STCB 10-K & 10-Q changes, risk factors and insider trading

The Company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events, pandemics and government lockdowns and technological developments (such as cyber-attacks and the ability to prevent those attacks). Additionally, early-stage companies are inherently more riskyriskier than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

Starco Brands uses independent contractors and consultants, and contributed servicesconsultants from related parties on an as needed basis for some administration of Company operations. As set forth in these Risk Factors, some of our revenues and manufacturing depend on the operations of related parties.

In certain voting situations, includingRoss Sklar has the electionability to direct votes of ourcertain directors,shares wewhich arehe effectivelydoes controllednot by Ross Sklar.own. As a result, Mr. Sklar Sklar has the ability to prevent or influence certain actions by us.

As of April 16,10, 2025,2026, Mr. Sklar beneficially controls, directly or indirectly, the voting power of up to 484,608,472221,483,611 shares of the Company’s Class A common stock representing up to 75.1 % of the outstanding voting power of the Class A common stock, with respect to the election of up to 4 of 7 directors to our Board. Mr. Sklar may exercise control over approximately 220,658,559 shares, or 34.2 %28.2% of the total voting power of STCB pursuant to certain stockholder actions as described in the respective voting agreements.

As a result of his stock ownership and various voting agreements, Mr. Sklar can exercise significant control and influence over our business, including many matters requiring stockholder approval (e.g., election of certain directors, and significant corporate transactions, such as a merger or other sale of our Company or its securities or assets).

Some of the Company’s products are dependent on TheTSG Starcoand GroupTemperance which isare wholly or majority owned by our CEO, Ross Sklar. There is no assurance that TSG or Temperance will produce, supply or distribute sufficient quantities of those products needed by the Company. Difficulties in developing alternative sources of supply, if required, or failure of TSG or Temperance to provide the products to the Company could have a material adverse effect on the Company’s business, financial condition, and result of operations.

We have historically incurred significant net losses since inception. We incurred a net loss of $20,673,058 in the year ended December 31, 2025, incurred a net loss of $17,334,549 in the year ended December 31, 2024, incurred a net loss of $46,402,121 in the year ended December 31, 2023, generated net income of $977,858 in the year ended December 31, 2022,2022 and incurred a net loss of $2,325,074 in the year ended December 31, 2021 and generated net income of $543,286 in the year ended December 31, 2020.2021. As of December 31, 2024, 2025, we had an accumulated deficit of $81,420,357. $102,347,578. We may not be able to maintain profitability and may incur significant losses again in the future for a number of reasons, including unforeseen expenses, difficulties, complications, and delays, and other unknown events.

In 2025, the Company recognized impairment charges on goodwill within the Soylent segment of $1,127,208. In 2024, the Company recognized $11,383,000 of impairment charges on goodwill within the Soylent segment and $2,944,871 of impairment charges on goodwill within the Starco Brands segment. In 2023, the Company recognized $20,467,700 and $9,145,000 of impairment charges on goodwill within the Soylent segment and Starco Brands segment, respectively.

Changes in trade policy, including trade restrictions, new or increased tariffs or quotas, embargoes, sanctions and countersanctions, safeguards or customs restrictions by the U.S. and/or other foreign governments could have a material adverse impact on our business. The imposition of new tariffs or increases in existing tariffs on products imported from countries where we or our suppliers operate could result in increased costs for our consumer goods. These cost increases may reduce our margins, require us to raise prices, or make our products less competitive in the marketplace. In addition, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in trade policy and regulations already enacted or that may be enacted in the future. If we are unable to mitigate these risks through supply chain adjustments, pricing strategies, or other measures, our financial performance and growth prospects could be negatively affected. For example, the U.S. has recently imposed new tariffs on China related to the importation of certain product categories and China has responded with retaliatory tariffs.

We rely on a licensing agreementsagreement with The Starco Group and Temperance Distilling Company.

