10-K: Bespoke Extracts Reports Increased Sales but Continues to Face Going Concern Challenges in Fiscal Year 2024

Bespoke Extracts, Inc. reports increased sales for the year ended December 31, 2024, but continues to face significant financial challenges, including operating losses and a working capital deficit.

Summary

• Bespoke Extracts, Inc., a Nevada corporation operating in the regulated cannabis market, reported its annual results for the fiscal year ended December 31, 2024.
• The company's common stock is traded on the OTCQB under the symbol BSPK.
• Bespoke Extracts operates primarily through its wholly-owned subsidiary, Bespoke Extracts Colorado, LLC, focusing on the production and sale of pre-rolled marijuana joints and processing services.
• The company discontinued its CBD operations to focus on regulated cannabis markets.
• Sales for the year ended December 31, 2024, increased to $1,117,452 from $785,453 in the previous year, driven by sales of Fresh Joints and related services.
• The cost of goods sold increased to $664,517, representing 59% of sales, compared to 56% in 2023, due to higher packaging and input costs.
• Operating expenses decreased to $1,447,563 from $1,815,142, primarily due to lower stock-based compensation.
• The company reported a net loss of $1,037,475, or $0.10 per share, compared to a net loss of $1,482,843, or $0.15 per share, in 2023.
• As of December 31, 2024, the company had cash of $60,305 and a working capital deficit of $953,414.
• The company's accumulated deficit stood at $26,404,116 as of December 31, 2024.
• The financial statements have been prepared assuming the company will continue as a going concern, but there is substantial doubt about its ability to do so.
• The company's ability to continue as a going concern is dependent on generating profitable operations and/or obtaining necessary financing.
• The company is pursuing strategic acquisitions and may use a combination of cash, shares, warrants, or notes to complete these acquisitions.
• The company faces risks associated with the federal illegality of cannabis, restricted access to banking, and evolving state regulations.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While sales increased, the company continues to face significant financial challenges, including operating losses, a working capital deficit, and doubt about its ability to continue as a going concern. The need for additional capital raises further underscores the company's financial vulnerability.

Positives

• Sales increased from $785,453 in 2023 to $1,117,452 in 2024, indicating growing market traction.
• Net loss decreased from $1,482,843 in 2023 to $1,037,475 in 2024, suggesting improved operational efficiency.
• Operating expenses decreased from $1,815,142 to $1,447,563, primarily due to lower stock-based compensation.
• The company amended its lease agreement to reduce monthly base rent to $4,000, improving cash flow.
• The company is actively pursuing strategic acquisitions to expand its business.

Negatives

• The company has a history of operating losses and an accumulated deficit of $26,404,116 as of December 31, 2024.
• The company has a working capital deficit of $953,414 as of December 31, 2024.
• The company's auditors have raised substantial doubt about its ability to continue as a going concern.
• The company is dependent on raising additional capital to fund its operations and expansion.
• The company faces risks associated with the federal illegality of cannabis and restricted access to banking.

Risks

• The company's ability to continue as a going concern is dependent on generating profitable operations and/or obtaining necessary financing.
• The company faces risks associated with the federal illegality of cannabis, which could lead to enforcement actions.
• The company's access to banking and financial services is restricted due to the nature of its business.
• The company is subject to evolving state regulations, which could impact its operations.
• The company faces intense competition in the regulated cannabis industry.
• The company's internal controls over financial reporting are not effective, which could lead to material misstatements in its financial statements.
• The company is subject to risks inherent in an agricultural business, including the risk of crop failure.
• The company may be subject to the risks associated with future acquisitions, which may increase capital requirements, dilute shareholders, cause the company to incur debt or assume contingent liabilities, and subject the company to other risks.

Future Outlook

The company plans to expand its focus to regulated cannabis markets in the United States, potentially acquiring related businesses in additional states. The company expects to raise additional capital, both in the form of debt and new equity offerings, during the next few years.

Industry Context

The company operates in the regulated cannabis industry, which is subject to evolving state and federal regulations. The industry is highly competitive, with significant competition from both licensed and illicit operators. The company also faces competition from psychoactive hemp-based products.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• To perform a proper comparison, we would need data from comparable companies in the Colorado cannabis market, such as revenue per employee, gross margins, and operating expenses as a percentage of revenue.
• Without this data, it is difficult to assess whether Bespoke Extracts' performance is above or below industry benchmarks.
• Comparable companies might include other small to medium-sized cannabis manufacturers and distributors in Colorado, such as Terrapin Care Station, LivWell Enlightened Health, and The Green Solution, although their financial information may not be readily available as they are privately held or part of larger entities.
• Additionally, comparing Bespoke Extracts to larger, multi-state operators (MSOs) like Curaleaf, Trulieve, or Green Thumb Industries would not be appropriate due to significant differences in scale and resources.

Legal Proceedings

• In March 2025, the Company was threatened with litigation by a former employee alleging violations of the Colorado Wage Claim Act and breach of contract.

Related Party Transactions

• Infinity Management, LLC, a company controlled by Michael Feinsod, the Company's chief executive officer, loaned the Company an additional $469,954 during the year ended December 31, 2023.
• $849,500 of notes payable were converted into a 5% interest bearing note due June 30, 2025, effective November 11, 2024 the Company and Infinity Management, LLC, agreed to extend the maturity of the Infinity Note until June 30, 2026.
• During the year ended December 31, 2024 Mr. Feinsod forgave a total of $321,772 which was treated as a contribution of capital.

Stakeholder Impact

• Shareholders face the risk of dilution from future equity offerings.
• Employees' job security is uncertain due to the company's financial challenges.
• Customers may be concerned about the company's ability to continue providing products and services.
• Creditors face the risk of non-payment if the company is unable to generate sufficient cash flow or obtain financing.

Next Steps

• The company needs to generate profitable operations and/or obtain necessary financing to meet its obligations and repay its liabilities.
• The company plans to expand its focus to regulated cannabis markets in the United States, potentially acquiring related businesses in additional states.
• The company will continue to monitor compliance with state and federal regulations.
• The company intends to take measures to cure the weaknesses in its internal controls over financial reporting.

Key Dates

Keywords

cannabis, Bespoke Extracts, marijuana, pre-rolls, Colorado, financial results, annual report, OTCQB, BSPK, WonderLeaf, acquisitions, going concern, risk factors, regulation