Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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

The following discussion should be read in conjunction with our condensed consolidated unaudited financial statements and notes to our unaudited financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.

Overview

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.

Since 2021, we continue under 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.

Results of Operations for the Three Months Ended March 31, 2026, Compared to the Three Months Ended March 31, 2025

Sales and Cost of Sales

During the three months ended March 31, 2026 and 2025, we had net sales of $1,161,353 and $460,816, respectively, an increase of $700,537 or 152%. We had cost of sales of $697,971 and $190,522, respectively, and gross profit of $463,382 and $270,294, 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 increase demand for our vaper products.

Operating Expenses

During the three months ended March 31, 2026 and 2025, employee costs were $130,020 and $128,908 respectively, an increase of only $1,112 or 0.9%.

During the three months ended March 31, 2026 and 2025, selling, general, and administrative expenses ("S,G&A") were $297,240 and $184,659, respectively, an increase of $112,581 or 61%. The increase in S,G&A expenses period over period was the result of increased promotional activities to support higher sales.

Other Expense

Total other expense during the three months ended March 31, 2026 was $101,859 compared to $64,999 the prior period. In the current period we had $211,806 of interest expense, a gain of $104,436 on derivative valuation and a gain on forgiveness of debt of $5,511. In the prior period we had $202,374 of interest expense, a gain of $132,234 on derivative valuation and a gain on forgiveness of debt of $5,141.

Net Loss

Our net loss from continuing operations for the three months ended March 31, 2026, was $65,737 compared to $108,272 for the three months ended March 31, 2025, a decrease to our net loss from continuing operations of $42,535. Our net loss decreased in the current period due to the reasons discussed above.

For the three months ended March 31, 2026, we recognized a gain from discontinued operations of $2,286,438 due to the extinguishment of time barred debt $2,324,279 and $37,841 of interest expense.

For the three months ended March 31, 2025, we recognized a loss from discontinued operations of $37,841 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 was approximately $60.1 million at March 31, 2026. As of March 31, 2026, we had current assets of $2.3 million and current liabilities of approximately $22.5 million, resulting in a working capital deficit of approximately $20.2 million at March 31, 2026.

Operating Activities

During the three months ended March 31, 2026, operations used $59,108 of net cash, comprised of net income of $2,220,701, noncash items totaling $82,511 consisting primarily of a gain recognized from the changes in fair values of derivative liabilities and debt discount amortization, and changes in working capital totaling $89,140. During the three months ended March 31, 2025, operations used $468,328 of net cash, comprised of a loss of $155,436, noncash items totaling $73,351 consisting primarily of a gain recognized from the changes in fair values of derivative liabilities and debt discount amortization, and changes in working capital totaling $239,541.

Financing Activities

During the three months ended March 31, 2026, financing activities provided $60,855 of cash, compared to $469,538 of cash provided during the three months ended March 31, 2025. Cash provided in financing consisted mostly of related party loans.

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 Note 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 had a total outstanding principal balance of $2.4 million, with accrued interest of $2 million as of March 31, 2026. We also have four additional convertible debentures with Tekfine with maturity dates ranging from December 8, 2022, until December 30, 2022, 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.

As of March 31, 2026 and December 31, 2025, there is $21,882 and $21,882 of short-term advances due to related parties , respectively. The advances are due on demand and included in current liabilities. No demand for payment has been made.

Going Concern

These interim unaudited financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the interim unaudited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we not be unable to continue as a going concern.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. Refer to Note 2 - Summary of Significant Accounting Policies for discussion.