Whipshots®, a significant contributor to our revenue for fiscal yearyears 20232024 and 2024,2025, is manufactured by Temperance. Temperance is responsible for the procurement of all raw materials and components required to manufacture Whipshots®. Due to the unique nature of Whipshots®, the Company is reliant on Temperance as the manufacturer of Whipshots® and would not be able to easily find a comparable third-party manufacturer if needed. The operations of Temperance can be subject to additional risks beyond our control, including shipping delays, labor disputes, trade restrictions, tariffs and embargos, or any other change in local conditions. Temperance may experience a significant disruption in the supply or raw materials from current sources and, in the event of such a disruption, it may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all. There have occasionally been, and there may again in the future be, shipments of products by Temperance to the Company’s customers that fail to comply with our specifications or that fail to conform to our quality control standards or those of our customers. Under these circumstances, we may incur substantial expense to remedy the problems and may be required to obtain replacement products. If we fail to remedy any such problem in a timely manner, we risk the loss of net revenue resulting from the inability to sell those products and related increased administrative and shipping costs. Additionally, if the unacceptability of our products is not discovered until after such products are purchased by our customers, our customers could lose confidence in our products or we could face a product recall. In such an event our brand reputation may be negatively impacted which could negatively impact our results of operations.

Freight costs are impacted by changes in fuel prices through surcharges, among other factors. Fuel prices and surcharges affect freight costs both on inbound freight from suppliers to the distribution center as well as outbound freight from the distribution center to stores/shops, supplier returns and third-party liquidators, and shipments of product to customers. The cost of transporting our products for distribution and sale is also subject to fluctuation due in large part to the price of oil. Our products must be transported by third parties over large geographical distances and an increase in the price of oil can significantly increase costs. Manufacturing delays or unexpected transportation delays can also cause us to rely more heavily on airfreight to achieve timely delivery to our customers, which significantly increases freight costs. Increases in fuel prices, surcharges, and other potential factors may increase freight costs. Since the Company receives a royalty on all of its product sales based on the total unit sales of the product minus costs, one of which is freight costs, theseThese fluctuations may increase our cost of products and have an adverse effect on our margins, results of operations and financial condition.

Section 404 of Sarbanes-Oxley requires us to evaluate the effectiveness of our internal control over financial reporting every quarter and as as of the end of each year, and to include a management report assessing the effectiveness of our internal controls over financial reporting reporting in each Annual Report on Form 10-K. Our management, including our Chief Executive Officer,Officer and Interim Chief Financial Officer, do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Furthermore, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in the conditions or deterioration in the degree of compliance with policies or procedures may occur. Because the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Starco Brands, Inc. (formerly Insynergy Products, Inc.), which we refer to as “the Company,” “our Company,” “STCB”, “we,” “us” or “our,” was incorporated in the State of Nevada on January 26, 2010 under the name Insynergy, Inc. On September 7, 2017, the Company filed an Amendment to the Articles of Incorporation to change the corporate name to Starco Brands, Inc. The Board determined the change of the Company’s name was in the best interests of the Company due to changes in our current and anticipated business operations at that time. In July 2017, the Company entered into a licensing agreement with The Starco Group (“TSG”),TSG, a related party entity, located in Los Angeles, California. TSG is a private label and branded aerosol and liquid fill manufacturer with manufacturing assets in the following verticals: DIY/Hardware, paints, coatings and adhesives, household, hair care, disinfectants, automotive, motorcycle, arts & crafts, personal care cosmetics, personal care FDA, sun care, food, cooking oils, beverages, and spirits and wine. Upon entering into the licensing agreement with TSG, the Company pivoted to commercializing novel consumer products manufactured by TSG.

In 2022, the Company embarked on a strategy to grow its consumer product line offerings through the acquisition of multiple subsidiaries with established behavior changing products and brands. With an increased product line and its existing partner relationships, the Company has continued expanding its vertical and consumer base through 2024.base.

For the year ended December 31, 2024,2025, the Company recorded related party revenues of $6,140,172$3,164,581 compared to $11,696,722$6,140,172 for the year ended December 31, 2023,2024, resulting in a decrease of $5,556,550$2,975,591 or 48%. TheThis decrease decline was primarily attributable to a reduction in royalties received during the current period was largely driven by lower Whipshots sales due to industry de-stocking and lower levels of new retailer loading.period.

