Starco Brands, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE

THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025

NOTE 1–ORGANIZATION AND DESCRIPTION OF BUSINESS

Starco Brands, Inc. (“STCB”, “Company”, “we”, “us” or “our,”) was incorporated in the State of Nevada on January 26, 2010, under the name Insynergy, Inc. On September 7, 2017, STCB filed an Amendment to the Articles of Incorporation to change the corporate name to Starco Brands, Inc. The Board of Directors (“Board”) determined the change of STCB’s name was in the best interests of the Company due to changes in its current and anticipated business operations.

On July 2, 2026, the Company formed Starco Manufacturing, LLC, a Nevada limited liability company (“Manufacturing Holdco”), and on July 6, 2026, the Company formed Starco Brands, LLC, a Nevada limited liability company (“Brands Holdco” and together with Manufacturing Holdco, the “Holdcos”). On July 6, 2026, the Company contributed 100% of the equity interests of The AOS Group, Inc., a Delaware corporation (“AOS”), Soylent Nutrition, Inc., a Delaware corporation (“Soylent”), Skylar Body, LLC, a Delaware limited liability company (“Skylar”) and Whipshots Holdings, LLC, a Delaware limited liability company (“Whipshots Holdings”) held by the Company down to Brands Holdco in exchange for 100% of the equity interests of Brands Holdco (the “Contribution” and together with the formation of the Holdcos, the “Reorganization”). The Reorganization established a holding-company structure beneath the Company.

Acquisition History

Whipshots and Whipshots Holdings

During the third quarter of 2021, STCB formed two subsidiaries, Whipshots, LLC, a Wyoming limited liability company (“Whipshots LLC”) and Whipshots Holdings, initially as Whipshots, LLC, a Delaware limited liability company. Whipshots LLC was a wholly-owned subsidiary of STCB at formation which was subsequently contributed to Whipshots Holdings. Whipshots Holdings was a majority-owned subsidiary of STCB in which STCB owned 85% of the vested voting interests, with vested interests not owned by STCB accounting for the additional 15% of the equity which has been issued. Following the Contribution, Brands Holdco owns 85% of the vested voting interests of Whipshots Holdings.

AOS

On September 12, 2022, STCB, through its wholly-owned subsidiary Starco Merger Sub Inc. (“Merger Sub”), completed its acquisition (the “AOS Acquisition”) of AOS. The AOS Acquisition consisted of Merger Sub merging with and into AOS, with AOS being the surviving corporation. Following the Contribution, AOS is a wholly-owned subsidiary of Brands Holdco.

Skylar

On December 29, 2022, STCB, through its wholly-owned subsidiary Starco Merger Sub II. Inc. (“First Merger Sub”) completed its acquisition (the “Skylar Acquisition”) of Skylar Body, Inc. (“Skylar Inc.”). The Skylar Acquisition consisted of First Merger Sub merging with and into Skylar Inc. (“First Merger”) with Skylar Inc. being the surviving corporation, and immediately following the First Merger, and as part of the same overall transaction as the First Merger, Skylar Inc. merged with and into Second Merger Sub (the “Second Merger”) with the Second Merger Sub being the surviving entity Skylar. Following the Contribution, Skylar is a wholly-owned subsidiary of Brands Holdco.

Soylent

On February 15, 2023, the STCB, through its wholly-owned subsidiary Starco Merger Sub I, Inc. (“Starco Merger Sub I”), completed its acquisition (the “Soylent Acquisition”) of Soylent. The Soylent Acquisition consisted of Starco Merger Sub I merging with and into Soylent, with Soylent being the surviving corporation. Following the Contribution, Soylent is a wholly-owned subsidiary of Brands Holdco.

