Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report, and with our audited consolidated financial statements and related notes and the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Registration Statement on Form 10. In addition to historical information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See "Forward-Looking Statements" and "Item 1A. Risk Factors" for a discussion of the uncertainties, risks, and assumptions associated with these statements. The components of our results of operations are described in our Registration Statement on Form 10 and have not materially changed.

Business Overview

Feel The World, Inc., doing business as Xero Shoes®, is a designer and marketer of minimalist, natural-movement footwear, including performance and casual shoes, boots, sandals, and do-it-yourself sandal kits, sold under the Xero Shoes® brand. The Company sells its products through direct-to-consumer e-commerce, wholesale accounts and independent international distributors, and third-party marketplaces. The Company reports revenue across two operating segments: North American operations, which includes all foreign distributors outside of Europe, and European operations, which includes the European Union countries and Middle Eastern wholesale accounts. The Company's business is seasonal, with a higher proportion of revenue and operating cash flow generated during the second half of the calendar year.

The Company's business is subject to an evolving macroeconomic and trade environment, including changes in tariffs. Beginning in early 2025, significant additional tariffs were imposed under the International Emergency Economic Powers Act ("IEEPA") on products imported from various countries, including the countries in which the Company's products are manufactured. In February 2026, the U.S. Supreme Court invalidated certain tariffs imposed under IEEPA, and in March 2026 the U.S. Court of International Trade ordered U.S. Customs and Border Protection to suspend collection of the invalidated tariffs and to establish a process to refund IEEPA tariffs previously collected. As a result, the Company is eligible to receive refunds of tariffs previously paid on qualifying imports. During the three months ended June 30, 2026, the Company received $49,374 of such refunds, which related to products sold in prior periods and was recognized as a reduction of cost of revenue. Subsequent to June 30, 2026, the Company received an additional $1,823,401 of such refunds. There remains substantial uncertainty regarding potential changes to existing and newly announced tariffs, whether additional tariffs may be imposed, modified, or suspended, and the timing of any refunds, any of which could materially and adversely affect the Company's business, financial condition, and results of operations.

During the second quarter of 2026, the Company's revenue increased 14.7% over the second quarter of 2025, driven by growth in its direct-to-consumer and wholesale and distributor channels, partially offset by lower European revenue. Gross margin expanded to 51.6% of revenue from 47.1%, reflecting a higher proportion of full-price sales relative to the prior-year period, partially offset by higher fulfillment costs. Income from operations improved to $885,930 from $83,735 in the prior-year quarter. Net income of $600,393 compared to $943,385 in the prior-year quarter, which included a $406,719 gain on the reversal of a loss on settlement and a $675,424 income tax benefit, neither of which recurred in the current period.

Second Quarter 2026 Financial Highlights Compared to Second Quarter 2025

●

Revenue increased 14.7% to $16,908,295

●

Gross profit increased 25.7% to $8,720,672; gross margin increased to 51.6% of revenue compared to 47.1%

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Income from operations increased to $885,930 compared to $83,735

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Net income of $600,393 compared to $943,385, which included a $406,719 settlement gain and a $675,424 income tax benefit

First Half 2026 Financial Highlights Compared to First Half 2025

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Revenue increased 9.8% to $32,891,465

●

Gross margin increased to 49.8% of revenue compared to 44.3%

●

Income from operations of $1,683,292 compared to a loss from operations of $699,260

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Net income of $1,072,996 compared to a net loss of $768,710

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Total inventory, including inventory in transit, decreased 6.3% to $20,921,642 from $22,331,638 at December 31, 2025

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Borrowings under the revolving credit facility decreased to $2,063,629 from $4,000,000 at December 31, 2025

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

Three Months Ended June 30, 2026 Compared with the Three Months Ended June 30, 2025

Our operating results for the three months ended June 30, 2026 and 2025 are summarized as follows:

		Three Months Ended
		June 30, 2026				June 30, 2025				Difference
Revenue		$	16,908,295			$	14,736,501			$	2,171,794
Cost of revenues - product costs			(5,943,978	)			(5,862,348	)			(81,630	)
Cost of revenues - fulfillment costs			(2,243,645	)			(1,934,360	)			(309,285	)
Operating expenses			7,834,742				6,856,058				978,684
Other income (expense)			(37,115	)			184,226				(221,341	)
Provision for (benefit from) income taxes			248,422				(675,424	)			923,846
Net income (loss)		$	600,393			$	943,385			$	(342,992	)