For the year ended December 31, 2024,2025, we recorded cost of goods sold of $33,907,301, $21,577,400, compared to $34,991,482$33,907,301 for the year ended December 13, 2023,2024, a decrease of $1,084,181$12,329,901 or 3%.36%. The decrease canis beprimarily attributeda to an inventory adjustment to fair valueresult of approximately $3.0 million related to the Soylent acquisition that was incorporated into cost of goods soldreduction in thesales prior year; such yields lower costs in the current year.volumes.

For the year ended December 31, 2024,2025, our cost of goods sold, related parties amounted to $3,896,551,$3,249,562, reflecting ana increasedecrease of $1,208,391 $646,989 or 45%,17%, compared to $2,688,160$3,896,551 for the year ended December 13, 2023.2024. The increase decrease can be attributed to increasesa reduction in sales for Winona in the current year, which yielded increased costsvolumes of goods sold.Winona.

For the year ended December 31, 2024,2025, our compensation expense amounted to $9,037,123, $7,188,607, reflecting a decrease of $6,862,369$1,848,516 or 43%,20%, compared to $15,899,492$9,037,123 for the year ended December 31, 2023.2024. The decreasedecline was primarily duereflects toworkforce areductions decreaseimplemented in stock-based compensation fromby the priorCompany, year,as whenwell sharesas the absence of Whipshotsbonus Holdings accruals in thefiscal amountyear of approximately $8.7 million were issued to Washpoppin at the end of the period.2025.

For the year ended December 31, 2024,2025, our professional fees totaled $3,533,052,$2,662,177, representing a decrease of $2,328,597$870,875 or 40%,25%, compared to $5,861,649$3,533,052 in the prior year. Professional fees are mainly for contractors, accounting, auditing and legal services associated with business operations, merger activity, and our quarterly filings as a public company, and advisory and valuation services. The decreasedecline iswas primarilymainly driven by a reduction in consulting and contractor services during the current period. Additionally, duethe prior-year period reflects the impact of a transition to a decreasenew inaccounting expensessystem (that occurred during Q3 2024. As part of this implementation, certain expense accounts—specifically contractor fees, legal, and auditconsultant costs—were reclassified from professional fees) to marketing and advertising. As a result, professional fees in the currentprior-year period may not be directly comparable For the year periodended December 31, 2025, our marketing, general and administrative expenses amounted to $13,150,677, reflecting a decrease of $5,740,061 or 30%, compared to expenses$18,890,738 related tofor the acquisitions year ended December 31, 2024. The year-over-year reduction was primarily driven by lower royalty costs and the termination of Soylent,several Skylar,vendor andservices, implemented AOSas inpart theof priora yearbroader period.cost-savings initiative.

For the year ended December 31, 2024,2025, we incurred a fair value share adjustment gain of $10,544,263$3,692,529 compared to a lossfair value share adjustment gain of $215,531$10,544,263 in the prior year; this was due to a decrease in the fair value of the Soylent sellers’ rights to potentially receive additional Starco shares For and included the yearfinal ended December 31, 2024, we incurred goodwill impairment lossessettlement of $14,327,871; the Starcoliability Brandsin segmentMay and the Soylent segment were impaired by $2,944,871 and $11,383,000, respectively, and have remaining goodwill balances of $0 and $1,127,208, respectively, as of December 31, 2024.2025.

For the year ended December 31, 2025, we incurred an intangibles impairment loss related to the Soylent segment of $14,000,000; as of December 31, 2024, we incurred an intangibles impairment loss of $13,304 to the AOS component of the Starco Brands segment.

In December 2021, the Company launched a new product line consisting of vodka-infused, whipped-cream aerosols, under the brand name “Whipshots” at Art Basel in Miami and garnered over 1 billion impressions world-wide, and sold-out of its limited quantity can launches on whipshots.com each day of the month of the December launch month. The Company launched brick and mortar retail distribution in the first quarter of 2022, signed a distribution agreement with Republic National Distributing Company (“RNDC”), one of the largest spirits distributors in the nation, and signed distribution agreements with others. Whipshots® is currently distributed in 47 of 50 states. The base flavors of Whipshots®– Vanilla, Mocha, Caramel and Chocolate – are accompanied by new and Limited Time flavors such as Peppermint, Lime, Pumpkin Spice, Strawberry and King Cake. We plan to continue to offer various additional Limited Time flavors over time. Whipshots® is produced by Temperance Distilling Company (“Temperance”),Temperance, where Sklar is a majority shareholder.