Custom Foods

On July 15, 2026, Manufacturing Holdco, through a Membership Interest Purchase Agreement, completed its acquisition (the “Custom Foods Acquisition”) of Custom Foods, LLC, a Delaware limited liability company, doing business as Custom Bakehouse (“Custom Foods” or “Custom Bakehouse”). The Custom Foods Acquisition consisted of STCB acquiring all of the outstanding securities of Custom Foods for cash consideration. Custom Foods is a wholly-owned subsidiary of Manufacturing Holdco. Custom Foods has two wholly-owned subsidiaries, International Commissary Corporation, a California Corporation, and SFB AcqCo, LLC, a Delaware limited liability company.

Organizational and Operational History

In July 2017, STCB entered into a licensing agreement with TSG, a related party entity, located in Los Angeles, California. The Company pivoted to commercializing novel consumer products manufactured by TSG. TSG is a private label and branded aerosol and liquid fill manufacturer with manufacturing assets in the following verticals: DIY/Hardware, paints, coatings and adhesives, household, hair care, disinfectants, automotive, motorcycle, arts & crafts, personal care cosmetics, personal care FDA, sun care, food, cooking oils, beverages, and spirits and wine.

On January 3, 2023, the Board approved the Amended and Restated Articles of Incorporation of Starco Brands, Inc. (the “Amended and Restated Articles). On January 6, 2023, the stockholders of the Company representing 53.47% of the Company’s outstanding common stock adopted the Amended and Restated Articles. On February 9, 2023, the Company filed the Amended and Restated Articles, which, among other things, (i) increased the authorized shares of common stock, par value $0.001 per share, from 300,000,000 shares (the “Old Common Stock”) to 2,000,000,000 shares, (ii) established two classes of common stock, consisting of (y)1,700,000,000 shares of Class A common stock, par value $0.001 per share (“Class A common stock”), and (z)300,000,000 shares of Class B common stock, par value $0.001 per share and (iii) reclassified all issued, outstanding or authorized Old Common Stock of the Company into Class A common stock on a one-for-one basis. As a result, following the filing of the Amended and Restated Articles with the Nevada Secretary of State, the Company’s prior “common stock” was renamed Class A common stock on its trading symbol. The authorized preferred stock, with a par value of $0.001 per share and totaling 40,000,000 shares, has remained unchanged.

NOTE 2–GOING CONCERN

The Company has concluded that substantial doubt exists regarding its ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. The principal conditions giving rise to substantial doubt include the Company’s history of recurring net losses and continued working capital deficiencies. As of June 30, 2026, the Company reported an accumulated deficit of $104,579,639, net losses of $1,461,634 and $2,291,354 for the three and six months ended June 30, 2026, respectively, and a working capital deficit of approximately $2.5 million.

Management has evaluated the conditions that contributed to substantial doubt. The historical net losses and accumulated deficit are primarily attributable to non-cash or one-time, non-recurring expenses, including goodwill impairment, stock-based compensation, fair value share adjustment losses, and acquisition-related transaction costs.

As of June 30, 2026, total debt was approximately $8.3 million, which includes $3,472,500 in a note payable to Ross Sklar (“Sklar”), a significant minority shareholder, member of the Board and CEO of the Company. Of this amount, $1.0 million was funded in July and August 2025 in response to requests from the Company’s prior lender. Mr. Sklar’s ownership interest and operational role provide an incentive for him to be supportive of the Company regarding repayment of this note, consistent with prior periods.

On December 22, 2025, the Company entered into a Bridge Term Loan Promissory Note with The Starco Group, Inc. (“TSGI”), an entity wholly owned by Sklar, providing for up to $5,000,000 in borrowing capacity, including an initial disbursement of $4,500,000 (the “Bridge Loan”). The proceeds were used to repay the Company’s then current revolving loan facility in full and to provide additional working capital. The Bridge Loan bears interest at a variable rate based on the Wall Street Journal Prime Rate plus an applicable margin, requires monthly interest payments which began on January 1, 2026, and provides for scheduled principal amortization beginning January 1, 2027. The Bridge Loan includes customary covenants and events of default and may be prepaid without penalty.

