10-Q: Frequency Holdings Reports Q2 Net Income Amid Strategic Shift
Sentiment:
Quarterly Report
Frequency Holdings Inc. reported a net income of $1.29 million for Q2 2025, driven by a non-cash gain from deconsolidation, as it pivots to a holding company model focused on cybersecurity and blockchain.
Capital raiseThe company's ability to continue as a going concern is dependent on its ability to generate sufficient cash flows or obtain financing through the sale of debt and/or equity securities.Issued multiple convertible notes payable to Frondeur Partners LLC and Trillium Partners, L.P. during the reporting period and subsequently, indicating ongoing reliance on debt financing.Received $126,000 from the issuance of a note payable and $25,000 from convertible notes payable during the six months ended June 30, 2025.Authorized the creation of a new series of preferred stock to be issued to First Portfolio Management LLC for an aggregate amount of $2,440,950 in satisfaction of liabilities.
Worse than expectedRevenue significantly declined for both the three and six-month periods ended June 30, 2025, compared to the prior year, primarily due to restructuring.Operating loss worsened for the six months ended June 30, 2025.Cash balance significantly decreased, and the company continues to incur negative cash flows from operations.The reported net income was primarily due to a large non-cash gain from the deconsolidation of subsidiaries, masking underlying operational challenges.The company continues to operate with substantial working capital, stockholders, and accumulated deficits.
Summary
- Net income was $1,290,481 for the three months ended June 30, 2025, compared to a net loss of $1,637,434 for the same period in 2024.
- Net income was $7,831,658 for the six months ended June 30, 2025, a significant improvement from a net loss of $10,660,143 for the same period in 2024, primarily due to a non-cash gain on disposal of $11,233,944.
- Revenue decreased to $919,304 for the three months ended June 30, 2025, from $1,313,873 in the prior year, and to $1,332,616 for the six months ended June 30, 2025, from $3,411,102 in the prior year, primarily due to restructuring.
- Cash balance significantly decreased to $66,148 as of June 30, 2025, from $275,292 at December 31, 2024.
- Working capital deficit was $6,536,826, stockholders deficit was $7,791,931, and accumulated deficit was $13,265,868 as of June 30, 2025.
- The company deconsolidated ReachOut Technology Corp. and its subsidiaries (Innovative Network Designs LLC and RedGear LLC) on March 31, 2025, unwinding a previous reverse acquisition.
- A new operating subsidiary, ReachOut Digital Intelligence (RDI), was formed on March 4, 2025, and is now the flagship, providing cybersecurity and IT management solutions to businesses.
- The company is shifting its growth strategy to a holding company model, focusing on acquiring smaller, high-potential firms in cybersecurity, AI, and blockchain, with an upcoming venture named TRUSTLESS.
- Basic income per share was $0.02 for the six months ended June 30, 2025, compared to a basic loss per share of $0.03 for the same period in 2024.
Sentiment
Score: 3
Explanation: While the company reported a net income, it was primarily due to a non-cash gain from deconsolidation. Core revenue declined significantly, and the company continues to face substantial going concern risks, negative operating cash flows, and large deficits. The strategic pivot is ambitious but carries high execution risk and requires significant future capital. The numerous defaulted convertible notes, even with waivers, indicate ongoing financial distress.
Positives
- Achieved net income of $7,831,658 for the six months ended June 30, 2025, a substantial improvement from a $10,660,143 net loss in the prior year, largely due to a non-cash gain on disposal of $11,233,944.
- Reduced total liabilities to $7,564,039 as of June 30, 2025, from $15,896,599 at December 31, 2024, primarily due to the deconsolidation of subsidiaries and related debt extinguishment.
- Improved cash flow from operating activities, with cash used decreasing to $271,232 for the six months ended June 30, 2025, from $632,634 in the prior year.
- Strategic pivot to a holding company model focused on high-growth areas like cybersecurity, AI, and blockchain, aiming for diversified revenue streams and NASDAQ uplisting.
- Reduced operating expenses, including general and administrative expenses by 59.2% and compensation expense by 48% for the six months ended June 30, 2025, compared to the prior year.