On September 8, 2021, Whipshots LLC, a Wyoming limited liability company (“Whipshots LLC”), an indirect subsidiary of the Company, entered into an Intellectual Property Purchase Agreement, effective August 24, 2021, with Penguins Fly, LLC, a Pennsylvania limited liability company (“Seller”). The agreement provided that the Seller would sell the trademarks “Whipshotz” and “Whipshots”, the accompanying domain and social media handles of the same nomenclature, and certain intellectual property, documents, digital assets, customer data and other transferable rights under non-disclosure, non-compete, non-solicitation and confidentiality contracts benefiting the purchased intellectual property and documents (collectively, the “Acquired Assets”) to Whipshots LLC. The purchase price for the Acquired Assets is payable to Seller, over the course of seven years, based on a sliding scale percentage of gross revenues actually received by us solely from our sale of Whipshots/Whipshotz Products. The payments are subject to a minimum amount in each contract year and a maximum aggregate amount.

On September 12, 2022, STCB, through its wholly-owned subsidiary Starco Merger Sub Inc. (“Merger Sub”), completed its acquisition acquisition (the “AOS Acquisition”) of The AOS Group Inc., a Delaware corporation (“AOS”). The AOS Acquisition consisted of Merger Sub merging with and into AOS, with AOS being the surviving corporation. AOS® is a wholly-owned subsidiary of Brands Holdco, which is in turn a wholly-owned subsidiary of STCB. AOS® is the maker of Art of Sport® premium body and skincare products engineered to power and protect athletes and brings over the counter respiratory, sun care, women and children, pain management, performance supplements, food, beverage and apparel product lines under STCB auspices.

On December 29, 2022, STCB, through its wholly-owned subsidiary Starco Merger Sub II, Inc. (“Merger Sub II”), completed its acquisition (the “Skylar Acquisition”) of Skylar Body, Inc., a Delaware corporation (“Skylar Inc.”) through the merger of Merger Sub II with and into Skylar Inc. Immediately following the Skylar Acquisition Skylar Inc. merged with and into Skylar Body, LLC (“Skylar”) a wholly-owned subsidiary of STCB, with Skylar as the surviving entity. Skylar® is a wholly-owned subsidiary of Brands Holdco, which is in turn a wholly-owned subsidiary of STCB. Skylar® is the maker of fragrances that are hypoallergenic and safe for sensitive skin.

On February 15, 2023, STCB, through its wholly-owned subsidiary Starco Merger Sub I, Inc. (“Merger Sub I”), completed its acquisition acquisition (the “Soylent Acquisition”) of Soylent Nutrition, Inc., a Delaware corporation (“Soylent”). The Soylent Acquisition consisted of Merger Sub I merging with and into Soylent, with Soylent being the surviving corporation. Soylent® is a wholly-owned subsidiary of Brands Holdco, which is in turn a wholly-owned subsidiary of STCB. Soylent® is the maker of a wide range of plant-based “complete nutrition” and “functional food” products with a lineup of plant-based convenience shakes, powders and bars that contain proteins, healthy fats, functional amino acids and essential nutrients.

To support this strategy, the Company continues to pursue strategic partnerships and acquisitions. In July 2025, our indirect subsidiary Skylar entered into a license agreement with BlueUTA-I LLC, granting rights to the likeness and trademarks of artist Leah Kateb for use in commercial products. This agreement includes base and royalty compensation, equity grants, and stock options, and is expected to enhance brand visibility and drive product innovation across multiple categories.

