Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. Our actual results or actions may differ materially from these forward-looking statements for many reasons. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect.

Introduction

Based on our diversified expertise in manufacturing, marketing, distribution, and technology services in a wide variety of consumer products, including tobacco products, medical devices, and beverages, around the world, we have an innovative and consumer-focused approach to brand portfolio management, resting on a strong understanding of consumers domestically, and we have established a footprint in more than 50 key, international markets.

During the year ended December 31, 2025, our business activities generated revenue of $3,126,891. In 2020, we completed phase one and two of our development of all HUSTLER®-branded products, related to our 2019 five-year manufacturing and distribution agreement with an unrelated party to manufacture, distribute, and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using the HUSTLER® brand name.

Going Concern

We have suffered substantial losses. The future of our company is dependent upon our ability to continue to generate revenues sufficient to offset operating costs or recover start-up costs under our GloBrands-HUSTLER® Exclusive Manufacturing and Distribution Agreement signed in December 2019. Management intends to seek additional capital through a private placement or public offering of its common stock, if necessary. Our auditors have expressed a going concern in their opinion, which raises substantial doubts about our ability to continue as a going concern.

Results of Operations

Comparison of Years Ended December 31, 2025 and 2024

Sales and Cost of Sales

We had revenues of $3,126,891 and $1,296,796 during the years ended December 31, 2025 and 2024, respectively, an increase of $1,830,095 or 141.1%. We had cost of sales of $1,586,194 and $458,158, respectively, for gross profit of $1,540,697 and $838,638, respectively. Revenues are derived from the design, manufacture, and delivery of certain licensed products in accordance with our GloBrands-HUSTLER® distribution agreement. We had higher revenue in the current period due to higher sales in our vapor product line where sales picked up in the last half of the year.

Operating Expenses

During the year ended December 31, 2025 and 2024, employee costs were $508,553 and $515,807, respectively, a decrease of only $7,254 or 1.4%.

During the year ended December 31, 2025 and 2024, selling, general, and administrative expenses were $1,161,867 and $873,570, respectively, an increase of $288,297 or 33%. The increase in operating expenses year over year is the result of additional marketing expense to launch product on retail chains.

Other Income and Expense

For the year ended December 31, 2025, we had total other expense of $418,445. This consisted of $822,735 of interest expense, a gain on settlement of debt of $328,857, a gain on forgiveness of debt of $19,859, a loss on disposal of equipment of $9,323 and a gain of $64,891 on derivative valuation. We also had other income of $6.

For the year ended December 31, 2024, we had total other expense of $1,996,615. This consisted of $790,589 of interest expense, an impairment loss on our investment of $52,000 and a loss of $1,161,498 on derivative valuation. We also had other income of $250 and a gain on the disposal of equipment of $7,222.

As a result of the foregoing, we had a net loss from continuing operations of $548,168 as compared to $2,547,354 in the prior year.

For the year ended December 31, 2025, we recognized a loss from discontinued operations of $153,466 due to interest expense.

For the year ended December 31, 2024, we recognized a loss from discontinued operations of $153,886 due to interest expense.

Liquidity and Capital Resources

We have had a history of losses from operations, as our expenses have been greater than our revenue. Our accumulated deficit is approximately $62.3 million at December 31, 2025.

Operating Activities

During the year ended December 31, 2025, operations used $1,338,174 of net cash, comprised of a loss from discontinued operations of $153,466, noncash items totaling ($152,221), consisting primarily of gains recognized from the settlement of debt, and changes in working capital totaled ($484,319).

During the year ended December 31, 2024, operations used $46,354 of net cash, comprised of a loss from discontinued operations of $153,886, noncash items totaling $1,310,404, consisting primarily of losses recognized from the changes in fair values of derivative liabilities and debt discount amortization, and changes in working capital totaled $1,122,020.

During the year ended December 31, 2025, we neither used or received any cash for investing activity. During the year ended December 31, 2024, we were provided with $15,400 of net cash from the sale of an automobile.

During the year ended December 31, 2025, we were provided $1,347,763 of net cash in financing activities comprised of a decrease in our bank overdraft of $30,384 and proceeds from related-party loans of $1,378,147.

During the year ended December 31, 2024, we were provided $30,954 of net cash in financing activities comprised of repayments on related-party loans that totaled $61,336, proceeds from related-party loans of $61,906 and an increase in our bank overdraft of $30,384.

Our Capital Resources and Anticipated Requirements

Our monthly operating costs are approximately $35,000 per month, excluding approximately $50,000 of accruing interest expense and capital expenditures. We continue to focus on generating revenue and reducing our monthly business expenses through cost reductions and operational streamlining. We have only recently begun to generate enough cash to sustain our day-to-day operations, and we expect to access external capital resources in the future to fund any new projects we may undertake. We cannot assure that we will be successful in obtaining such capital.

If we seek infusions of capital from investors, it is unlikely that we will be able to obtain additional debt financing. If we did incur additional debt, we would be required to devote additional cash flow to servicing the debt and securing the debt with assets.

Our issuance of additional shares for equity or for conversion of debt could dilute the value of our common stock and existing stockholders' positions.

Convertible Debentures and Notes Payable

We currently have an outstanding amended, restated, and consolidated secured convertible debenture with Tekfine, LLC, an unrelated entity, with a maturity date of April 30, 2027, to the extent not previously converted. The amended debenture has a total outstanding principal balance of $2.4 million, with accrued interest of $2.2 million as of December 31, 2025. We also have four additional convertible debentures with Tekfine with a maturity date April 30, 2027, totaling $275,000, unless earlier converted. The convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $100 or $0.10 (depending on the instrument) or the lowest bid price for the 20 trading days prior to conversion.

We have received advances from related parties totaling $1,378,147 and $61,906 during the years ended December 31, 2025 and 2024, respectively, as well as making repayments on related-party loans of $0 and $61,336 during the years ended December 31, 2025 and 2024, respectively.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect reported amounts and disclosures.

Refer to Note 2 of our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K for a summary of our significant accounting policies and recently adopting and issued accounting standards.