- Significant reduction in derivative expense to $175,495 for the six months ended June 30, 2025, from $20,722,300 in the prior year.
Negatives
- Revenue significantly decreased by 60.9% to $1,332,616 for the six months ended June 30, 2025, from $3,411,102 in the prior year, primarily due to restructuring.
- Continued negative cash flows from operations, using $271,232 for the six months ended June 30, 2025.
- Maintained substantial working capital deficit of $6,536,826, stockholders deficit of $7,791,931, and accumulated deficit of $13,265,868 as of June 30, 2025.
- The net income reported was primarily driven by a non-cash gain on disposal of $11,233,944, masking underlying operational profitability challenges.
- Operating loss worsened to $4,095,551 for the six months ended June 30, 2025, from $3,242,237 in the prior year.
- Cash balance significantly declined to $66,148 as of June 30, 2025, from $275,292 at December 31, 2024.
- Numerous convertible notes payable are in default, though waivers and forbearances have been issued by note holders.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern due to historical losses, negative operating cash flows, and significant deficits.
- The company's ability to continue operations is dependent on generating sufficient cash flows or obtaining additional financing through debt or equity, which may not be available on acceptable terms.
- Issuance of additional equity to raise capital would result in dilution to existing shareholders.
- Risks related to integrating acquired companies, including cultural alignment and operational scalability, despite the shift to smaller targets.
- The rapid evolution of AI and cybersecurity technologies requires continuous innovation and investment to maintain service relevance.
- Market volatility, macroeconomic fluctuations, and capital availability may impact the pace of acquisitions and expansion plans.
- The company's high-growth profile and media-forward leadership may attract increased public scrutiny.
- Several convertible notes are in default, which could lead to adverse consequences if waivers are not maintained or new terms are not agreed upon.
- The Chairman of the Board holds a control block of Series A Preferred Stock, conferring 66 2/3% of all votes, which could limit the influence of other shareholders.
Future Outlook
The company plans to expand its portfolio beyond traditional IT services into cybersecurity, AI, and blockchain, exemplified by its upcoming TRUSTLESS platform. It aims to diversify revenue streams, capitalize on emerging market opportunities, and achieve a NASDAQ uplisting. The strategy involves acquiring smaller, high-potential firms (4-10 annually) and integrating them rapidly using AI and operational playbooks, with a goal of 25X growth within 24 months for each acquired location. Organic growth is also targeted through the CEO's personal brand and media presence, and compliance-driven market penetration in regulated sectors.
Management Comments
- Management anticipates that these revenue streams [from RDI] will be more substantial and potentially more profitable than those contributed by ReachOut Technology Corp.'s subsidiaries.
- Our strategy is to emulate the customer-centric approach of companies like T-Mobile, offering accessible, high-quality cybersecurity services to underserved SMBs across the nation.
- With a strong leadership team, a clear strategic vision, and a commitment to innovation, we are well-positioned to execute our growth plans and achieve a successful uplisting to NASDAQ.
- RDI is positioning to fill that gap by building a nationally recognized brand offering enterprise-grade cybersecurity tailored for SMBs.
- The Company has mitigated this [acquisition risk] by shifting focus from larger, complex acquisitions to smaller, more agile targets with faster onboarding potential.
- RDI isn't just improving MSP operations—it's replacing them. By reimagining IT and cybersecurity as a national, AI-powered, subscription-based platform with media-fueled brand recognition, RDI is positioned to lead this $700B+ market into its next evolution while creating massive long-term value for shareholders.
Industry Context
The cybersecurity and IT services industry for small to medium-sized businesses (SMBs) is highly fragmented, with many regional providers lacking specialization, brand distinction, and scalability. Enterprise-focused firms often overlook the SMB sector. Frequency Holdings, through its ReachOut Digital Intelligence (RDI) subsidiary, aims to fill this gap by building a nationally recognized brand offering enterprise-grade cybersecurity tailored for SMBs, leveraging AI for scalability and a subscription-based model. The company's strategy to expand into blockchain-based identity management (TRUSTLESS) aligns with emerging trends in decentralized security solutions.
