Executive Summary / Key Takeaways

• Farmhouse, Inc. (FMHS) is undergoing a significant strategic pivot, transitioning from a struggling wellness technology and Web3 licensing business to a holding company focused on acquiring casual lifestyle brands, specifically in the beverage and multi-unit franchise sectors.
• This shift is driven by the failure of the prior business model, evidenced by a sharp decline in revenue in 2024 and persistent operating losses and a substantial working capital deficit ($2.33 million as of Dec 31, 2024).
• The core of the new strategy is the planned acquisition of Thrown, LLC (a beverage company) and Ledgewood Holdings, LLC (a multi-unit franchise operator with ~$31 million TTM revenue), intended to provide immediate revenue diversification and scale.
• FMHS faces substantial doubt about its ability to continue as a going concern, requiring significant external financing to fund operations and complete the planned acquisitions, with no assurance of securing such capital on favorable terms or at all.
• The investment thesis hinges entirely on the successful execution of these high-risk acquisitions and subsequent integration, representing a speculative opportunity in a company attempting to reinvent itself from a distressed state.

A Strategic Reinvention: From Wellness Tech to Lifestyle Holdings

Farmhouse, Inc. (FMHS) stands at a critical juncture, shedding its past identity rooted in wellness technology and Web3 licensing to embrace a new future as a casual lifestyle brand holding company. Incorporated in 2013, the company's journey included the acquisition of Farmhouse Washington in 2019 and a foray into Web3 initiatives in late 2021, aiming to bridge wellness brands with digital collectibles. However, this venture proved unsuccessful, culminating in its discontinuation in 2024 after a major customer ceased operations. This history of limited revenue generation and operational challenges has paved the way for a dramatic strategic pivot.

The company's new direction is clear: leverage its public company structure to acquire established businesses in scalable industries with broad consumer appeal, specifically targeting the casual food and beverage sectors. This strategic shift is an explicit response to the shortcomings of the prior business model and an attempt to build a viable, revenue-generating entity.

The Acquisition Engine: Fueling the New Strategy

The cornerstone of FMHS's reinvention lies in its planned strategic acquisitions. The company has publicly disclosed two key potential transactions that embody this new direction:

First, on September 10, 2024, FMHS entered into a Share Exchange Agreement with Thrown, LLC, a beverage company known for its nootropic esports drink, "Good Game by T-Pain." The agreement contemplates acquiring Thrown in exchange for 5.13 million newly issued shares of FMHS common stock, representing approximately 25% of the combined entity post-closing. As of June 20, 2025, this transaction had not yet closed, with discussions ongoing.

Second, and potentially more transformative, on June 9, 2025, FMHS signed a non-binding term sheet to acquire Ledgewood Holdings, LLC. Ledgewood is described as a multi-unit franchise operator with approximately $31 million in trailing twelve-month revenue. The proposed acquisition involves issuing up to 31 million shares of FMHS common stock, structured with vested shares at closing, performance-based vesting over two years, and potential additional shares based on post-closing revenue milestones. The term sheet outlines a structure where Ledgewood would retain day-to-day operational control, subject to FMHS Board oversight, and would contribute 1.5% of its gross revenue monthly to FMHS for operating support. This transaction is subject to numerous conditions, including definitive documentation, due diligence, Board approval, and resolving approximately $5 million in outstanding debt reportedly secured by Ledgewood's assets. There is no guarantee this acquisition will be completed on the proposed terms or at all.

These planned acquisitions represent FMHS's primary path to generating significant revenue and establishing a foothold in new, potentially more stable markets.

Competitive Landscape: Shifting Battlegrounds

The competitive landscape for FMHS is fundamentally changing with its strategic pivot. In its former life, focused on cannabis-related wellness tech and licensing, FMHS competed against players like Tilray (TLRY), WM Technology (MAPS), and Canopy Growth (CGC). These companies operate across various parts of the cannabis value chain, including production, distribution, and digital platforms for discovery and e-commerce.

Financial data indicates FMHS significantly lagged these competitors in scale, revenue growth, and profitability. For example, while Tilray and WM Technology reported revenue growth rates in the mid-to-high teens or higher and gross margins significantly above FMHS's historical levels (Tilray ~40-45%, WM Technology ~60-65% vs. FMHS's 56.2% TTM gross margin, which is overshadowed by massive operating losses), FMHS struggled to generate meaningful revenue from its niche licensing activities. FMHS's TTM operating margin of -4937% and net margin of -5561% starkly contrast with competitors who, while often unprofitable, exhibit significantly better margin profiles (e.g., TLRY TTM Operating Margin -22%, MAPS TTM Operating Margin 8%, CGC TTM Operating Margin -77%). This unfavorable competitive positioning in the old market underscores the strategic necessity of the pivot.