Revenue

Revenue for the three months ended June 30, 2026 was $16,908,295, an increase of $2,171,794, or 14.7%, compared to $14,736,501 for the three months ended June 30, 2025. The increase reflected higher direct-to-consumer volume on the Company's 2026 product line, a full quarter of sales through the Company's marketplace distributor partner compared to a prior-year quarter that was disrupted by the transition of the Company's third-party marketplace business to that partner, and sales to distributor partners added in international markets over the past year, partially offset by lower European revenue. The current period also reflected a higher proportion of full-price direct-to-consumer sales, whereas the prior-year period included a greater proportion of inventory-liquidation and clearance-related sales, which contributed to improved realized pricing and gross margin, as discussed below. Growth in gross product sales was partially offset at the net revenue level by higher discounts and customer returns associated with the increased direct-to-consumer volume.

By geographic segment, North American revenue increased $2,979,317, or 27.2%, to $13,939,301 for the three months ended June 30, 2026 from $10,959,984 for the three months ended June 30, 2025, driven by the recovery in marketplace sales following the prior-year transition to the distributor model, new international distributor relationships, and full-price direct-to-consumer growth. European revenue decreased $807,523, or 21.4%, to $2,968,994 from $3,776,517, reflecting the wind-down of the Company's United Kingdom direct operations, which contributed $549,548 of revenue in the prior-year quarter, lower European wholesale revenue as certain European retailers experienced financial difficulty and reduced their inventory commitments, lower European direct-to-consumer promotional activity, and the effect of foreign currency translation.

Gross product sales (before returns, discounts, and shipping revenue) were $19,285,429 for the three months ended June 30, 2026, compared to $16,696,577 for the three months ended June 30, 2025. Customer returns, allowances, and chargebacks decreased to $1,839,852 from $2,078,593, reflecting the shift in the Company's sales mix toward wholesale and distributor partners, which generate fewer returns than direct-to-consumer sales, and changes to the Company's direct-to-consumer return policy. Discounts increased to $956,245 from $279,981, reflecting increased promotional discounting in the current period. Shipping revenue billed to customers, which is included in revenue, increased to $418,963 from $398,498, reflecting higher order volume, partially offset by the Company's continued use of free-shipping promotions.

Cost of Revenues

Cost of revenue for the three months ended June 30, 2026 was $8,187,623, an increase of $390,915, or 5.0%, compared to $7,796,708 for the three months ended June 30, 2025. Cost of revenue consisted of $5,943,978 of product cost in the 2026 period, compared to $5,862,348 in the 2025 period, and $2,243,645 of fulfillment cost in the 2026 period, compared to $1,934,360 in the 2025 period. Product cost increased 1.4% on revenue growth of 14.7%, reflecting the improvement in realized pricing described above, while fulfillment cost increased 16.0%, reflecting higher direct-to-consumer unit volume and returns and higher shipping costs.

Gross profit for the three months ended June 30, 2026 was $8,720,672, or 51.6% of revenue, compared to $6,939,793, or 47.1% of revenue, for the three months ended June 30, 2025, an increase of $1,780,879, or 25.7%, and gross-margin expansion of approximately 4.5 percentage points. The improvement in gross margin primarily reflected a higher proportion of full-price sales and reduced inventory-liquidation activity relative to the prior-year period, partially offset by higher fulfillment costs.

Operating Expenses. Total operating expenses for the three months ended June 30, 2026 were $7,834,742, an increase of $978,684, or 14.5%, compared to $6,856,058 for the three months ended June 30, 2025. The increase primarily reflected higher sales and marketing expense and higher operations expense, partially offset by lower general and administrative expense.

General and Administrative. General and administrative expenses for the three months ended June 30, 2026 were $1,730,675, a decrease of $125,071, or 6.7%, compared to $1,855,746 for the three months ended June 30, 2025. The decrease primarily reflected the absence of restructuring-related costs incurred in the prior-year period in connection with the Company's 2025 workforce reductions, partially offset by higher professional, legal, audit, and compliance costs, including costs associated with the Company becoming a reporting company under the Exchange Act.

