022.

Summary of Cash Flows

Below is a summary of the Company’s cash flows for the six months ended June 30, 2023, and 2022.

Operating activities                                                                                                                  

Net cash used in operating activities was $336,107 during the six months ended June 30, 2023 and consisted of the net loss of $227,532 offset by the non-cash items for the six months ended June 30, 2023, of $298,477 change in change in fair value of derivative liabilities offset by the gain on derivative liabilities due to conversion of note payable, and a $22,954 decrease in depreciation and amortization expenses. The significant change in operating assets and liabilities was $175,000 in advances to Joint Venture.

Net cash used in operating activities was $473,793 for the six months ended June 30, 2022, and consisted of net income of $190,324, offset by a gain in change in derivative liability of $478,754 and an increase in Advances $325,000.

Investing Activities

The Company did not use any funds for investing activities during the six months ended June 30, 2023.  The Company used $4,022 to purchase office equipment during the six months ended June 30, 2022.

Financing activities

Net cash provided in financing activities for the six months ended June 30, 2023, and 2022 was $145,868 and $503,437, respectively, consisting of the following:

Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since inception, resulting in an accumulated deficit of approximately $36,607,845 and a working capital deficit of $4,398,364 as of June 30, 2023, and future losses are anticipated. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue its operations as a going concern is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.

We currently do not see any need to raise additional capital at this time. Our current capital investors are on favorable terms, and we expect that we will be able to execute our business plan, grow the business and start generating greater revenue. We have no current plans to restrict our operations at this time. The Company may require additional funding to finance the growth of its current and expected future operations as well to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Off-Balance Sheet Arrangements

As of June 30, 2023, the Company had no off-balance sheet arrangements.

Limited Operating History; Need for Additional Capital

There is no historical financial information about us upon which to base an evaluation of our performance. We are a development stage company and have yet to generate any revenues from operations to implement our business plan fully. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and competition from larger organizations. We will require equity and/or debt financing to provide for the capital required to implement our plans. We will require additional funds to operate for the next year.

We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are not required to provide the information required by this Item because we are a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As required by the SEC Rules 13a-15(b) and 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below. 

To address these material weaknesses, management engaged financial consultants, performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. We have not remedied the material weaknesses as of June 30, 2023. The Company plans to take remedial action to address these weaknesses during the fiscal year ended 2023.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except the implementation of the controls identified above.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

As of the date of this filing, the Company is a party to Six pending litigation matters.

One matter is entitled Randazzo LLC v. Avani Holdings LLC & Global Fashion Technologies, Inc. This litigation was initiated by the plaintiff in order to evict Avani Holdings LLC from its rented premises in California and to recover unpaid rent. the company does not operate out of the premises in question and has never signed any leases or other documents with the plaintiff. A judgment of eviction was entered, but The company does not operate out of the premises in question and therefore did not appear in the matter to oppose the judgment of eviction. The plaintiff is also seeking unpaid rent in the amount of $26,595.

The second matter is entitled Patricia Witthuhn v. Global Fashion Technologies, Inc. This litigation was initiated by the plaintiff in order to collect wages allegedly due pursuant to her employment with Avani Holdings LLC. The Company never hired Ms. Witthuhn and never acquired Avani Holdings, LLC. Consequently, there is no legitimate cause of action against the Company. However, due to cash flow constraints, the Company is unable to hire outside counsel for this litigation. The amount being sought by the plaintiff is approximately $15,000.

The third matter is entitled William Corso v. Global Fashion Technologies, Inc. This litigation was initiated by the plaintiff in order to collect wages allegedly due pursuant to his employment with Avani Holdings LLC. The Company never hired Mr. Corso and never acquired Avani Holdings, LLC. Consequently, there is no legitimate cause of action against the Company. However, due to cash flow constraints, the Company is unable to hire outside counsel for this litigation. The amount being sought by the plaintiff is approximately $40,000.

Item 1A. Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the six months ended June 30, 2023, the Company issued common shares as follows:

The Company is required to issue a total of 100,000 shares of Series C Preferred Stock in connection with the Purchase Agreement, which shares are expected to be issued soon. 

The Company is required to issue a total of 100,000 shares of Series D Preferred Stock in connection with the Asset Agreement, which shares are expected to be issued soon.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None.

Item 6. Exhibits

** Provided herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.