10-Q: Farmhouse, Inc. Reports Q3 2024 Results; Pursues Acquisition Amidst Going Concern Doubts

Sentiment:

Quarterly Report 25 April 2025 1:33 PM

Farmhouse, Inc. reports minimal revenue and a net loss for Q3 2024, while continuing to pursue a Share Exchange Agreement with Thrown, LLC amidst concerns about its ability to continue as a going concern.

Capital raiseThe company is seeking to raise between $5 million and $10 million in equity financing as a condition of the Share Exchange Agreement with Thrown, LLC.Subsequent to September 30, 2024, the company raised additional capital through a Convertible Note Offering.The company has authorized a Convertible Promissory Note Offering with the following key terms: Interest Rate: 10% per annum, Maturity: Three years from the date of issuance, Automatic Conversion: o If the Company completes a new equity financing of at least $1,000,000, the note will automatically convert into common stock at a price equal to 50% of the offering price.o If the Company's common stock trades at or above $1.00 per share for ten consecutive trading days, the note will automatically convert at a price equal to 50% of the closing price on the tenth trading day.Prepayment: The Company may prepay the notes at any time without penalty; however, each holder will be given five business days prior notice to elect conversion before any such prepayment.Use of Proceeds: Proceeds from the offering are being used for general corporate purposes.

Worse than expectedThe company's revenue decreased significantly compared to the same period in the previous year due to the discontinuation of its NFT licensing business.The company has a significant working capital deficit and limited access to capital.The company's auditors have raised substantial doubt about its ability to continue as a going concern.

Summary

Farmhouse, Inc. reported its financial results for the quarter ended September 30, 2024.
The company had no revenue for the three months ended September 30, 2024, compared to $5,503 for the same period in 2023, due to the discontinuation of its NFT licensing business.
The net loss for the three months ended September 30, 2024, was $107,193, compared to a net loss of $116,358 for the same period in 2023.
For the nine months ended September 30, 2024, revenue was $4,154, compared to $10,707 for the same period in 2023.
The net loss for the nine months ended September 30, 2024, was $362,383, compared to a net loss of $440,750 for the same period in 2023.
As of September 30, 2024, the company had zero cash and a working capital deficit of $2,239,979.
The company is pursuing a Share Exchange Agreement (SEA) with Thrown, LLC, a beverage company, but the transaction has not closed as of April 25, 2025.
The company's history of operating losses and working capital deficit raise substantial doubt about its ability to continue as a going concern.
Subsequent to September 30, 2024, the company raised additional capital through a Convertible Note Offering.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation for Farmhouse, Inc., with declining revenue, a significant working capital deficit, and doubts about its ability to continue as a going concern. While the company is pursuing an acquisition and has secured some additional financing, the overall outlook is negative.

Positives

The net loss decreased for both the three and nine months ended September 30, 2024, compared to the same periods in 2023.
Operating expenses decreased for both the three and nine months ended September 30, 2024, compared to the same periods in 2023.
The company is actively pursuing a Share Exchange Agreement with Thrown, LLC, which could provide new revenue streams.
Subsequent to the reporting period, the company secured additional financing through a Convertible Note Offering.

Negatives

The company reported no revenue for the three months ended September 30, 2024.
Revenue decreased for the nine months ended September 30, 2024, compared to the same period in 2023.
The company has a significant working capital deficit of $2,239,979 as of September 30, 2024.
The company's auditors have raised substantial doubt about its ability to continue as a going concern.
The Share Exchange Agreement with Thrown, LLC has not closed as of April 25, 2025, and there is no assurance it will be completed.
The company is in default on several promissory notes.

Risks

The company's ability to continue as a going concern is uncertain due to its history of operating losses and working capital deficit.
The Share Exchange Agreement with Thrown, LLC may not be completed, which could impact the company's future prospects.
The company may not be able to secure additional financing on acceptable terms, or at all.
The company is in default on several promissory notes, which could lead to legal action.
The company's disclosure controls and procedures were not effective as of September 30, 2024.

Future Outlook

The company does not currently expect to generate significant revenues from existing operations and is focused on completing the Share Exchange Agreement with Thrown, LLC. The company expects to require additional financing to support its ongoing operations and strategic growth initiatives.