Sales and Marketing. Sales and marketing expenses for the three months ended June 30, 2026 were $4,551,367, an increase of $854,191, or 23.1%, compared to $3,697,176 for the three months ended June 30, 2025. Sales and marketing expense as a percentage of revenue was 26.9% in the 2026 period compared to 25.1% in the 2025 period. The increase reflected higher advertising and marketing expense, higher sales commissions as a greater proportion of the Company's European wholesale accounts are serviced by independent sales agencies rather than in-house sales personnel, and higher selling costs associated with the increased direct-to-consumer volume.

Research and Development. Research and development expenses for the three months ended June 30, 2026 were $428,246, an increase of $17,893, or 4.4%, compared to $410,353 for the three months ended June 30, 2025.

Operations. Operations expenses for the three months ended June 30, 2026 were $1,124,454, an increase of $231,671, or 25.9%, compared to $892,783 for the three months ended June 30, 2025. The increase primarily reflected higher costs associated with increased unit volume and severance costs incurred during the period.

Income from Operations

As a result of the foregoing, the Company generated income from operations of $885,930 for the three months ended June 30, 2026, compared to income from operations of $83,735 for the three months ended June 30, 2025, an improvement of $802,195.

Total other income (expense), net for the three months ended June 30, 2026 was an expense of $37,115, compared to income of $184,226 for the three months ended June 30, 2025, an unfavorable change of $221,341. The change primarily reflected the absence in the 2026 period of a $406,719 gain recognized in the prior-year period on the reversal of a previously recorded loss on settlement, partially offset by lower interest expense.

Interest Expense. Interest expense for the three months ended June 30, 2026 was $102,818, a decrease of $8,467, or 7.6%, compared to $111,285 for the three months ended June 30, 2025, reflecting lower average outstanding borrowings under the Company's credit facilities during the 2026 period.

Loss on Settlement. There was no loss on settlement for the three months ended June 30, 2026. The three months ended June 30, 2025 included a $406,719 gain reflecting the reversal of a loss on settlement that had been recorded in the three months ended March 31, 2025.

Other Income (Expense). Other income (expense), net was income of $65,521 for the three months ended June 30, 2026, compared to a net expense of $111,208 for the three months ended June 30, 2025. The change primarily reflected fluctuations in foreign currency transaction gains and losses.

Provision for (Benefit from) Income Taxes

The Company recorded a provision for income taxes of $248,422 for the three months ended June 30, 2026, compared to a benefit from income tax of $675,424 for the three months ended June 30, 2025. The provision for the 2026 period reflects the application of the Company's estimated annual effective tax rate to pre-tax income, taking into account the Company's valuation allowance position, and represents an effective tax rate of 29.27%. The benefit in the prior-year period reflected the Company's pre-tax results and interim tax accounting for that period and did not recur.

Net Income (Loss)

As a result of the foregoing, the Company recorded net income of $600,393 for the three months ended June 30, 2026, compared to net income of $943,385 for the three months ended June 30, 2025, a decrease of $342,992. The decrease occurred notwithstanding the $802,195 improvement in income from operations, because the prior-year period included a $406,719 gain on the reversal of a loss on settlement and an income tax benefit of $675,424, neither of which recurred in the 2026 period.

Six Months Ended June 30, 2026 Compared with the Six Months Ended June 30, 2025

Our operating results for the six months ended June 30, 2026 and 2025 are summarized as follows:

		Six Months Ended
		June 30, 2026				June 30, 2025				Difference
Revenue		$	32,891,465			$	29,967,779			$	2,923,686
Cost of revenue - product costs			(12,427,106	)			(12,608,869	)			181,763
Cost of revenue - fulfillment costs			(4,098,101	)			(4,085,734	)			(12,367	)
Operating expense			(14,682,966	)			(13,972,436	)			(710,530	)
Other income (expense)			(175,751	)			(469,614	)			293,863
Provision for (benefit from) income taxes			434,545				(400,164	)			834,709
Net (income) loss		$	1,072,996			$	(768,710	)		$	1,841,706