Management is pursuing additional financing sources to enhance liquidity, provide working capital, and support repayment of existing obligations, if necessary. Management is also focused on strategic initiatives intended to increase revenue in the most profitable sales channels and reduce overall expenses as a percentage of revenue. Operational synergies from the Company’s shared services model and continued emphasis on profitable channels have contributed to improvements to date and are expected to continue.

On July 15, 2026, subsequent to the balance sheet date, the Company and each of its subsidiaries (including the newly acquired Custom Foods and its subsidiaries) entered into a secured credit facility with Pasadena Private Lending Inc. providing for term, accordion and revolving borrowings of up to $18.0 million, a portion of which was used to fund the acquisition of Custom Foods and to support working capital needs (see Note 16 – Subsequent Events). This financing is primarily acquisition-related, is guaranteed and cross-collateralized, and contains financial covenants; accordingly, it does not eliminate the substantial doubt described above.

While the payoff of the revolving loan facility and the execution of the Bridge Loan have provided near-term liquidity, these actions do not eliminate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s plans are not entirely within its control, and there can be no assurance that additional financing or operational improvements will be achieved as contemplated. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 3 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The condensed consolidated financial statements of Starco Brands, Inc. include the accounts of STCB, our indirectly wholly-owned subsidiaries AOS, Skylar, Soylent, and our indirectly 85% owned subsidiary Whipshots Holdings and its wholly-owned subsidiary Whipshots LLC, which are comprised of voting interest entities in which we have a controlling financial interest in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation. The condensed consolidated financial statements of Starco Brands, Inc. do not include the accounts of Brands Holdco, Manufacturing Holdco, Custom Foods or its wholly-owned subsidiaries, all of which were formed or acquired subsequent to June 30, 2026. All significant intercompany profits, losses, transactions and balances have been eliminated in consolidation in the condensed consolidated financial statements.

Our condensed consolidated subsidiaries at June 30, 2026 include: AOS, Skylar, Soylent, Whipshots Holdings and its wholly owned subsidiary Whipshots LLC. Intercompany accounts and transactions have been eliminated upon consolidation.

Basis of Presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to annual financial reporting. The condensed consolidated financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature unless otherwise disclosed.

The condensed consolidated financial statements of the Company do not contain certain information included in the Company’s Annual Report and Form 10-K for the year ended December 31, 2025. Therefore, the condensed consolidated financial statements should be read in conjunction with that Annual Report on Form 10-K. Certain prior-period amounts in the condensed consolidated financial statements and related disclosures have been reclassified to conform to the current period presentation. Specifically, cost of revenues from related parties has been reclassified into cost of revenues on the condensed consolidated statements of operations and within the segment information. These reclassifications had no impact on previously reported gross profit, total operating expenses, net loss, or stockholders’ equity.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, equity-based transactions, and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and the recognition of costs and expenses that are not readily apparent from other sources. Actual results may differ materially from those estimates, and such differences could affect future results of operations.

The Company believes the following critical accounting policies involve the most significant judgments and estimates used in the preparation of the condensed consolidated financial statements: the timing of revenue recognition; testing goodwill and intangible assets for impairment; evaluating the recoverability of long-lived assets; estimating the allowance for doubtful accounts; determining the net realizable value of inventory; assessing the value of certain share-based adjustments; accounting for income taxes; and assumptions used in the Black-Scholes valuation model, including expected volatility, risk-free interest rate, and expected dividend rate.

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts, the balances of which may at times exceed federally insured limits. The Company monitors the creditworthiness of the financial institutions with which it maintains deposits and has not experienced any losses in such accounts. Management believes the Company is not exposed to significant credit risk with respect to its cash balances.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company didnot have any cash equivalents as of June 30, 2026 or December 31, 2025.