The new target markets – beverages and multi-unit franchises – present entirely different competitive dynamics. These are vast, fragmented industries with numerous established players, strong brands, and intense competition based on operational efficiency, location, and consumer preference. Success in these areas relies less on niche technology platforms (like the old Web3 focus) and more on brand recognition, supply chain management, store-level execution, and effective marketing to broad demographics. FMHS's strategy is not to build these businesses from scratch but to acquire existing operators like Ledgewood, aiming to gain immediate scale and revenue streams to compete in these new arenas. The competitive challenge shifts from developing proprietary digital platforms to effectively acquiring, integrating, and managing diverse operational businesses.

Financial Performance: A Reflection of Transition and Distress

FMHS's recent financial performance reflects the wind-down of its prior business and the costs associated with maintaining operations and pursuing the new strategy. For the year ended December 31, 2024, revenue plummeted to $4,154 from $15,227 in 2023, directly attributable to discontinuing the NFT licensing business. While total operating expenses decreased to $410,668 in 2024 from $517,843 in 2023, primarily due to lower stock-based compensation, the company still incurred a net loss of $464,343 in 2024, following a $560,789 net loss in 2023.

The company's liquidity position is precarious. As of December 31, 2024, FMHS had minimal cash ($413) and a significant working capital deficit of $2.33 million, worsening from $1.94 million in 2023. Historically, operations have been funded through related party advances, private placements, and debt. Subsequent to year-end, the company raised some capital through convertible notes ($120,000 in new cash, plus conversion of liabilities), but management explicitly states these financings are not expected to materially change the financial condition. The company's history of losses and working capital deficit raise substantial doubt about its ability to continue as a going concern.

Several debt obligations, including notes payable and a related party note to the CEO, were in default as of June 20, 2025. The company also has significant accrued liabilities, including $218,000 owed to its contracted CFO as of December 31, 2024.

Technology: A Legacy, Not a Current Driver

While FMHS's history includes a focus on technology and holding intellectual property like domain names and trademarks, the company's strategic transition explicitly states that its new direction "does not rely on our pre-existing intellectual property assets." This indicates that the historical technology development and IP portfolio, which might have been intended as competitive differentiators in the wellness/Web3 space, are not considered foundational to the success of the casual lifestyle holding company model or the planned acquisitions.

In the context of the new strategy, technology would likely pertain to operational systems within acquired businesses (e.g., point-of-sale systems, supply chain management in franchises) rather than proprietary platforms developed by FMHS itself. Information available does not detail any specific technological advantages or R&D efforts related to the beverage or franchise sectors. Therefore, technology, which can be a significant moat for companies like WM Technology with its digital platform, appears to be a legacy aspect of FMHS's past rather than a core driver of its current or future competitive positioning.

Outlook and Risks: A Path Fraught with Uncertainty

The outlook for FMHS is entirely dependent on its ability to successfully execute its acquisition strategy. The company does not expect significant revenue from existing operations. The potential acquisition of Ledgewood, with its substantial trailing revenue, represents the most concrete path to achieving scale and diversifying revenue, but it remains non-binding and subject to significant hurdles, including securing financing and resolving Ledgewood's existing debt. The Thrown acquisition, while smaller, also remains unclosed.

Management intends to seek additional financing through various means, but market conditions for microcap companies are challenging, and there is no assurance that necessary capital will be available. Without sufficient funding, the company may be forced to further curtail or cease operations.

Key risks facing FMHS include:

• Going Concern Risk: The company's financial state raises substantial doubt about its ability to continue operations.
• Financing Risk: Inability to secure sufficient capital to fund operations and complete acquisitions.
• Acquisition Risk: Failure to close the proposed Thrown and Ledgewood transactions due to unmet conditions, financing issues, or other factors.
• Operational Risk: Lack of significant revenue until acquisitions are completed and successfully integrated.
• Default Risk: Existing debt defaults could lead to legal challenges or accelerated repayment demands.
• Tax Filing Risk: Failure to file timely corporate tax returns could result in penalties and loss of tax benefits.
• Integration Risk: Challenges in integrating acquired businesses, even if transactions close.
• Market Risk: Competition and changing consumer preferences in the beverage and franchise industries.

Conclusion

Farmhouse, Inc. is undertaking a radical transformation, pivoting away from a failed wellness tech and licensing model towards becoming a holding company for casual lifestyle brands. This strategic shift, centered on the potential acquisitions of Thrown and Ledgewood, represents a high-stakes gamble to inject revenue and operational substance into a company currently facing severe financial distress and a going concern warning.

The investment thesis is speculative and rests squarely on the successful completion and integration of these planned acquisitions. While the Ledgewood deal, if closed, could provide significant scale, the path forward is fraught with execution risk, particularly regarding securing necessary financing in a challenging market and resolving the conditions precedent to the transactions. FMHS's historical technology assets appear to play a minimal role in this new strategy, which instead relies on the operational capabilities of potential acquisition targets. Investors considering FMHS must weigh the potential upside of a successful pivot against the significant financial instability, execution challenges, and the fundamental uncertainty surrounding the completion of its proposed strategic transactions.