Additionally, on July 29, 2025, the Company executed a non-binding exclusive Letter of Intent to acquire its contract manufacturers, collectively referred to as The Starco Group. This proposed transaction is expected to provide greater scale and margin efficiency through vertical integration and would result in the Company being renamed “STARCO,” with two primary operating subsidiaries:subsidiaries. We have not acquired the contract manufacturers as of this Report, however, on July 2, 2026 the Company formed Starco BrandsManufacturing, LLC, a Nevada limited liability company (“Manufacturing Holdco”), and on July 6, 2026, the Company formed Starco Brands, LLC, a Nevada limited liability company (“Brands Holdco” and together with Manufacturing Manufacturing.Holdco, the “Holdcos”).

Our principal executive offices are located at 706 N Citrus Avenue, Los Angeles, California,California 90038, and our telephone number is (844) 478-2726. Our website is www.starcobrands.com and the Company makes its SEC reports available on the website. Our internet website and the information contained therein or connected thereto are not intended to be incorporated by reference into this Quarterly Report.

STCB and its subsidiaries had 2926 full-time employees as of MarchJune 31,30, 2026 and used independent contractors and consultants on an as needed basis.

Comparison of the three months ended MarchJune 31,30, 2026 to the three months ended MarchJune 31,30, 2025

For the three months ended MarchJune 31,30, 2026, we recorded revenues of $8,979,270$7,836,040 compared to $9,818,757$10,586,121 for the three months ended MarchJune 31,30, 2025 for2025, a decrease of $839,487$2,750,081 or 9%.26%. The decrease in the current period was primarily due to decreases in sales of Soylent stemming from an inability to receive product from ourits primary supplier, partially offset by increases in sales of Skylar.

For the three months ended MarchJune 31,30, 2026, we recorded related party revenues of $283,158$229,752 compared to $1,050,312$421,379 for the three months ended endedJune March30, 31, 2025 for2025, a decrease of $767,154$191,627 or 73%.45%. This decline was due to declines in sales of Whipshots due to continued softening in the spirits market.

The following discussion provides additional detail on segment-level revenue performance for the three months ended MarchJune 31,30, 2026 and 2025.

Soylent. Soylent revenues were $4,386,006$2,989,196 for the three months ended MarchJune 31,30, 2026, compared to $7,254,599$6,754,481 for the three months ended MarchJune 31, 2025, a decrease30, of $2,868,593 or 40%.2025. The declinechange was primarily attributable to supply constraints stemming from an inability to receive product from our its primary supplier, which limited our ability to fulfill customer demand during the quarter.supplier.

Skylar. Skylar revenues were $3,672,501$3,485,170 for the three months ended MarchJune 31,30, 2026, compared to $1,413,933$2,445,134 for the three months ended MarchJune 31,30, 2025, an increase of $2,258,568 or 160%.2025. The increase was primarily due to athe success of our marketing initiatives and new product launch and increased unit sales from our monthly Scent Club subscription program.rollouts.

Winona.Whipshots. Whipshots Winonarelated-party revenues were $865,933$229,752 for the three months ended MarchJune 31,30, 2026, compared to $964,571$421,379 for the three months ended June March30, 31,2025. 2025,The achange decreasereflects of $98,638continuing orsoftening 10%.in the spirits market.

AOS. AOSWinona. Winona revenues were $54,830 $1,361,749 for the three months ended MarchJune 31,30, 2026, compared to $185,654$1,026,623 for the three months ended MarchJune 31,30, 2025, a decrease of $130,824 or 70%.2025.

For the three months ended MarchJune 31,30, 2026, our compensation expense amounted to $1,678,748,$1,900,689, reflecting aan decreaseincrease of $57,440$238,718 or 3%,14%, compared compared to $1,736,188$1,661,971 for the three months ended MarchJune 31,30, 2025. ThisThe declineincrease is primarily attributable to reductionsthe payment of employee bonuses in the quarter, partially offset by reduced stock-based compensation expenseheadcount and overall headcountstock-based compensation compared to the prior-year period.

For the three months ended March 31,June 30, 2026, our professional fees totaled $583,879,$686,079, representing a decrease of $196,345$225,848 or 25%, compared to $780,224 $911,927 in the prior period. Professional fees are mainly for contractors, accounting, auditing and legal services associated with business operations, merger activity, and our quarterly filings as a public company, and advisory and valuation services. The decrease is primarily due to a decreasereduction in legaloutsourced accounting fees as we transitioned the function to internal employees in the second half of last year and accounting/decreased legal and audit and valuation fees in the current year period.year.

