10-K: Farmhouse Inc. Shifts Strategy Amidst Deep Losses

Farmhouse Inc. reported a net loss of $464,343 for 2024, continuing its financial struggles while pivoting from Web3 to a casual lifestyle brand holding company through planned acquisitions.

Summary

• Net loss for the year ended December 31, 2024, was $464,343, an improvement from a net loss of $560,789 in 2023.
• Revenue significantly decreased to $4,154 in 2024 from $15,227 in 2023, primarily due to the discontinuation of the NFT licensing business.
• Total operating expenses decreased to $410,668 in 2024 from $517,843 in 2023, mainly due to lower stock-based compensation and consulting fees.
• Cash and cash equivalents were $413 as of December 31, 2024, compared to $0 in 2023.
• The working capital deficit increased to $2,334,745 as of December 31, 2024, from $1,944,281 in 2023.
• The company is transitioning from a wellness industry technology and brand development focus to a casual lifestyle brand holding company, discontinuing its Web3 licensing initiatives.
• A Share Exchange Agreement with Thrown, LLC (a beverage company) was entered into on September 10, 2024, to acquire all membership interests for 5,130,000 shares, but the transaction has not closed as of June 20, 2025.
• A non-binding term sheet was entered into with Ledgewood Holdings, LLC (a multi-unit franchise operator with approximately $31 million in trailing twelve-month revenue) on June 9, 2025, for a proposed acquisition involving up to 31,000,000 shares.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by recurring losses, a substantial working capital deficit, and multiple defaulted debts, leading to a going concern doubt. While a strategic pivot towards acquisitions and recent small capital raises offer a glimmer of future potential, the current financial state is highly precarious and the proposed acquisitions are not guaranteed.

Positives

• Net loss decreased to $464,343 in 2024 from $560,789 in 2023.
• Operating expenses decreased by approximately 20.7% to $410,668 in 2024, primarily due to reduced stock-based compensation and consulting fees.
• Successfully raised $120,000 in new cash proceeds from convertible notes and converted $278,100 of existing obligations into convertible notes subsequent to year-end.
• Actively pursuing strategic acquisitions, including a non-binding term sheet with Ledgewood Holdings, LLC, which has significant trailing twelve-month revenue of $31 million.

Negatives

• Revenue declined significantly by 72.7% to $4,154 in 2024 from $15,227 in 2023, due to the discontinuation of the NFT licensing business.
• The company has a history of recurring losses and a substantial working capital deficit of $2,334,745 as of December 31, 2024, raising substantial doubt about its ability to continue as a going concern.
• The Share Exchange Agreement with Thrown, LLC, entered into on September 10, 2024, has not closed as of June 20, 2025, and discussions are ongoing.
• Several notes payable and related party loans are in default as of June 20, 2025, including a $45,000 convertible note (18% interest) and a $50,000 loan (6% interest).
• The company has material weaknesses in internal control over financial reporting, including a lack of defined internal control structure, insufficient accounting resources, limited segregation of duties, and inadequate review procedures.
• The company has not filed corporate income tax returns for fiscal years after 2018, which may expose it to penalties and potential limitations on its net operating loss carryforwards.
• The company relies heavily on related party advances and borrowings from officers to fund operations.

Risks

• Substantial doubt about the ability to continue as a going concern due to recurring losses and a net capital deficiency.
• Inability to secure additional financing on acceptable terms or at all, which may require curtailment or cessation of operations.
• Uncertainty regarding the completion of proposed acquisitions (Thrown, Ledgewood) on proposed terms or at all, as they are subject to definitive documentation, due diligence, and Board approval.
• Reliance on a single customer for a significant portion of past NFT licensing revenue (90-91%), which has now ceased.
• Common stock is classified as a penny stock, which may adversely affect liquidity and increase transaction costs for investors.
• Default on multiple notes payable and related party loans, potentially leading to acceleration of payments.
• Material weaknesses in internal control over financial reporting, increasing the risk of material misstatements or fraud.
• Failure to file timely corporate income tax returns for fiscal years after 2018, potentially leading to penalties, interest, or disallowance of net operating loss carryforwards.
• Lack of formal corporate governance structures, including no separate audit, nominating, or compensation committees, and no formal Code of Ethics.
• Potential conflicts of interest due to significant ownership by officers and directors (45.7%) and reliance on related party transactions.
• Cybersecurity risks, despite monitoring by the CTO, as the framework is still developing.