Accounts Receivable

Accounts receivable are stated at net realizable value, which includes an allowance for credit losses representing the amount expected to be uncollectible. The allowance for credit losses is estimated based on relevant available information, including historical loss experience, the aging of receivables, customer-specific information, and current and expected economic conditions. The allowance is evaluated quarterly. As of June 30, 2026 and December 31, 2025, accounts receivable, net were approximately $2,458,933 and $2,988,724, respectively. As of those dates, the allowance for credit losses was $19,883 and $223,867, respectively**.**

Fair Value of Financial Instruments

The Company follows ASC 825-10-50 for disclosures about the fair value of its financial instruments and ASC 820 for the framework used to measure fair value. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in valuation techniques into three levels, giving the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, approximate their fair values because of the short-term nature of these instruments. The Company’s notes payable approximate fair value based on management’s best estimate of the interest rates that would be available to the Company for similar financial arrangements as of June 30, 2026.

Property and Equipment, net

Property and equipment are recorded at historical cost, net of depreciation; all property and equipment with a cost of $2,000 or greater are capitalized. Depreciation is computed using straight-line over the estimated useful lives of the related assets. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Maintenance and repairs are expensed as incurred. Construction in progress (“CIP”) relates to costs for assets under construction or development that are not yet ready for their intended use; such will be transferred to their appropriate asset category upon completion. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606,Revenue from Contracts with Customers. Revenue is recognized when control of the promised goods or services transfers to the customer, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

Product Sales (STCB, AOS, Skylar, Soylent)

STCB, excluding its subsidiaries, earns a majority of its revenues through the sale of food products, primarily through Winona. AOS, Skylar, and Soylent, each wholly owned subsidiaries of the Company, generate revenue through the sale of premium body and skincare products, fragrances, and nutritional drinks, respectively. For these businesses:

Licensing Revenue (Whipshots)

Whipshots, an indirect 85%-owned subsidiary, earns revenue from royalty-based licensing agreements with Temperance Distilling Company (“Temperance”), a related entity. Under these agreements, the Company licenses the right for Temperance to manufacture and sell vodka-infused whipped cream products. Royalty revenue varies based on contractual royalty rates and underlying product sales. Revenue is recognized when Temperance sells licensed products to third-party customers, as this is when the Company’s performance obligation is satisfied and the amount of consideration is determinable.

ASC 606 Framework

In applying ASC 606, the Company evaluates contracts using the following five-step model:

The Company applies the five-step model only when collection of consideration is probable. Performance obligations are generally satisfied at a point in time, typically upon shipment or delivery, depending on when control transfers to the customer.

Income Taxes

The Company follows Section 740-10-30 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

Stock-based Compensation

The Company accounts for stock-based compensation per the provisions of ASC 718, Share-based Compensation (“ASC 718”), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (warrants, options, and restricted stock units). The fair value of each warrant and option is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the future. Expected volatility is based on the volatility of comparable companies’ common stock. The expected term of awards granted is derived using estimates based on the specific terms of each award. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of a restricted stock unit equals the closing price of our Class A common stock on the trading day of the grant date.

Net Income (Loss) Per Common Share

Net income (loss) per share of common stock is computed by dividing net income (loss) attributable to Starco Brands, Inc. by the weighted average number of shares of common stock outstanding during the period. All outstanding options are considered potential common stock. The dilutive effect, if any, of stock payable, options and warrants is calculated using the treasury stock method. Any outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method.

For each period in which the Company reported a net loss, the effect of common stock equivalents was anti-dilutive and such equivalents have been excluded from the computation of diluted net loss per share, resulting in basic and diluted net loss per share being equal. For the six months ended June 30, 2025, the Company reported net income attributable to Starco Brands, and dilutive common stock equivalents were therefore included in the computation of diluted net income per share.

The following table summarizes the securities that were excluded from the diluted per-share computation for the periods presented because their inclusion would have been anti-dilutive:

Because the effect of the Company’s common stock equivalents was dilutive for the six months ended June 30, 2025, the following table reconciles the weighted average shares used to compute basic and diluted net income per share for that period:

Intangible Assets

Definite-lived intangible assets consist of certain domain names, trademarks, and trade names. These assets are amortized using the straight-line method over their estimated useful lives, which range from approximately 10 to 16 years.

