Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q of Freeze Tag, Inc. ("Freeze Tag" or the "Company") for the nine months ended September 30, 2025 contains forward-looking statements, principally in this Section and "Business." Generally, you can identify these statements because they use words like "anticipates," "believes," "expects," "future," "intends," "plans," and similar terms. These statements reflect only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation of belief will be accomplished.

We believe it is important to communicate our expectations to our investors. There may be events in the future; however, that we are unable to predict accurately or over which we have no control. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2024, as well as any cautionary language in this Quarterly Report on Form 10-Q and our last Annual Report on Form 10-K, provide examples of risks, uncertainties, and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated include but are not limited to: distributors not accepting our games; price reductions; unforeseen delays in game production; changes in product strategies; general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.

Summary Overview

Freeze Tag, Inc. is a creator of location-based, mobile social games that are fun and engaging for consumers and businesses. Based on a free-to-play business model that has propelled games built and marketed by some of our competitors to worldwide success, we employ state-of-the-art data analytics and proprietary technology to dynamically optimize the gaming experience for revenue generation. Players can download and enjoy our games for free, and, if they so choose, they can purchase virtual items and additional features within the game to increase the fun factor.

In October 2017, Rob Vardeman, former President of Munzee Inc. joined gaming industry veterans, Craig Holland and Mick Donahoo, to form a stronger and well-rounded Freeze Tag team through a merger. In addition to successful games Freeze Tag has launched previously, the current portfolio of games includes hits such as Munzee, a real-world gaming adventure and social platform with over 8 million locations worldwide and hundreds of thousands of players, WallaBee, an addictive collecting game with over 2,000 beautifully drawn digital cards.

We also offer our technology and services to businesses that want to leverage our expertise in location-based mobile gaming in their marketing and branding programs. For example, our Eventzee solution allows businesses to create private scavenger hunts in physical places such as malls, tradeshows, company events or campuses to create immersive brand experiences.

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Central to Freeze Tag's core strategy is capitalizing on fast-growing trends in the mobile applications world, including geofencing and location-based advertising. We plan to leverage the combined company's proprietary technology and expertise to create more exciting location-based experiences in our games.

In the quarter ended March 31, 2020, our wholly-owned subsidiary, Space Coast Geo Store, LLC, a Florida limited liability company, began selling merchandise to the geocaching industry. In October 2024, the Company began shutting down Space Coast Geo Store, LLC. Effective December 31, 2024, there are no longer any employees paid through the LLC, and the Company has completely closed down the business operations of the LLC as of April 30, 2025.

Due to the significant increase in costs related to being a public company, as well as our historical losses, our management has been exploring options related to our business. These options include, but are not limited to, selling our current business and trying to find another business, either within or outside of our current segment, to take over the public corporation.

Going Concern Uncertainty

The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. As shown in the accompanying condensed consolidated financial statements, the Company recognized a net loss of $163,431 and used net cash of $81,135 in operations for the nine months ended September 30, 2025. As of September 30, 2025, the Company had a working capital deficit of $940,369 and a total stockholders' deficit of $821,875. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern.

Management believes that by continuing to implement cost reductions and by increasing revenue from updated product lines, operating cash flows will be sufficient to support the Company's business plan. However, management is currently evaluating alternative financing sources to fund the Company's current business plan should cash provided by operations be insufficient.

The Company's ability to continue as a going concern is dependent upon successfully executing its plans to attain a successful level of operations. The Company's financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern.

Critical Accounting Policies

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, expenses and related disclosures. These estimates and assumptions are often based on historical experience and judgments that we believe to be reasonable under the circumstances at the time made. However, all such estimates and assumptions are inherently uncertain and unpredictable and actual results may differ. For further information on our significant accounting policies, see Note 2 to our financial statements included in this filing.

The following is a summary of our critical accounting policies that involve estimates and management's judgment.

Revenue Recognition

The Company's revenues are derived primarily by licensing software products in the form of mobile games for smartphone and tablet platforms. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

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We determine revenue recognition through the following steps:

	·	identification of the contract, or contracts, with a customer;
	·	identification of the performance obligations in the contract;
	·	determination of the transaction price;
	·	allocation of the transaction price to the performance obligations in the contract; and
	·	recognition of revenue when, or as, we satisfy a performance obligation.

Intangible Assets

Intangible assets consist primarily of intellectual property, customer base and non-compete agreements acquired in 2017, which are amortized on a straight-line basis over their estimated useful lives of 5 years. Intangible assets are reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

Accounting for Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718-10, Compensation-Stock Compensation and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees. Stock-based compensation expense recognized during the requisite services period is based on the value of share-based payment awards after reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Software Development Costs

Software development costs include direct costs incurred for internally developed products and payments made to independent software developers and/or contract engineers and artists. The Company accounts for software development costs in accordance with the FASB guidance for the costs of computer software to be sold, leased, or otherwise marketed as found in ASC Subtopic 985-20. On a case-by-case basis, certain software development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be recoverable. Technological feasibility of a product encompasses both technical design documentation and game design documentation, or the completed and tested product design and working model. Software development costs are capitalized once technological feasibility of a product is established and such costs are determined to be recoverable against future revenues. For products where proven game engine technology exists, this may occur early in the development cycle.

Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established. For most products, technological feasibility is established when a detailed game design document containing sufficient technical specifications written for a proven game engine or framework technology had been created and approved by management. However, technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to the appropriate expense account. Amounts that were considered 'research and development' that are not capitalized are immediately charged to general and administrative expense.

Prior to a product's release, the Company expenses, as part of "Cost of Sales-Product Development," capitalized costs when the Company believes such amounts are not recoverable. Capitalized costs for those products that are cancelled or abandoned are charged to product development expense in the period of cancellation. Commencing upon product release, capitalized software development costs are amortized to "Cost of Sales-Product Development" based on the straight-line method.

The Company evaluates the future recoverability of capitalized software development costs and intellectual property licenses on an annual basis. For products that have been released in prior years, the primary evaluation criterion is actual title performance. For products that are scheduled to be released in future years, recoverability is evaluated based on the expected performance of the specific products to which the costs relate or in which the licensed trademark or copyright is to be used. Criteria used to evaluate expected product performance include: historical performance of comparable products developed with comparable technology; orders for the product prior to its release; and, for any sequel product, estimated performance based on the performance of the product on which the sequel was based.

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Recent Accounting Pronouncements

Although there were new accounting pronouncements issued or proposed by the FASB during the nine months ended September 30, 2025, and through the date of filing of this report, we do not believe any of these accounting pronouncements has had or will have a material impact on our financial position or results of operations.

Results of Operations

Revenues

Our revenues for the nine months ended September 30, 2025 of $1,278,744 were down $235,415 from revenues of $1,514,159 for the nine months ended September 30, 2024. The primary reason for the year-over-year decrease in revenues was a reduction in demand for some product types. We are continuing to improve our products and expect continued growth in our Munzee and Eventzee apps, with increased demand going forward.

Cost of Sales

Cost of sales decreased $34,329 to $295,277 for the nine months ended September 30, 2025, from $329,606 for the nine months ended September 30, 2024. The decrease was mainly due to lower server and supporting software product costs.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses increased $77,071 to $1,135,965 for the nine months ended September 30, 2025, from $1,058,894 for the nine months ended September 30, 2024. The decrease is primarily due to a decrease in travel, employee salaries due to headcount reduction, and external contractor expenses.

Other Income (Expense)

Total other expense, net for the nine months ended September 30, 2025 of $10,933 was $22,012 lower than other expense of $42,623 for the nine months ended September 30, 2024. Higher interest expense was mostly offset by other income of $32,945 received during the nine months ended September 30, 2025. Other income also included a prior 2020 loan that later became a grant and was recognized in the third quarter.

Net Income

As a result of the above, we reported a net loss of $163,431 and $354,461 for the nine months ended September 30, 2025 and September 30, 2024, respectively.

Liquidity and Capital Resources

Introduction

As of September 30, 2025, we had current assets of $137,771, including cash of $108,201, and current liabilities of $1,078,142, resulting in a working capital deficit of $940,371. In addition, we had a total stockholders' deficit of $821,874 at September 30, 2025.

During the nine months ended September 30, 2025, we used net cash of $108,389. Management believes that by continuing to implement cost reductions and by increasing revenue from updated product lines, operating cash flows will be sufficient to support our business plan. However, management is currently evaluating alternative financing sources to fund our current business plan should cash provided by operations be insufficient. There can be no assurance that we will be successful in these efforts.

Sources and Uses of Cash

We used net cash of $81,135 from operating activities for the nine months ended September 30, 2025. A net loss of $163,431 was offset by decreases in prepaid expenses, accounts receivable, plus an increase in accounts payable of $20,253, plus $99,811 of non-cash expenses.

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By comparison, we used net cash of $235,893 from operating activities for the nine months ending September 30, 2024. A net loss of $354,461 was offset by an increase in accounts payable and accrued expenses, plus a decrease in Prepaid expenses of $15,368, and $104,553 of non-cash expenses.

We used no cash for investing activities for the nine months ended September 30, 2025 and 2024.

Financing activities used $27,254 and $7,899 for loan payments for the nine months ended September 30, 2025, and 2024, respectively.

Notes Payable - Related Party

As of September 30, 2025, our related party debt was comprised of notes payable totaling $379,825 to Craig Holland, our Chief Executive Officer, and Mick Donahoo, our Chief Financial Officer. These notes are non-interest bearing and mature on December 31, 2025. Of this related party indebtedness, there are two convertible notes payable of $186,450 to each of Messrs. Holland and Donahoo, who have the right, at any time, at their election, to convert all or part of the amount due into shares of fully paid and non-assessable shares of our common stock. The fixed conversion price is $0.02 per share. We have imputed interest on these notes payable at an annual rate of 10%, offset by an increase in additional paid-in capital. However, no further shares are distributed or owed to the related parties.