Future Outlook

The company is focused on strategic acquisitions to diversify into scalable industries that appeal to broad demographics, leveraging its public company platform to enhance shareholder value. It does not expect to generate significant revenues from existing operations until a strategic acquisition is completed. Management intends to address going concern uncertainty through continued financing from officer loans, third-party borrowings, and equity sales. The proposed acquisition of Ledgewood Holdings, LLC, if completed, would involve significant equity issuance and a monthly operating support contribution to the company.

Management Comments

• Management continues to focus on maintaining expense discipline and exploring strategic opportunities to enhance stockholder value.
• Management intends to address this uncertainty [going concern] through continued financing from officer loans, third-party borrowings, and equity sales.
• While no assurance can be given, management believes these sources will provide sufficient liquidity to support operations in the near term.

Industry Context

The company is pivoting from the niche Web3/wellness industry, which yielded limited revenue, towards the broader and more established casual lifestyle brand and food/beverage sectors. This strategic shift aims to diversify revenue streams and appeal to wider demographics, moving away from a discontinued NFT licensing business. The proposed acquisitions of a nootropic esports beverage company (Thrown, LLC) and a multi-unit franchise operator (Ledgewood Holdings, LLC) indicate an intent to enter consumer-facing markets with established revenue bases, contrasting with its prior, less successful, digital asset focus.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess the company's performance against global benchmarks. The company is a smaller reporting company with limited operations and is in a transitional phase, making direct comparisons difficult based solely on the provided information.

Corporate Governance

Legal Proceedings

• Litigation initiated in 2017 by Farmhouse DTLA against Los Angeles Farmers, Inc. under a Strategic Consulting Agreement is considered closed, with no further expected proceeds.
• No active litigation as of December 31, 2024.

Related Party Transactions

• Company officers advanced $41,758 to the company in 2024; repayments totaled $1,167 (non-cash).
• As of December 31, 2024, loans from company officers totaled $69,549.
• The company owed its contracted CFO $218,000 as of December 31, 2024, for services provided since 2021.
• An unsecured promissory note of $4,500 was entered into with the CEO on August 12, 2024, bearing 20% interest, which matured and is in default as of June 20, 2025.
• A Convertible Promissory Note of $25,000 was issued to the spouse of a Company director on April 18, 2025, on the same terms as those offered to unaffiliated investors.
• Officers and directors owned approximately 45.7% of the company's common stock as of December 31, 2024.

Stakeholder Impact

• Shareholders face significant dilution risk from potential future equity raises and convertible note conversions. Existing shares are classified as penny stock, affecting liquidity. The going concern doubt poses a substantial risk to investment value, though potential upside exists if strategic acquisitions are successful.
• Employees (two full-time executive officers and several independent contractors) may be impacted by financial instability and reliance on accrued, unpaid salaries for executives, potentially affecting morale and retention.
• Customers from the discontinued NFT licensing business will no longer generate revenue. Future customer base will depend on the success of new ventures like Thrown and Ledgewood.
• Suppliers and creditors may face payment difficulties, as indicated by multiple defaulted notes and related party loans, which could impact future credit terms and relationships.
• Management bears high personal financial exposure through loans to the company and accrued unpaid salaries.

Next Steps

• Complete the Share Exchange Agreement with Thrown, LLC.
• Execute definitive documentation, complete due diligence, and obtain Board approval for the Ledgewood Holdings, LLC acquisition.
• Resolve or refinance the approximately $5 million in outstanding debt secured by Ledgewood's Jamba Juice assets.
• Obtain additional financing through equity or debt offerings and strategic partnerships to support ongoing operations and strategic growth initiatives.
• Remediate material weaknesses in internal control over financial reporting by implementing formal control processes and hiring additional accounting personnel.
• Complete all outstanding corporate income tax filings for fiscal years after 2018.
• Consider establishing a more formal process for shareholder communications with the Board of Directors.
• Consider adopting a formal Code of Ethics.
• Consider appointing an audit committee financial expert.

Key Dates

Recommendation

The company faces severe financial distress, including recurring losses, a substantial working capital deficit, and multiple defaulted debts, which collectively raise significant doubt about its ability to continue as a going concern. While a strategic pivot and potential acquisitions are noted, these are highly uncertain and speculative given the company's precarious financial position and governance weaknesses. The current financial state presents an unacceptably high risk for investors, warranting an exit.

Keywords

Casual lifestyle brand, Holding company, Acquisitions, Food and beverage, Nootropic esports beverage, Franchise operator, SEC filing, 10-K, Financial reporting, Going concern, Microcap company, Corporate governance, Internal controls, Convertible notes, Related party transactions