Indefinite-lived intangible assets consist of certain trade names and trademarks. These assets are not amortized but are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

The Company evaluates its long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Indicators of impairment include, among other factors, current-period operating or cash flow losses combined with a history of such losses, forecasts demonstrating continuing losses or insufficient income, significant changes in the manner in which an asset is used, or adverse industry or economic trends. Recoverability is assessed by comparing the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to result from its use. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized for the amount by which the carrying value exceeds the estimated fair value, determined using the best information available and consistent with ASC 820,Fair Value Measurements. During the six months ended June 30, 2026 and 2025, the Company did not record asset impairment charges related to its intangible assets.

Royalties and Licenses

Royalty-based obligations with content licensors are either paid in advance and capitalized as prepaid royalties or are accrued as incurred and subsequently paid. These royalty-based obligations are generally expensed to cost of revenue at the greater of the contractual royalty rate or an effective royalty rate based on total projected net revenue for contracts with guaranteed minimums. Prepayments are typically made in connection with the development of a particular product and therefore expose the Company to risk during the development phase. Royalty payments earned after completion of the product are expensed as cost of revenue.

Certain licensing agreements include minimum guaranteed royalty payments. When no further performance remains with the licensor, such minimum guarantees are recorded as an asset and a liability at the contractual amount upon execution of the agreement. When performance obligations remain with the licensor, minimum guarantees are recorded as an asset when paid and as a liability when incurred.

The Company evaluates the expected future realization of royalty-based assets each quarter, including any unrecognized minimum commitments, to identify amounts unlikely to be recovered through future revenue. Impairments or losses identified post-launch are charged to cost of revenue. Long-lived royalty-based assets are evaluated for impairment using undiscounted cash flows when impairment indicators exist. If impairment is indicated, the assets are written down to fair value. Unrecognized minimum royalty commitments are accounted for as executory contracts, and losses are recognized when the underlying intellectual property is abandoned or the contractual rights to use the intellectual property are terminated.

Minimum contractual royalty-based obligations outstanding as of June 30, 2026 are approximately $20,000 for each of the years ending December 31, 2026, 2027, and 2028.

Leases

The Company accounts for leases in accordance with ASC 842,Leases. Operating leases are recognized on the condensed consolidated balance sheet as Right-of-Use (“ROU”) assets and corresponding lease liabilities. ROU assets include prepaid lease payments and exclude lease incentives and initial direct costs. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

On May 1, 2024, the Company entered into a three-year operating lease agreement (the “Citrus Lease”) with Ralks Corporation, a related-party lessor (see Note 9). The lease covers approximately 3,000 square feet located at 706 N. Citrus Ave., Los Angeles, California, with monthly base rent of $10,000 and annual increases of 5%. The lease includes an option to renew for an additional three years with notice required 90 days prior to the end of the term.

In accordance with ASC 842, the Company recognized an ROU asset and corresponding lease liability for its long-term office leases. See Note 12 – Leases for additional information.

Inventory

Inventory consists of premium body and skincare products, fragrances and nutritional products. Inventory is measured and stated at average cost as of June 30, 2026. The carrying value of inventory is reduced for excess or obsolete items. The Company monitors inventory levels and usage to identify indicators of obsolescence and adjusts inventory values when necessary. The Company did not record any inventory impairment losses for the six months ended June 30, 2026 or 2025.

Acquisitions, Intangible Assets and Goodwill

The condensed consolidated financial statements reflect the operations of an acquired business beginning on the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values as of the acquisition date, and goodwill is recognized for any excess of the purchase price over the fair value of the net assets acquired. Significant judgment is required in determining the fair value of certain tangible and intangible assets and in assigning their respective useful lives. The Company typically engages third-party valuation specialists to assist in valuing significant tangible and intangible assets.

Fair value measurements are based on available historical information and on future expectations and assumptions deemed reasonable by management, although such estimates are inherently uncertain. The Company generally employs an income approach to measure the fair value of intangible assets, which relies on forecasts of expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in these valuations include the amount and timing of future cash flows (including expected growth rates and profitability), product or technology life cycles, economic barriers to entry, and the discount rate applied to the cash flows. Determining the useful life of an intangible asset also requires judgment. Definite-lived intangible assets are amortized over their estimated useful lives. Intangible assets associated with acquired in-process research and development (“IPR&D”) are not amortized until the related product is available for sale.

