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

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

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business and operations, future trends and operating results of such business, the planned expansion of those operations into new markets and applications, characteristics and trends and the demand for the products and services we offer, the need for and use of proceeds from one or more financings for strategic arrangements and partnerships, our future capital needs and ability to obtain financings and liquidity. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, working capital sources, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include the future impact of the geopolitical conflicts in Israel and Ukraine, inflation and Federal Reserve interest rate increases in response thereto on the economy including the potential for a recession, downturn in economic activity and the capital markets and a resulting reduction in demand for our offerings, declines in expenditures for digital marketing campaigns and a trend towards in-housing those functions, our limited operating history and revenue, our ability to effectively navigate challenges posed by the complex industries we serve including the potential for rapid and unpredictable technological change, regulatory burdens and an intense competitive environment. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Background of the Company

The Cannaisseur Group, Inc. (the "Company" or "TCRG") was established in December 2020. On January 4, 2021 the Company acquired a fifty-one percent (51%) interest in Atlanta CBD Inc. (d/b/a as Inno Medicinals) ("Atlanta CBD"). Atlanta CBD was formed to engage in hemp cultivation, extraction, manufacturing, distribution, and retail sales through CBD stores. The Company, however, has now transitioned into a health and wellness company, with the aim of promoting and selling health and wellness products, including CBD-related products. Currently, the Company's only assets and operations consist of the 51% interest it owns in Atlanta CBD, Inc. TCRG manages and operates Atlanta CBD's business on a day-to-day basis. The Company intends to work in conjunction with Atlanta CBD to grow the business operations.

Atlanta CBD, at its inception, was a hemp products supplier and retailer. It sold its retail hemp products through the trade name, Inno Medicinals, located in Atlanta Georgia. Currently, Atlanta CBD, in order to better reflect the direction of TCRG, intends to sell health and wellness products, through its retail operations. The products offered for sale will also reflect the shift in strategy of TCRG.

Results of Operations for the Three Months Ended June 30, 2025 Compared with the Three Months Ended June 30, 2024

Revenue

Revenue was $0 for the three months ended June 30, 2025 and 2024. The lack of revenue was due to a decline in retail sales driven by the closing of the Company's retail store. The Company is in the process of restructuring its website and plans to conduct business online. The Company may reopen a physical store or stores in the future if it is advantageous to its operations.

Costs of Revenue

Cost of revenue was $282 for the three months ended June 30, 2025, compared to $485 during the three months ended June 30, 2024, a decrease of $203, or 41.9%. The decrease was driven primarily by reduced write off of obsolete inventories in the current period.

The Company reported negative gross profit for the three months ended June 30, 2025 and 2024. The negative profit margins were the result of reduced sales, due to the closing of the Company's retail store, and increases in write-offs of obsolete inventory. Continued growth of the consumer market for CBD products and increases in competition are anticipated to continue to create pressure on gross profit margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $77,207 for the three months ended June 30, 2025, compared to $1,069,581 during the three months ended June 30, 2024, an decrease of $992,374, or 92.8%. The decrease was driven primarily by a decreases in share-based compensation expense.

Other Expense, Net

Other expense, net was $1,640 during the three months ended June 30, 2025, compared to $1,560 during the three months ended June 30, 2024, an increase of $80, or 5.1%. The increase was the result of an increase in interest expense during the three months ended June 30, 2025.

Results of Operations for the Six Months Ended June 30, 2025 Compared with the Six Months Ended June 30, 2024

Revenue

Revenue was $0 for the six months ended June 30, 2025, compared to $415 for the six months ended June 30, 2024, a decrease of $415, or 100%. The decrease in revenue was due to a decline in retail sales driven by the closing of the Company's retail store. The Company is in the process of restructuring its website and plans to conduct business online. The Company may reopen a physical store or stores in the future if it is advantageous to its operations.

Costs of Revenue

Cost of revenue was $446 for the six months ended June 30, 2025, compared to $2,494 during the six months ended June 30, 2024, a decrease of $1,633, or 78.5%. The decrease was driven primarily by reduced sales in the current period.

The Company reported negative gross profit for the six months ended June 30, 2025 and 2024. The negative profit margins were the result of reduced sales, due to the closing of the Company's retail store, and increases in write-offs of obsolete inventory. Continued growth of the consumer market for CBD products and increases in competition are anticipated to continue to create pressure on gross profit margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $924,115 for the six months ended June 30, 2025, compared to $1,153,777 during the three months ended June 30, 2024, an increase of $229,662, or 19.9%. The decrease was driven primarily by a decreases in share-based compensation expense.

Other Expense, Net

Other expense, net was $3,351 during the six months ended June 30, 2025, compared to $3,100 during the six months ended June 30, 2024, an increase of $251, or 8.1%. The increase was the result of an increase in interest expense during the six months ended June 30, 2025.

Liquidity and Capital Resources

As of June 30, 2025, the Company had $3,140 in total assets, including cash of $2,558, as compared to $1,876 in total assets, including cash of $563, as of December 31, 2024. The increase in assets is attributable to an increase in cash from the sale of common stock.