Comparison to Industry Standards
- The company explicitly states its strategy is to 'emulate the customer-centric approach of companies like T-Mobile' in the telecom industry, aiming to disrupt the cybersecurity and IT services market for SMBs by turning a commodity into a brand experience.
- The holding company expansion is 'modeled after Berkshire Hathaway’s capital efficiency and Alphabet’s innovation strategy,' indicating an aspiration to manage diverse, high-growth subsidiaries.
- RDI aims to lead the '$700B+ market' for IT and cybersecurity services for SMBs, suggesting a large addressable market.
- The company differentiates itself from 'traditional Managed Service Provider (MSP) models' which are described as 'outdated, fragmented, and fundamentally ill-equipped to scale,' suffering from 'delayed response & resolution,' 'inefficient frontline support,' 'limited cyber talent,' and 'basic security tools.' RDI contrasts this with 'sub-minute response times,' 'AI-Augmented Service Delivery,' 'Proactive Strategic Engagement,' and 'Advanced Security Infrastructure.'
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| CEO and Chairman of the Board of Directors | Robert Bohorad (CEO), Everett Dickson (Chairman) | Richard Jordan | 2023-11-09 | Acquisition of ReachOut Technology Corp. and related control block transfer. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Control Block Transfer | Richard Jordan acquired Everett Dickson's remaining Series A Preferred Stock for $140,000. This Series A Preferred Stock confers 66 2/3% of all votes in company matters, including authorization of additional common shares or reverse stock splits. | 2023-12-31 | Consolidates significant voting control in the hands of the new CEO, Richard Jordan, potentially streamlining decision-making but also concentrating power. |
| Preferred Stock Authorization and Issuance | Authorized 8,750,000 Series C Preferred Shares (convertible into 87.5% of common stock) and 1,250,000 Series D Preferred Shares (convertible into 12.5% of common stock) for ReachOut owners and Trillium Partners, L.P., respectively. | 2023-12-13 | Significant dilution potential upon conversion; Series C and D holders have voting rights equal to their converted common shares. |
| New Preferred Stock Series Creation | Approved the creation of a new series of preferred stock to be issued to First Portfolio Management LLC for $2,440,950, in satisfaction of liabilities owed to the CEO and a private company he controlled. These shares have a 2% annual dividend and rank senior to all other preferred stock in liquidation. | 2024-12-27 | Addresses existing liabilities but introduces a new class of senior preferred stock with dividend obligations and liquidation preference, potentially impacting other shareholders. |
Legal Proceedings
- Prior legal proceedings involving IND & RedGear LLC purchase disputes were retained by the former subsidiaries upon deconsolidation on March 31, 2025. The company has no guarantees, indemnities, or other commitments related to these matters and expects no future obligations.
Related Party Transactions
- Owes CEO Richard Jordan $74,098 for advances made to the company for operating costs, which are non-interest bearing and due on demand.
- Liabilities totaling $2,440,950 owed to the CEO and a private company he controlled were satisfied by authorizing a new series of preferred stock to be issued to First Portfolio Management LLC through a Debt Cancellation and Exchange Agreement.
Stakeholder Impact
- Shareholders face significant dilution risk from the conversion of numerous outstanding convertible notes and preferred shares. The going concern warning indicates a risk to investment value. The concentration of voting power with the CEO (Richard Jordan) through Series A Preferred Stock may limit the influence of other shareholders.
- Employees: The company has approximately twenty-five full-time and part-time employees. Restructuring and strategic shifts could impact roles and stability, though the focus on AI and automation might streamline operations.
- Customers: The strategic shift to ReachOut Digital Intelligence (RDI) aims to provide more substantial and potentially more profitable cybersecurity and IT management solutions, potentially improving service quality and offerings for SMBs.
- Creditors: The deconsolidation of subsidiaries extinguished significant liabilities, which is positive for the remaining creditors. However, the company's going concern status and reliance on future financing pose risks for new or existing creditors.