Goodwill is measured as the excess of consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date. Although management uses its best estimates and assumptions to value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement.

The Company reviews goodwill for impairment at least annually, or more frequently if indicators of impairment exist. The goodwill impairment test may require the use of qualitative assessments and fair-value techniques, both of which involve significant judgment. An impairment loss is recognized when the fair value of a reporting unit is less than its carrying amount.

No impairment losses related to goodwill were recognized for the six months ended June 30, 2026 and 2025. As of June 30, 2026 and December 31, 2025, goodwill was $11,234,312 and $11,234,312, respectively.

Segments

Operating segments are defined as components of an enterprise for which separate financial information is available and that are evaluated regularly by the chief operating decision maker (“CODM”) in allocating resources and assessing performance. The Company’s Chief Executive Officer (“CEO”) serves as the CODM. The CEO reviews the Company’s operations and manages the business through five reportable operating segments: (i) AOS, (ii) Skylar, (iii) Soylent, (iv) Whipshots, and (v) Winona. Parent-level corporate activities are presented as “Corporate” and reconcile reportable segment results to consolidated results. The CODM evaluates segment performance and allocates resources based primarily on revenues, revenues from related parties, gross profit and income (loss) from operations.

Effective January 1, 2026, the Company discontinued the elective aggregation of operating segments previously combined within the Starco Brands reportable segment because the operating margins of those operating segments are no longer expected to converge over time as previously anticipated, increasing the Company’s reportable segments from three to the five segments described above, with parent-level corporate activities presented separately as Corporate. Segment information for the three and six months ended June 30, 2025 has been recast to conform to the current-period presentation. See Note 4 – Segments for additional information regarding the change and related disclosures.

Recently Issued Accounting Pronouncements

The Company evaluates the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board. Management has reviewed all newly issued but not yet effective accounting pronouncements and determined that none are expected to have a material impact on the Company’s condensed consolidated financial statements.

NOTE 4–SEGMENTS

Effective January 1, 2026, the Company changed the composition of its reportable segments by discontinuing the elective aggregation of operating segments previously combined within the Starco Brands reportable segment. Aggregation under ASC 280 is permitted but not required, and the Company has determined to discontinue the previously applied aggregation because the operating margins of the previously aggregated operating segments are no longer expected to converge over time as previously anticipated.

As a result, the Company now presents five reportable operating segments: AOS, Skylar, Soylent, Whipshots, and Winona. Parent-level corporate activities are presented as “Corporate” and reconcile reportable segment results to consolidated results. Previously, the Company reported three reportable segments: Starco Brands (which included the activities of the parent platform, AOS, Whipshots, and Winona), Skylar, and Soylent. Segment information for the three and six months ended June 30, 2025 has been recast to conform to the current-period segment presentation.

The Company’s reportable segments are described below:

Skylar. The Skylar segment generates revenue through the sale of hypoallergenic fragrance products under the Skylar brand.

Soylent. The Soylent segment generates revenue through the sale of plant-based nutritional products, including ready-to-drink shakes, powders, and bars, under the Soylent brand.

AOS. The AOS segment generates revenue through the sale of premium body and skincare products designed for athletes under the Art of Sport brand.

Whipshots. The Whipshots segment earns its revenues as royalties from licensing arrangements with Temperance, a related party, under which Temperance manufactures and sells vodka-infused whipped cream products under the Whipshots® brand. The Whipshots segment includes Whipshots Holdings and Whipshots LLC.

Winona. The Winona segment generates revenue through the sale of popcorn spray and sauce spray products under the Winona Pure® brand. Winona operates as a division of STCB, which is the marketer of record under a licensing arrangement with the brand owner. The Company is the principal in arrangements with end customers. Winona products are sold through retail partners including Walmart, H-E-B, Meijer, and Food Lion, and on Amazon through the Company’s strategic partner Pattern (formerly iServe), which is a stockholder of the Company.