As of June 30, 2025, the Company had total liabilities of $433,298 consisting of accounts payable and accrued expenses of $310,029, rent settlement payable of $9,501, notes payable - current of $87,026, dividends payable of $1,608, and long-term notes payable of $25,134. As of December 31, 2024, we had total liabilities of $305,576, consisting of accounts payable and accrued expenses of $169,807, settlement payable of $9,501, notes payable - current of $46,697, dividends payable of $1,608, and long-term notes payable of $76,463. The increase in liabilities is mainly due to an increase in accounts payable and accrued expenses.

Cash Flows from Operating Activities

For the six months ended June 30, 2025, cash used in operating activities of $86,505 resulted from a net loss of $927,912, adjustments for share-based compensation of $700,000, and a net increase of $141,407 in the components of working capital. The change in the components of working capital was primarily due to an increase in accounts payable and accrued expenses and a decrease in inventory.

For the six months ended June 30, 2024, cash used in operating activities of $86,919 resulted from a net loss of $1,158,956, adjustments for share-based compensation of $1,042,000 and a net increase of $30,037 in the components of working capital. The change in the components of working capital was due primarily to an increase in accounts payable, a decrease in inventory, and a decrease in settlement payable, with the remaining change attributable to normal operational fluctuations in current assets and current liabilities.

Cash Flows Provided by Financing Activities

Our financing activities consisted primarily of the sale of common stock, borrowings and repayments of debt, and contributed capital from related parties.

For the six months ended June 30, 2025, cash provided by financing activities was $88,500 consisting of $90,000 in proceeds from the sale of common stock, off set by repayments of a short-term loan - related party in the amount of $1,500.

For the six months ended June 30, 2024, cash provided by financing activities was $50,000 consisting of $40,000 in proceeds from convertible notes payable, $5,000 in proceeds from the sale of common stock, and contributed capital by related parties of $5,500.

Non-cash Financing Activities

During the six months ended June 30, 2025, the Company issued 76,365 shares of common stock, with a fair value of $10,691, for the conversion of principal and accrued interest on notes payable in the amount of $11,454.

General

Historically, we have financed the Company through a combination of debt and equity transactions. To meet future capital requirements, we plan to raise additional capital through the sale of equity securities or through equity-linked or debt-financing arrangements, to the extent our operating cash flow is insufficient to fund our operations in future periods.

The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.

TCRG expects to raise funds through private investors and investment firms and is looking to secure a non-recourse loan for work capital and operating expenses. We intend to continue offering smaller investment opportunities. Long term, we plan to seek larger amounts of investment to expand our operations. TCRG will also look to attain a non-recourse loan of $50,000.

There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We continue to monitor macro-economic factors such as inflationary pressures, continued Federal Reserve interest rate hikes and recessionary fears, as well as trends within our industry, all of which may affect our working capital requirements.

Inflation

The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Going Concern

The accompanying financial statements have been prepared on a going concern basis. For the six months ended June 30, 2025, the Company had a net loss of $927,912, net cash used in operating activities of $86,505, negative working capital of $405,024, an accumulated deficit of $2,642,291 and stockholders' deficit of $468,033. These matters raise substantial doubt about the Company's ability to continue as a going concern for a period of one year from the date of this filing. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company's capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

A summary of significant accounting policies is included in Note 2 to the consolidated financial statements included in this Registration Statement. Of these policies, we believe that the following items are the most critical in preparing our financial statements.

Consolidation Policy

TCRG relied upon the guidance of ASC 250 Accounting Changes and Error Corrections ("ASC 250") and ASC 805 Business Combinations ("ASC 805") in accounting for and presenting acquisition of Atlanta CBD. Pursuant to ASC 805-50-05-5, the pooling-of-interests method of accounting provides relevant guidance when an exchange of shares between entities under common control results in a change in the reporting entity. Under the pooling-of-interests method, the transferred assets and liabilities are recorded at their historical carrying amounts, and the equity accounts of the separate entities are combined. Pursuant to ASC 805-50-45-2, the transaction should be presented as if it occurred on the first day of the period reported; accordingly, we have reported the Atlanta CBD transaction as if it occurred on January 1, 2020.

Inventory

Inventories are stated at the lower of cost or market. Atlanta CBD periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting.

Revenue Recognition

TCRG recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Atlanta CBD sells CBD related products in a retail location in Atlanta, Georgia and through e-commerce. Revenue is recognized based on the following model:

1.

Atlanta CBD sells products at their one retail location and via web site sales. A sale agreement exists when the customer purchases the product at the counter or via an online purchase. The price for and product to be received are known at time of purchase.

2.

The performance obligations are to provide the product for the customer at the counter or ship the product to the customer. The product is shipped on the day of sale.

3.

The price of the product is located on the label or presented on the web site and therefore is known at the time of purchase.

4.

The price of the product is properly allocated to the sole performance of providing the product.

5.

Revenue is recognized in the retail location at the point of sale where money is collected and the product is in control of customer and from the web site upon settlement of the credit card transaction, which is effectively at the time of purchase.

Use of Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.

Most Recent Accounting Pronouncements

Refer to Note 2 in the accompanying consolidated financial statements.

Impact of Most Recent Accounting Pronouncements

There were no recent accounting pronouncements that have had a material effect on the Company's financial position or results of operations.