For the three months ended MarchJune 31,30, 2026, our marketing, general and administrative expenses were $2,427,821,$2,153,923, reflecting a decrease of $956,597 $1,039,966 or 28%,33%, compared to $3,384,418$3,193,889 for the three months ended MarchJune 31,30, 2025. The decrease primarily reflects lower amortization expense of approximately $370,000 following the write-offs of intangible assets at our Soylent subsidiary at December 31, 2025, reduced broker commissions ofand approximatelymarketing $200,000support costs at Soylent,Soylent and a $400,000 reduction in marketingAOS, and advertisingreduced borrower fees due to our year end refinancing, partially offset by increased marketing spend at the STCB segment as part of a broader cost-saving initiative.Skylar.

For the three months ended March 31,June 30, 2026, we had total other expense of $253,502$199,133 compared to total other expense of $558,832$494,694 for the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026, the Company had interest expense of $237,985$193,048 compared to interest expense of $236,636$257,538 during the same period in 2025; the Company also had other expense of $15,517$6,085 for the three months ended MarchJune 31, 30, 2026 as compared to other expense of $322,196$237,156 during the same period in 2025.

For the three months ended March 31,June 30, 2026, we reported a net loss of $829,720,$1,461,634, compared to a net incomeloss of $1,976,105$1,850,201 for the same period in 2025. The year-over-year change improvement was primarily driven by thelower $3,692,529operating gainexpenses, recognizedincluding inreduced themarketing prior-yearand period related to the change in fair value of our share adjustment,professional which did not recur in 2026,fees, partially offset by improvedlower performance in our Skylar segment.revenue.

As reflected in the accompanying condensed consolidated financial statements, we had an accumulated deficit of $103,145,543$104,579,639 as of MarchJune 31, 30, 2026. Net cash used in financing activities for the threesix months ended March 31,June 30, 2026 was $113,158,$149,202, allconsisting of which related to payments on our notes payable. During the same period in 2025, we usedgenerated $293,307$693,062 in cash cash from financing activitiesactivities, primarily due to $268,397$362,194 of net paymentsproceeds towardfrom the revolving loan and $24,910$330,868 in paymentsnet onproceeds from notes payable.

We used $707,412$768,074 of net cash in operating activities for the threesix months ended MarchJune 31,30, 2026. Operating cash outflows were primarily driven driven by our net loss of $829,720$2,291,354, partially offset by non-cash adjustments (including $708,628 of amortization and higher$463,880 workingof capitalstock-based compensation) usage,and by working-capital changes, including increasesa decrease in accounts receivable of $622,316$529,791 andoffset by an increase in inventory inventory of $349,501, resulting from purchase timing and higher inventory levels maintained during the period.$414,285. During the same period in 2025, our net cash providedused byin operating activities was $839,143$859,889 andcompared was driven byto net income of $1,976,105$125,904 for andthe aperiod, decrease innegatively accountsaffected receivableby ofthe $3,099,686.$3,692,529 non-cash gain recognized during the period.

On August 11, 2023, wethe Company issued athe Consolidated Secured Promissory Note to Ross Sklar in the principal amount of $4,000,000, consolidating several prior notes. The noteConsolidated bearsSecured Note bore interest at the Wall Street Journal Prime Rate plus 2 percent, reassessed monthly, and iswas secured by substantially all of our assets pursuant to an Amended and Restated Consolidated Security Agreement.Agreement, dated August 11, 2023. On May 31, 2024, we and Mr. Sklar entered into an amendment extending the maturity date of the Consolidated Secured Note to August 31, 2026, with an automatic extension to August 31, 2027 if amounts remain outstanding at maturity. The restructuring was accounted for as a debt modification.

During 2024, we repaid $1,527,500 of principal under the Consolidated Secured Note using proceeds from the Gibraltar Loan. As of December 31, 2024, the outstanding principal balance under the Amended Consolidated Secured Promissory Note was $2,472,500, with no accrued interest outstanding.

