10-Q: Freedom Holdings Q3 2025: Restatement, New Revenue, Going Concern

Freedom Holdings, Inc. reported Q3 2025 results, revealing new revenue streams post-TAG merger, a significant prior-period financial restatement, and ongoing substantial doubt about its ability to continue as a going concern.

Summary

• Reported revenues of $139,375 for the three months ended June 30, 2025, and $816,528 for the nine months ended June 30, 2025, primarily from Power Purchase Agreements, compared to no revenues in the prior year periods.
• Incurred a net loss of $175,887 for the three months ended June 30, 2025, and $556,758 for the nine months ended June 30, 2025.
• Accumulated deficit increased to $10,886,013 as of June 30, 2025.
• Cash and cash equivalents decreased to $65,078 at June 30, 2025, from $95,815 at September 30, 2024.
• Total assets significantly increased to $61,671,209 at June 30, 2025, from $29,049,999 at September 30, 2024, driven by an increase in solar equipment and notes receivable.
• Total liabilities also significantly increased to $30,923,671 at June 30, 2025, from $6,369,698 at September 30, 2024, primarily due to accrued project costs and deferred revenues.
• Generated $9,021,556 in cash from operating activities for the nine months ended June 30, 2025, a substantial improvement from a $15,417 cash usage in the prior year.
• Previously issued financial statements for fiscal years ended September 30, 2024 and 2023 were restated due to material misstatements, including overstating accounts receivable by approximately $8.9 million and misclassifying acquisition costs.
• Management concluded that disclosure controls and procedures were not effective, and a material weakness exists due to a lack of segregation of duties.

Sentiment

Score: 3

Explanation: The company faces significant challenges, including a material financial restatement, ongoing net losses, substantial doubt about its ability to continue as a going concern, and ineffective internal controls. While new revenue streams and positive operating cash flow are noted, these are overshadowed by the fundamental financial and governance issues.

Positives

• Generated new revenues of $816,528 for the nine months ended June 30, 2025, primarily from Power Purchase Agreements, following the September 2024 merger with The Awareness Group (TAG).
• Achieved a positive cash flow from operating activities of $9,021,556 for the nine months ended June 30, 2025, a significant improvement from a cash usage of $15,417 in the prior year.
• Reported a working capital surplus of $3,286,233 at June 30, 2025.
• Total assets increased substantially to $61,671,209 at June 30, 2025, from $29,049,999 at September 30, 2024, largely due to increased solar equipment and notes receivable.
• Acquired $3,546,414 in investment tax credits.

Negatives

• Reported a net loss of $556,758 for the nine months ended June 30, 2025, and an accumulated deficit of $10,886,013 at June 30, 2025.
• Substantial doubt exists about the ability to continue as a going concern due to ongoing operating losses and the need for additional funding.
• Prior period financial statements for fiscal years ended September 30, 2024 and 2023 were restated due to material misstatements, including an overstatement of accounts receivable by approximately $8.9 million and premature revenue recognition.
• Disclosure controls and procedures were deemed not effective as of June 30, 2025, with a material weakness identified due to a lack of segregation of duties.
• Cash and cash equivalents decreased to $65,078 at June 30, 2025, from $95,815 at September 30, 2024.
• Total liabilities significantly increased to $30,923,671 at June 30, 2025, from $6,369,698 at September 30, 2024.
• The acquisition of Renewable Energy Products Manufacturing Corp. (REPM) in January 2025 was dissolved in May 2025 without material operational impact or funding.

Risks

• Inability to manage the business given continuing operating losses and negative cash flows.
• Difficulty obtaining sufficient capital to fund operations, development, and expansion plans.
• Exposure to competitive factors and developments beyond control.
• Challenges in maintaining and protecting intellectual property.
• Inability to obtain patents based on current and/or future patent applications.
• Difficulty obtaining and maintaining other rights to technology required or desirable to conduct or expand the business.
• Potential limitations on offsetting future taxable income with net operating loss tax carryforwards due to non-filing of tax returns or changes in ownership under Internal Revenue Code Section 382.

Future Outlook

The company anticipates future liquidity requirements will arise from funding growth, paying current obligations, and future capital expenditures. It plans to seek additional funds from private sources and/or debt financing as needed, acknowledging no assurance of obtaining such financing on favorable terms or at all. Continuation as a going concern is dependent on generating sufficient cash flow and ultimately attaining profitability.

Management Comments

• Management does not expect that the Company's disclosure controls and procedures or the Company's internal control over financial reporting will prevent or detect all error and fraud.
• Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.
• We plan to remediate this weakness [material weakness in internal controls] over the next 12 months.
• Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability.

Industry Context

The company's strategic focus on renewable energy, particularly solar solutions through Power Purchase Agreements, aligns with global trends towards sustainable energy development. Its involvement with crypto currency tokens (Candela and CLA) suggests an attempt to integrate blockchain technology into its business model, potentially for financing or operational efficiencies within the energy sector. The dissolution of the REPM acquisition highlights the challenges of integrating new ventures in this rapidly evolving space.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• No material, active, pending, or threatened legal proceedings against the company or its subsidiaries.

Related Party Transactions

• TAG entered into a $196,000 promissory note with a related party on April 22, 2025, bearing 15% interest per annum, due July 22, 2025, and secured by TAG assets.
• Outstanding notes payable include $86,289 to Bruce Miller (a personal acquaintance of the former CEO) and $36,074 to New Opportunity Business Solutions (Brian Kistler, a former related party).

Stakeholder Impact

• Shareholders face significant risk of value erosion due to ongoing losses, going concern doubt, and the material restatement of prior financials. Potential for future dilution if capital is raised through equity.
• Creditors are exposed to repayment risk given the company's going concern issues and accumulated deficit. The related party note to TAG is secured by TAG assets, which may offer some protection for that specific loan.
• Employees may face job insecurity due to the company's financial instability and the need to achieve profitability.
• Customers with Power Purchase Agreements may experience potential for disruption in service or product delivery if the company's financial health deteriorates further.

Next Steps

• Remediate the identified material weakness in internal control over financial reporting within the next 12 months.
• Generate sufficient cash flow from operations to meet obligations and achieve profitability.
• Raise additional capital from private sources and/or debt financing to fund growth and operations.
• Continue development and marketing of products and future growth initiatives.

Key Dates

Recommendation

The company presents a highly concerning financial profile. The material restatement of prior financial statements, coupled with ongoing net losses and management's explicit disclosure of substantial doubt about its ability to continue as a going concern, signals severe operational and financial instability. The identified material weakness in internal controls further exacerbates these concerns, indicating a high risk of future financial misstatements or fraud. While new revenue streams from the TAG merger and positive operating cash flow are noted, they are insufficient to offset the fundamental issues. Investors face significant risk of capital loss, and the stock is likely to experience downward pressure.

Keywords

Freedom Holdings, FHLD, SEC 10-Q, quarterly report, financial restatement, going concern, solar energy, renewable energy, Power Purchase Agreements, crypto currency, Candela Coin, The Awareness Group, TAG, internal controls, corporate governance, financial performance