Management Comments

Management believes that loans and advances from Company officers, funds raised from the sale of its common stock, and funds raised from loans with third parties allow the Company sufficient capital for operations and to continue as a going concern.

Industry Context

The company's discontinuation of its NFT licensing business reflects a broader trend of cooling interest in NFTs. The company's pursuit of an acquisition is a common strategy for microcap companies seeking to enhance shareholder value.

Comparison to Industry Standards

It is difficult to compare Farmhouse, Inc.'s results to industry standards due to its unique business model and small size.
Many companies in the beverage industry, such as Monster Beverage Corporation and National Beverage Corp., have significantly higher revenue and profitability.
The company's reliance on related party advances and debt financing is not uncommon for early-stage companies, but it also carries significant risks.

Related Party Transactions

On August 12, 2024, the Company entered into an unsecured promissory note with its Chief Executive Officer in the principal amount of $4,500.
Officers of the Company have also provided cash advances and paid Company expenses directly to fund operations.
As of September 30, 2024, Company officers owned approximately 41.7% of the Company's outstanding common stock.
The Company has entered into indemnification agreements with its officers and directors covering certain events arising from their service.
$25,000 issued to the spouse of a Company director on April 18, 2025. This note was issued on the same terms as those offered to unaffiliated investors and was executed on an arms length basis.

Stakeholder Impact

Shareholders face significant risk due to the company's financial difficulties and the uncertainty surrounding its future.
Employees may be impacted by potential cost-cutting measures or a cessation of operations.
Creditors face the risk of non-payment due to the company's defaults on promissory notes.

Next Steps

The company needs to secure additional financing to support its operations.
The company needs to complete the Share Exchange Agreement with Thrown, LLC.
The company needs to improve its financial performance and address the concerns about its ability to continue as a going concern.

Key Dates

Date	Description
2013-06	Company incorporated as Somerset Transition Corporation.
2017-07	Company redomesticated in Nevada and changed its name to Revival, Inc.
2017-08	DTLA entered into a Strategic Consulting Agreement (the SCA) with Los Angeles Farmers, Inc. (LAFI).
2019-06	Company changed its name to Farmhouse, Inc.
2019-08	Company acquired Farmhouse, Inc., a Washington corporation.
2020-01	Confidential settlement with the principals in January 2020 and a judgment in favor of DTLA against LAFI.
2021-04	Judgment in favor of DTLA against LAFI.
2021-05	Board of Directors approved the Farmhouse, Inc. Omnibus Incentive Plan (the 2021 OIP).
2021-12	Company launched its Web3 division.
2024-04	A court-appointed receiver completed the sale of LAFI.
2024-04-26	Company issued unsecured promissory notes to unrelated parties.
2024-05-17	Board granted Restricted Stock Awards (RSAs) totaling 340,000 shares of common stock under the 2021 Omnibus Incentive Plan.
2024-05-28	Company issued 62,500 shares of common stock to an unrelated third party in connection with a Subscription Agreement.
2024-07-02	Company issued unsecured promissory notes to unrelated parties.
2024-07-06	Company issued 187,500 shares to Thrown.
2024-08-09	Company issued unsecured promissory notes to unrelated parties.
2024-08-12	Company entered into an unsecured promissory note with the Company's Chief Executive Officer.
2024-09-06	Board granted an RSA of 10,000 shares of common stock under the 2021 Omnibus Incentive Plan.
2024-09-10	Company entered into a Share Exchange Agreement (SEA) with Thrown, LLC.
2024-09-30	End of the quarterly reporting period.
2025-02-12	Maturity date of the promissory note with the Company's Chief Executive Officer.
2025-02-24	Company issued $10,000 in Convertible Notes to an unrelated individual.
2025-03-18	Company issued $61,000 in Convertible Notes to an unrelated individual.
2025-04-16	Company issued $25,000 in Convertible Notes to an unrelated individual.
2025-04-18	Company issued $25,000 in Convertible Notes to the spouse of a Company director.
2025-04-21	Company issued $12,500 in Convertible Notes to an unrelated individual.
2025-04-25	Date of the report, SEA with Thrown remains unclosed.

Keywords

Farmhouse, Inc., financial results, Share Exchange Agreement, Thrown, LLC, going concern, convertible notes, NFT licensing, working capital, net loss, revenue

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