Revenue

Revenue for the six months ended June 30, 2026 was $32,891,465, an increase of $2,923,686, or 9.8%, compared to $29,967,779 for the six months ended June 30, 2025. The increase reflected growth in the Company's North American operations, driven by a full period of sales through the Company's marketplace distributor partner, sales to distributor partners added in international markets, and higher direct-to-consumer volume, partially offset by lower European revenue; wholesale revenue was essentially unchanged as new-season bookings offset lower European wholesale volume. The comparability of revenue between the two periods was also affected by shifts in the Company's sales mix. The prior-year period included first-party sales through a third-party marketplace during the first quarter of 2025, substantially all of which had transitioned to sales through a distributor partner beginning in April 2025; the Company records sales to that distributor partner within its wholesale and distributor channel. In addition, the prior-year period reflected a higher proportion of inventory-liquidation and clearance-related direct-to-consumer sales, whereas the current period reflected a greater proportion of full-price sales, which contributed to improved realized pricing and gross margin, as discussed below.

By geographic segment, North American revenue increased $4,488,768, or 20.5%, to $26,392,988 for the six months ended June 30, 2026 from $21,904,220 for the six months ended June 30, 2025, driven by the recovery in marketplace sales following the prior-year transition to the distributor model, new international distributor relationships, and direct-to-consumer growth. European revenue decreased $1,565,082, or 19.4%, to $6,498,477 from $8,063,559, reflecting the wind-down of the Company's United Kingdom direct operations, which contributed $874,692 of revenue in the prior-year period, lower European wholesale revenue as certain European retailers experienced financial difficulty and reduced their inventory commitments, lower European direct-to-consumer promotional activity, and the effect of foreign currency translation.

Gross product sales (before returns, discounts, and shipping revenue) were $37,084,171 for the six months ended June 30, 2026, compared to $34,098,687 for the six months ended June 30, 2025. Customer returns, allowances, and chargebacks decreased to $3,155,825 from $4,328,449, reflecting the shift in the Company's sales mix toward wholesale and distributor partners, which generate fewer returns than direct-to-consumer sales, and changes to the Company's direct-to-consumer return policy. Discounts increased to $1,698,759 from $789,441, reflecting differences in the nature of promotional activity between the periods. Shipping revenue billed to customers, which is included in revenue, decreased to $661,878 from $986,982, reflecting the Company's continued use of free-shipping promotions.

Cost of Revenues

Cost of revenue for the six months ended June 30, 2026 was $16,525,207, a decrease of $169,396, or 1.0%, compared to $16,694,603 for the six months ended June 30, 2025. Cost of revenue consisted of $12,427,106 of product cost in the 2026 period, compared to $12,608,869 in the 2025 period, and $4,098,101 of fulfillment cost in the 2026 period, compared to $4,085,734 in the 2025 period. Product cost decreased 1.4% on revenue growth of 9.8%, reflecting the improvement in realized pricing described above, while fulfillment cost was essentially unchanged.

Gross profit for the six months ended June 30, 2026 was $16,366,258, or 49.8% of revenue, compared to $13,273,176, or 44.3% of revenue, for the six months ended June 30, 2025, an increase of $3,093,082, or 23.3%, and gross-margin expansion of approximately 5.5 percentage points. The improvement in gross margin primarily reflected a higher proportion of full-price sales and reduced inventory-liquidation activity relative to the prior-year period, together with a more favorable channel mix that carried lower fulfillment costs and lower return rates.

Operating Expenses

Total operating expenses for the six months ended June 30, 2026 were $14,682,966, an increase of $710,530, or 5.1%, compared to $13,972,436 for the six months ended June 30, 2025. The increase reflected higher sales and marketing expense in the second quarter and higher research and development expense, partially offset by the full-period benefit of the workforce reductions and organizational restructuring completed during the first half of 2025 and the transition of the Company's third-party marketplace business to a distributor model, which shifted the related fulfillment, advertising, and marketing costs to the distributor partner.

General and Administrative. General and administrative expenses for the six months ended June 30, 2026 were $3,250,373, a decrease of $41,203, or 1.3%, compared to $3,291,576 for the six months ended June 30, 2025. Higher professional, audit, and compliance costs associated with the Company becoming a reporting company under the Exchange Act were more than offset by the absence of restructuring-related costs incurred in the prior-year period.

Sales and Marketing. Sales and marketing expenses for the six months ended June 30, 2026 were $8,301,529, an increase of $616,795, or 8.0%, compared to $7,684,734 for the six months ended June 30, 2025. Sales and marketing expense as a percentage of revenue was 25.2% in the 2026 period compared to 25.6% in the 2025 period. The increase in expense reflected higher advertising and marketing expense in the second quarter and higher sales commissions as a greater proportion of the Company's European wholesale accounts are serviced by independent sales agencies rather than in-house sales personnel.

