10-K: Freedom Holdings Inc. Reports Fiscal Year 2023 Results, Transitioning to Cannabis Operations

Freedom Holdings, Inc. reports its fiscal year 2023 results, highlighting a transition from consulting to cannabis cultivation and sales, while also noting ongoing financial challenges.

Summary

• Freedom Holdings, Inc. (FHLD) was initially formed to participate in the mortgage industry but shifted focus after the 2008 housing crisis.
• The company has since explored oil and gas leases, asphalt shingle recycling, and business consulting.
• On January 18, 2023, FHLD entered into a definitive agreement with MedCann Industries, Inc., resulting in MedCann acquiring a majority stake in Freedom.
• As part of the agreement, MedCann purchased 40,000,000 restricted common shares of Freedom for $50,000.
• The company's operations are now focused on developing as a grower and seller of cannabis for medical use.
• For the fiscal year ended September 30, 2023, the company reported no revenue.
• Total operating expenses were $395,456, including $351,000 in stock-based compensation.
• The company's total assets were $588, and total liabilities were $412,477.
• The company reported a net loss of $399,918 for the year ended September 30, 2023.
• The company has an accumulated deficit of $10,177,748 as of September 30, 2023.
• The company's independent auditor has issued a going concern opinion, indicating substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 2

Explanation: The document paints a concerning picture of the company's financial health and operational challenges. The lack of revenue, significant losses, going concern opinion, and ineffective internal controls all contribute to a very negative sentiment.

Positives

• The company has a new strategic direction focused on the growing medical cannabis market.
• MedCann Industries has assumed the debt and ongoing operational costs of Freedom Holdings, Inc.
• The company has brought all financial disclosures current.
• The company is working to reactivate its 15c211 with FINRA to improve liquidity.

Negatives

• The company has no revenue for the fiscal year ended September 30, 2023.
• The company has a significant accumulated deficit of $10,177,748.
• The company's independent auditor has issued a going concern opinion.
• The company has a working capital deficit of $325,600.
• The company's internal controls over financial reporting were deemed ineffective.
• The company is dependent on the services of its CEO, John Vivian.
• The company's stock is subject to penny stock rules, which may limit marketability.
• The company has a limited operating history and minimal assets.

Risks

• The company has a limited operating history and minimal assets, raising concerns about its ability to continue as a going concern.
• The company is dependent on the services of its CEO, John Vivian, and his loss could harm the business.
• Shareholder approval for acquisitions may be difficult to obtain due to the voting control of the CEO.
• The time and cost of preparing a private company to become a public reporting company may preclude attractive mergers or acquisitions.
• The company may be subject to further government regulation, which could adversely affect operations.
• The company's stock has limited liquidity and is subject to penny stock rules.
• The company has never paid dividends and does not intend to in the foreseeable future.
• The company may not be able to structure acquisitions to result in tax-free treatment.
• The company's business will have no meaningful increase in revenue unless it merges with or acquires an operating business.
• The company intends to issue more shares in a merger or acquisition, which will result in substantial dilution.
• The company's management has limited experience in mergers and acquisitions.
• The company has not conducted market research or identified specific business opportunities.
• The company's shares may be subject to penny stock rules, which might restrict marketability.
• The company's stock may not be listed on NASDAQ or any other securities exchange.
• The company's authorization of blank-check preferred stock could be used to discourage a takeover.
• The company's lack of diversification should be considered a substantial risk.

Future Outlook

The company's future operations and direction are focused on the development as a grower and seller of cannabis for medical use. The company plans to raise capital to implement its strategy but cannot guarantee that additional funding will be available on favorable terms.

Management Comments

• Management believes that the financial statements and other information presented are materially correct.
• Management anticipates that it will likely be able to effect only one business combination.
• Management believes that there are numerous firms seeking even the limited additional capital which we will have and/or perceived benefits of becoming a publicly traded corporation.

Industry Context

The company's transition to the cannabis industry reflects a broader trend of companies exploring opportunities in the rapidly growing legal cannabis market. However, the company's financial challenges and lack of operating history present significant risks compared to more established players in the sector.

Comparison to Industry Standards

• The company's lack of revenue and significant losses are not uncommon for early-stage companies in the cannabis industry, but the magnitude of the accumulated deficit and the going concern opinion are concerning.
• Compared to established cannabis companies like Canopy Growth or Tilray, which have significant revenue and infrastructure, Freedom Holdings is in a very early stage of development.
• The company's reliance on stock-based compensation is also a common practice in the industry, but the high percentage of operating expenses attributed to this is notable.
• The company's lack of internal controls is a significant concern compared to industry standards for public companies.

Management Changes

Related Party Transactions

• On December 30, 2013, the Company received a $56,978 Demand Instalment Loan from Bruce Miller.
• During the year ended September 30, 2023, a previously related party, Mr. Brian Kistler loaned the company $8,531 for operations.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and potential for stock dilution.
• Employees may be impacted by the company's financial challenges and potential restructuring.
• Customers are not yet impacted as the company is in the development phase of its cannabis operations.
• Suppliers and creditors face risk due to the company's going concern status.

Next Steps

• The company plans to raise capital to implement its strategy.
• The company is working to reactivate its 15c211 with FINRA.
• The company intends to continue to search for a qualified individual for hire as a financial expert.
• The company may engage in one or more private offerings of its securities.

Key Dates

Keywords

cannabis, medical cannabis, MedCann Industries, reverse merger, going concern, penny stock, financial statements, operating expenses, stock dilution, acquisition, internal controls, SEC reporting