Next Steps
- Execute the strategic shift to a holding company model.
- Integrate smaller, high-potential acquisitions rapidly.
- Launch and scale the TRUSTLESS blockchain-based identity management platform.
- Achieve NASDAQ uplisting.
- Generate sufficient cash flows from operations to meet obligations and address going concern issues.
- Potentially seek additional financing through debt or equity securities.
Key Dates
| Date | Description |
|---|---|
| 2013-04-19 | Company incorporated in Nevada under the name Aureus Incorporated. |
| 2015-09-09 | Company issued a promissory note to Backenald Corp. in the principal amount of $20,000. |
| 2015-12-30 | A non-interest-bearing note for $24,656 was in default. |
| 2017-02-23 | Company issued a promissory note to Travel Data Solutions in the principal amount of $17,500. |
| 2017-03-27 | Company issued a promissory note to Craigstone Ltd. in the principal amount of $12,465. |
| 2017-05-16 | Company issued a promissory note to Travel Data Solutions in the principal amount of $4,500. |
| 2017-07-28 | Company issued a promissory note to Backenald Trading Ltd. in the principal amount of $20,000. |
| 2017-12-15 | Company name changed to Hohme, Inc. |
| 2019-01-18 | Company entered into a Series A Preferred Stock Purchase Agreement with Device Corp. |
| 2019-02-07 | Company name changed to Aureus, Inc. |
| 2020-01-24 | Company issued a promissory note to a third party in the principal amount of $15,000. |
| 2020-03-24 | Company issued a promissory note to a third party in the principal amount of $20,000. |
| 2021-09-14 | Company name changed to Yuenglings Ice Cream Corporation. |
| 2021-10-29 | ReachOut Technology Corp.'s subsidiary (RedGear, LLC) entered into a lease for office facilities. |
| 2022-09-02 | ReachOut acquired 100% of the members interest of Innovative Network Designs LLC (IND). |
| 2022-10-01 | ReachOut issued a term promissory note and a secured promissory note to the sellers of Innovative Network Designs LLC. |
| 2023-02-07 | Company's subsidiary IND engaged PIPE Technologies Inc. for financing. |
| 2023-03-07 | Weekly payments to Fora Financial began. |
| 2023-05-01 | A second stock purchase agreement was executed by Device Corp. for $250,000. |
| 2023-06-01 | Company issued a promissory note to a third party in the principal amount of $40,675. |
| 2023-08-25 | Company amended its Articles of Incorporation to designate Series B Preferred Stock; Everett Dickson agreed to return 4,525,000 shares of Series A preferred Stock. |
| 2023-09-12 | Certificate of Designation for Series A Convertible Preferred Stock was amended. |
| 2023-09-29 | ReachOut entered into a Membership Interest Purchase Agreement with RedGear, LLC. |
| 2023-10-02 | Closing of RedGear acquisition. |
| 2023-11-09 | Frequency Holdings Inc. closed the Share Exchange and Control Block Transfer Agreements with ReachOut Technology Corp. |
| 2023-11-10 | FRQN issued a convertible note payable, warrants, and Series D Preferred Shares to Trillium Partners, L.P. |
| 2023-12-01 | FRQN issued a convertible note payable to Frondeur Partners LLC; Company entered into a service agreement with Frondeur Partners LLC. |
| 2023-12-13 | Company authorized 8,750,000 Series C Preferred Shares of Stock and 1,250,000 Series D Preferred Shares of Stock. |
| 2023-12-27 | Board of directors approved the Debt Cancellation and Exchange Agreement. |
| 2024-01-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-01-11 | FRQN issued a convertible note payable and warrants to Trillium Partners, L.P. |
| 2024-01-26 | Everett Dickson acquired the preferred series A shares formerly held by Device Corp. |
| 2024-01-30 | Company arranged financing (Future Sale of Receivables) with Fox Funding Group LLC. |
| 2024-02-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-03-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-04-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-04-03 | FRQN issued a convertible note payable and warrants to Trillium Partners, L.P. |
| 2024-05-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-05-20 | Company issued a promissory note to 1800 Diagonal Lending LLC. |
| 2024-05-31 | FRQN issued a convertible note payable and warrants to Trillium Partners, L.P. |