Research and Development. Research and development expenses for the six months ended June 30, 2026 were $968,731, an increase of $158,008, or 19.5%, compared to $810,723 for the six months ended June 30, 2025.

Operations. Operations expenses for the six months ended June 30, 2026 were $2,162,333, a decrease of $23,070, or 1.1%, compared to $2,185,403 for the six months ended June 30, 2025, as lower costs in the first quarter were largely offset by higher volume-related costs and severance in the second quarter.

Income (Loss) from Operations

As a result of the foregoing, the Company generated income from operations of $1,683,292 for the six months ended June 30, 2026, compared to a loss from operations of $699,260 for the six months ended June 30, 2025, an improvement of $2,382,552.

Total other expense, net for the six months ended June 30, 2026 was $175,751, a decrease of $293,863, or 62.6%, compared to $469,614 for the six months ended June 30, 2025. The decrease was driven primarily by a favorable change in foreign currency transaction gains and losses and lower interest expense.

Interest Expense. Interest expense for the six months ended June 30, 2026 was $191,609, a decrease of $28,115, or 12.8%, compared to $219,724 for the six months ended June 30, 2025, reflecting lower average outstanding borrowings under the Company's credit facilities during the 2026 period.

Loss on Settlement. There was no loss on settlement for the six months ended June 30, 2026 or 2025. The six months ended June 30, 2025 included a $406,719 loss on settlement recorded in the first quarter of 2025 that was reversed in the second quarter of 2025.

Other Income (Expense). Other income (expense), net was income of $15,676 for the six months ended June 30, 2026, compared to a net expense of $249,890 for the six months ended June 30, 2025. The change primarily reflected fluctuations in foreign currency transaction gains and losses.

Provision for (Benefit from) Income Taxes

The Company recorded a provision for income taxes of $434,545 for the six months ended June 30, 2026, compared to a benefit from income tax of $400,164 for the six months ended June 30, 2025. The provision for the 2026 period reflects the application of the Company's estimated annual effective tax rate to pre-tax income, taking into account the Company's valuation allowance position, and represents an effective tax rate of 28.82%. The benefit in the prior-year period reflected the pre-tax loss for that period.

Net Income (Loss)

As a result of the foregoing, the Company recorded net income of $1,072,996 for the six months ended June 30, 2026, compared to a net loss of $768,710 for the six months ended June 30, 2025, an improvement of $1,841,706.

Liquidity and Capital Resources

Overview

The Company has historically funded its operations through cash generated from operations, borrowings under its credit facilities, and proceeds from the issuance of equity securities. As of June 30, 2026, the Company had cash and cash equivalents of $6,169,920, compared to $10,134,276 as of December 31, 2025, a decrease of $3,964,356. As of June 30, 2026, the Company had $2,063,629 outstanding under its revolving credit facility with Wells Fargo, compared to $4,000,000 outstanding under its revolving credit facility with JPMorgan Chase as of December 31, 2025.

In February 2026, the Company entered into a new credit agreement with Wells Fargo providing for a revolving commitment of $12,000,000 with a maturity date of February 5, 2029. The Company drew on the new Wells Fargo facility to repay its outstanding revolving commitment with JPMorgan Chase, which had matured in February 2026, and for working capital purposes, and during the second quarter reduced its outstanding borrowings under the facility from cash generated by the business. The Wells Fargo facility increased the Company's borrowing capacity by $8,000,000 compared to the prior JPMorgan Chase facility and extended the Company's debt maturity profile.

The Company believes that its current cash and cash equivalents, anticipated cash flows from operations, and available borrowing capacity under the Wells Fargo credit facility are sufficient to fund its operations and capital requirements for at least the next twelve months. The Company's future liquidity needs will depend on a number of factors, including the rate of growth in its business, the timing of inventory purchases and other working capital requirements, capital expenditures, debt service obligations, and the costs and timing of any future strategic initiatives.