On August 13, 2025, we and Mr. Sklar entered into a Second Amendment to the Amended Consolidated Secured Promissory Note. The Second Amendment consolidated two additional loans made by Mr. Sklar to us in the aggregate principal amount of $1,000,000, consisting of a $500,000 loan funded on July 15, 2025 and a $500,000 loan funded on August 15, 2025. After giving effect to these additional loans and prior repayments, the principal balance under the noteConsolidated Secured Note was adjusted to $3,472,500. The Second Amendment reaffirmed that the noteConsolidated remainsSecured Note remained subject to the Subordination Agreement dated May 24, 2024 between Mr. Sklar and Gibraltar Business Capital, LLC. Except as modified by the Second Amendment, all other terms of the Amended Consolidated Secured Promissory Note, including interest rate, repayment provisions, and maturity, remained unchanged.

As of MarchJune 31,30, 2026, the outstanding principal balance owed to Mr. Sklar under the amendedConsolidated noteSecured Note was $3,472,500. Interest expense related to notes held by Mr. Sklar was $84,921$87,792 and $59,312$61,393 for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $172,713 and $120,705 for the six months ended June 30, 2026 and 2025, respectively.

On December 22, 2025, we entered into athe Bridge Term Loan Promissory Note with The Starco Group, Inc. (“TSGI”),TSGI, a company wholly ownedwholly-owned by Ross Sklar, the Company’s Chief Executive Officer. The PromissoryBridge NoteLoan provides for a bridge term loan of up to $5,000,000, including an initial disbursement of $4,500,000 and additional delayed drawdowns of up to $500,000 through December 31, 2026. The initial proceeds were used to repay our outstanding obligations under the Gibraltar Loan and to support working capital needs.

The Bridge Loan bears interest at the lesser of (i) the Highest Lawful Rate or (ii) the Prime Rate (not less than 6.00 percent) plus 4.25 percent. Interest is payable monthly beginning January 1, 2026. Principal payments begin January 1, 2027 and continue through 2030, with scheduled monthly payments ranging from $28,000 to $66,000. We may prepay the loanBridge Loan at any time without penalty. The loanBridge Loan matures on the earlier of (i) five years from issuance, (ii) acceleration upon default, or (iii) full repayment.

As of MarchJune 31,30, 2026, the outstanding principal balance under the Bridge Loan was $4,500,000, and interest expense related to the loan was $137,500$83,875 and $0 for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $221,375 and $0 for the six months ended June 30, 2026 and 2025, respectively.

The condensed consolidated financial statements included in this QuarterlyWe Report on Form 10-Q have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. We have concluded that substantial doubt exists about our ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. The principal conditions giving rise to substantial doubt include our history of recurring net losses and continued working capital deficiencies. As of MarchJune 31,30, 2026, we had an accumulated deficit of $103,145,543,$104,579,639, including a net losslosses of $829,720$1,461,634 and $2,291,354 for the three and six months then ended, and a working capital deficit of approximately $2.5 $1.6 million.

As of MarchJune 31,30, 2026, our total debt was $7,972,500, consisting of $3,472,500 of notes payable to our CEO, Ross Sklar and $4,500,000 outstanding under athe newBridge bridge loan.Loan. Mr. Sklar holds a significant minority ownership interest, interest,is the Company’s CEO and a member of the Board, and historically, certain notes payable to him have been extended or refinanced; however, there can be no assurance that such extensions or refinancings will continue in the future.

Working Capital Surplus Deficit

The increase decrease in current assets is primarily due to increases in accounts receivable and prepaid assets of $622,316 and $349,501, respectively, offset by a decrease in cash of $820,570.$917,276 and a decrease in accounts receivable of $529,791, partially offset by increases in inventory of $414,285 and prepaid expenses of $67,721. The increase in current liabilities is primarily the result of an increase in other payables and accrued liabilities of $577,897.$244,411, an increase in notes payable of $221,267 and an increase in related-party payables, partially offset by a decrease in accounts payable of $784,290.