| 2024-06-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-07-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-08-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-09-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-10-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-11-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-12-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2024-12-15 | PCAOB AS 1000 series effective date for audits of financial statements for fiscal years ending on or after this date. |
| 2025-01-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2025-02-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2025-02-04 | Company issued a promissory note to Red Road Holdings Corporation. |
| 2025-03-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2025-03-04 | ReachOut Digital Intelligence (RDI) was formed. |
| 2025-03-27 | FRQN issued a convertible note payable and warrants to Trillium Partners, L.P. |
| 2025-03-30 | Company recognized a gain on disposition that included accounts receivable and prepaid consulting related to assigned subsidiaries. |
| 2025-03-31 | ReachOut Technology Corp. and its subsidiaries (RedGear and IND) were deconsolidated from the reporting group; YCRM resumed its position as the accounting parent; officer life insurance premiums payable and certain loans were extinguished due to deconsolidation; RedGear office lease and related obligation were assigned to a third party. |
| 2025-04-01 | FRQN issued a convertible note payable to Frondeur Partners LLC. |
| 2025-05-01 | Company issued a convertible note payable to Frondeur Partners LLC. |
| 2025-05-09 | Company changed its name to Frequency Holdings, Inc., in the State of Nevada. |
| 2025-06-01 | Company issued a convertible note payable to Frondeur Partners LLC. |
| 2025-06-30 | End of the current quarterly reporting period; service agreement with Frondeur Partners LLC was terminated. |
| 2025-07-07 | Frondeur Partners LLC converted $8,345 of principal, interest, and fees into 33,381,920 shares of common stock. |
| 2025-07-15 | Trillium LP converted $16,075 of interest and $1,325 of conversion fees into 69,600,000 common shares. |
| 2025-07-25 | Frondeur Partners LLC converted $11,408 of principal, interest, and fees into 45,631,400 shares of common stock; FINRA name change to Frequency Holdings, Inc. and symbol change to FRQN was finalized. |
| 2025-07-27 | FRQN issued a convertible note payable and 55,000,000 warrants to Trillium Partners, L.P. |
| 2025-08-04 | Trillium LP converted $13,297 of interest and $1,325 of conversion fees into 58,489,560 common shares. |
| 2025-08-19 | Date of filing of the Form 10-Q; 877,141,824 shares of common stock outstanding. |
| 2025-10-31 | RedGear, LLC office lease extends through this date. |
| 2025-12-15 | Promissory note to Red Road Holdings Corporation matures. |
| 2025-12-31 | Convertible note payable to Trillium Partners, L.P. (issued March 27, 2025) matures. |
| 2026-01-31 | Convertible note payable to Frondeur Partners LLC (issued May 1, 2025) matures. |
| 2026-02-28 | Convertible note payable to Frondeur Partners LLC (issued June 1, 2025) matures. |
| 2026-06-30 | Convertible note payable to Trillium Partners, L.P. (issued July 27, 2025) matures. |
| 2026-12-15 | ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for annual periods after this date. |
Recommendation
sellDespite reporting a net income, it is primarily a non-cash gain from deconsolidation, masking a significant decline in core revenue and worsening operating losses. The company faces substantial going concern risks, with a low cash balance and large accumulated deficits. While the strategic pivot to cybersecurity and blockchain is ambitious, it is in early stages and carries high execution risk, requiring significant future capital raises that will likely lead to further shareholder dilution. The numerous defaulted convertible notes, even with waivers, indicate ongoing financial distress. The overall financial health and operational performance suggest a high-risk investment with significant downside potential.
Keywords
Cybersecurity, IT Services, Managed Service Provider, MSP, Blockchain, Identity Management, AI, Acquisition Strategy, SMB, NASDAQ Uplisting, FRQN, Frequency Holdings, ReachOut Digital Intelligence, TRUSTLESS
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.