Working Capital

As of June 30, 2026, the Company had working capital of $17,188,710, calculated as total current assets of $31,647,433 less total current liabilities of $14,458,723. This compares to working capital of $16,425,904 as of December 31, 2025, calculated as total current assets of $36,298,372 less total current liabilities of $19,872,468, an increase of $762,806. Current assets decreased $4,650,939, primarily reflecting a $3,964,356 decrease in cash and a $1,903,673 decrease in inventory in transit as in-transit goods were received into inventory, partially offset by increases in prepaid expenses, inventory, and accounts receivable. Current liabilities decreased $5,413,745, primarily reflecting a $2,925,221 reduction in accounts payable and accrued expenses, which had been elevated at December 31, 2025 in connection with the timing of inventory receipts and vendor payments, a $2,143,706 reduction in the net carrying amount of the Company's line of credit, and a $417,247 decrease in customer deposits.

Cash Flows

		Six Months Ended June 30,
		2026				2025
Net cash provided by (used in) operating activities		$	(929,993	)		$	287,372
Net cash used in investing activities			(383,604	)			(437,243	)
Net cash provided by (used in) financing activities			(2,199,743	)			4,659,967
Effect of foreign currency translation			(451,016	)			1,617,923
Change in cash		$	(3,964,356	)		$	6,128,019

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2026 was $929,993, compared to net cash provided by operating activities of $287,372 for the six months ended June 30, 2025, a decrease of $1,217,365. The decrease primarily reflected changes in working capital, including a $2,925,221 reduction in accounts payable and accrued expenses as the Company paid down vendor balances that had been elevated at December 31, 2025, compared to a $2,067,020 increase in the prior-year period, together with a $394,810 increase in prepaid expenses, a $493,683 increase in inventory, a $480,844 increase in accounts receivable and a $417,247 decrease in customer deposits. These uses were partially offset by a $1,903,673 decrease in inventory in transit as in-transit goods were received into inventory, and by the Company's net income of $1,072,996 for the six months ended June 30, 2026, as compared to a net loss of $768,710 for the six months ended June 30, 2025. Non-cash items in the 2026 period included $313,065 deferred taxes, $203,761 of depreciation and amortization, $56,037 of amortization of debt issuance costs, $91,197 of stock-based compensation, and $29,935 of credit loss expense.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2026 was $383,604, compared to $437,243 for the six months ended June 30, 2025. Investing activities in the 2026 period consisted of $313,256 of purchases of property and equipment and $70,348 of additions to intangible assets. By comparison, in the 2025 period the Company invested $369,887 in property and equipment and $67,356 in intangible assets.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2026 was $2,199,743, compared to net cash provided by financing activities of $4,659,967 for the six months ended June 30, 2025. Financing activities in the 2026 period consisted of gross proceeds of $21,444,023, net of borrowing costs, and gross repayments of $23,643,766 under the Company's revolving credit facilities, reflecting the repayment of the $4,000,000 JPMorgan Chase revolving commitment upon its maturity, borrowings under the new Wells Fargo facility, and subsequent repayments of borrowings under that facility during the second quarter. Financing activities in the 2025 period consisted primarily of $4,859,967 of net proceeds from the issuance of Senior Preferred Stock to TZP Group Investments, L.P., partially offset by $200,000 of repayments on the Company's term loan.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Indebtedness

On February 5, 2026, the Company entered into a credit agreement with Wells Fargo providing for a revolving commitment of $12,000,000 with a maturity date of February 5, 2029. The Company utilized a portion of the facility to repay its maturing revolving commitment with JPMorgan Chase. As of June 30, 2026, the Company had $2,063,629 outstanding under the Wells Fargo revolving commitment. Borrowings under the credit agreement are secured by substantially all of the assets of the Company.

The Company's prior credit agreement with JPMorgan Chase, which included a $4,000,000 revolving commitment, matured in February 2026 and was repaid in full. Total interest expense was $134,135 for the six months ended June 30, 2026, compared to $219,724 for the six months ended June 30, 2025.

Lease Obligations

The Company leases its corporate office in Broomfield, Colorado and a warehouse facility in Denver, Colorado, along with certain office equipment, under operating lease agreements. As of June 30, 2026, the Company had operating lease right-of-use assets of $1,824,887 and total operating lease liabilities of $2,013,797, consisting of $867,393 of current lease liabilities and $1,146,404 of long-term lease liabilities. The Company's operating leases expire at various dates through 2031. See the notes to the condensed consolidated financial statements for additional information regarding future minimum lease payments.