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

Sales and Cost of Sales

During the three months ended June 30, 2026 and 2025, we had net sales of $1,171,666 and $168,435, respectively, an increase of $1,003,231 or 595.6%. We had cost of sales of $552,642 and $83,493, respectively, and gross profit of $619,024 and $84,942, 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 increased demand for our vapor products.

Operating Expenses

During the three months ended June 30, 2026 and 2025, employee costs were $128,567 and $122,546, respectively, an increase of only $6,021 or 4.9%.

During the three months ended June 30, 2026 and 2025, selling, general, and administrative expenses ("SG&A") were $329,829 and $155,654, respectively, an increase of $174,175 or 111.9%. The increase in SG&A expenses was the result of increased promotional activities to support higher sales.

Other Expense

Total other expense during the three months ended June 30, 2026 was $256,145 compared to $331,231 in the prior period. In the current period we had $214,734 of interest expense and a loss of $41,411 on derivative valuation. In the prior period we had $203,387 of interest expense, a loss of $127,850 on derivative valuation and other income of $6.

Net Loss

Our net loss from continuing operations for the three months ended June 30, 2026, was $95,517 compared to $524,489 for the three months ended June 30, 2025, a decrease in our net loss from continuing operations of $428,972 or 81.8%. Our net loss decreased in the current period because of our income from operations of $160,628 in the current period compared to a loss from operations of $193,258 in the prior period.

For the three months ended June 30, 2026 and 2025, we recognized a loss from discontinued operations of $12,407 and $38,261, respectively, of interest expense.

Results of Operations for the Six Months Ended June 30, 2026, Compared to the Six Months Ended June 30, 2025

Sales and Cost of Sales

During the six months ended June 30, 2026 and 2025, we had net sales of $2,333,019 and $629,251, respectively, an increase of $1,703,768 or 270.8%. We had cost of sales of $1,250,613 and $274,015, respectively, and gross profit of $1,082,406 and $355,236, 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 increased demand for our vapor products.

Operating Expenses

During the six months ended June 30, 2026 and 2025, employee costs were $258,587 and $251,454 respectively, an increase of only $7,133 or 2.8%.

During the six months ended June 30, 2026 and 2025, selling, general, and administrative expenses ("SG&A") were $627,069 and $340,313, respectively, an increase of $286,756 or 84.3%. The increase in SG&A expenses period over period was the result of increased promotional activities to support higher sales.

Other Expense

Total other expense during the six months ended June 30, 2026 was $358,004 compared to $396,230 in the prior period. In the current period we had $426,540 of interest expense, a gain of $63,025 on derivative valuation and a gain on forgiveness of debt of $5,511. In the prior period we had $405,761 of interest expense, a gain of $4,384 on derivative valuation and a gain on forgiveness of debt of $5,141.

Net Loss

Our net loss from continuing operations for the six months ended June 30, 2026, was $161,254 compared to $632,761 for the six months ended June 30, 2025, a decrease in our net loss from continuing operations of $471,507. Our net loss decreased in the current period as a result of our income from operations of $196,750 compared to a loss from operations of $236,531 in the prior period.

For the six months ended June 30, 2026, we recognized a gain from discontinued operations of $2,274,031 due to the extinguishment of time barred debt $2,324,279 partially offset by $50,248 of interest expense.

For the six months ended June 30, 2025, we recognized a loss from discontinued operations of $76,102 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 $60.2 million at June 30, 2026. As of June 30, 2026, we had current assets of $2.4 million and current liabilities of approximately $22.6 million, resulting in a working capital deficit of approximately $20.2 million at June 30, 2026.

Operating Activities

During the six months ended June 30, 2026, net cash provided by operating activities was $124,586, compared with net cash used in operating activities of $627,088 during the six months ended June 30, 2025. The improvement was primarily attributable to improved operating results and changes in working capital.

Financing Activities

During the six months ended June 30, 2026, financing activities provided $23,962 of cash, compared to $631,423 of cash provided during the six months ended June 30, 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, to the extent not previously converted. The amended debenture had a total outstanding principal balance of $2.4 million, with accrued interest of approximately $2.2 million as of June 30, 2026. We also have four additional convertible debentures with Tekfine. On November 26, 2025, the Company and the lender entered into a Forbearance and Standstill Agreement, extending the maturity dates on all debentures to April 30, 2027.

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 June 30, 2026 and December 31, 2025, there is $1,424,661 and $1,400,699 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

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2026, the Company had cash of approximately $158,000, a working capital deficit of approximately $20.3 million, and an accumulated deficit of approximately $60.2 million. In addition, the Company incurred a loss from continuing operations of approximately $161,000 for the six months ended June 30, 2026. These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued.

Management's plans to address these conditions include continuing to increase revenues, reduce operating costs, obtain additional advances from related parties, and seek additional financing through debt or equity transactions as needed to support ongoing operations. The Company's ability to continue as a going concern is dependent upon its ability to generate sufficient cash flows from operations and obtain additional financing when required. There can be no assurance that the Company will be successful in these efforts or that additional financing will be available on acceptable terms, if at all.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary if the Company is 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.