Corporate. Corporate consists of the activities of Starco Brands, Inc., the publicly traded parent legal entity, including executive management, public-company costs, professional services, platform-level marketing and administration, and other expenses incurred at the parent level that are not allocated to the reportable segments. Corporate is not an operating segment.

The Company’s Chief Executive Officer, Ross Sklar, is the Chief Operating Decision Maker (“CODM”). The CODM reviews balance sheet data on a consolidated basis; therefore, disaggregated balance sheet data are not presented.

The measures the CODM uses to evaluate segment performance and allocate resources among the Company’s product lines - revenues, revenues from related parties, gross profit, and income (loss) from operations – are consistent with the measures disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The Company’s revised segment presentation reflects an increased level of disaggregation of these measures, consistent with the change in management approach described above.

Profit or Loss Measures

The CODM uses these measures, together with the underlying components of cost of revenues and operating expenses (including marketing and sales spend), to assess the effectiveness of resource allocation decisions among the Company’s segments. For example, the CODM evaluates the effectiveness of marketing and sales spend initiatives by reference to corresponding changes in segment revenue and gross profit contribution in order to determine whether to direct additional marketing investment to a given segment or to redirect investment elsewhere. The disaggregated presentation of segment results also enables the CODM to assess each segment’s contribution to the consolidated enterprise.

The following expense categories are regularly provided to the CODM, included in the reported measures of segment profit or loss, and are significant quantitatively or qualitatively. These categories are consistent with those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025:

Significant Expense Categories

The following tables present gross profit (loss) and significant expenses by reportable segment. Corporate is presented as a reconciling column and is not a reportable segment:

Geographic Information. The Company’s external customer revenues and long-lived assets are substantially all attributable to operations and locations within the United States for the three and six months ended June 30, 2026 and 2025.

Major Customers. For the three months ended June 30, 2026, the Company had two customers that each represented 10% or more of consolidated revenues: Customer A at approximately 12%, contributing approximately $1,001,000 of revenue reported within the Soylent and AOS segments, and Customer C at approximately 15%, contributing approximately $1,201,000 of revenue reported within the Skylar segment. For the six months ended June 30, 2026, the Company had two customers that each represented 10% or more of consolidated revenues: Customer A at approximately 21%, contributing approximately $3,724,000 of revenue reported within the Soylent and AOS segments, and Customer C at approximately 16%, contributing approximately $2,846,000 of revenue reported within the Skylar segment.

For the three months ended June 30, 2025, the Company had one customer that represented 10% or more of consolidated revenues: Customer A at approximately 29%, contributing approximately $3,142,000 of revenue reported within the Soylent segment. For the six months ended June 30, 2025, the Company also had two customers that each represented 10% or more of consolidated revenues: Customer A at approximately 30%, contributing approximately $6,626,000 of revenue reported within the Soylent segment, and Customer B at approximately 10%, contributing approximately $2,216,000 of revenue reported within the Winona and Soylent segments.

Products and Services. The Company’s reportable segments are organized by brand, and each segment represents a discrete product line. Accordingly, the segment revenue information presented above also reflects the disaggregation of revenues by product group, and no separate product-level revenue disclosure is required.

NOTE 5–ACQUISITIONS

The Company did not complete any acquisitions during the six months ended June 30, 2026, and there were no changes to the purchase price allocations or fair value measurements previously reported. The Company’s acquisitions completed in prior periods, along with the related purchase price allocations and fair value measurements, are described in the Company’s Form 10-K for the years ended December 31, 2025 and 2024. Subsequent to June 30, 2026, on July 15, 2026, the Company completed the Custom Foods Acquisition Manufacturing Holdco.

NOTE 6–NOTES PAYABLE

Insurance Loans

The Company has several financing loans for general liability, directors’ and officers’ insurance and other insurance liabilities, which bear interest at varying percentages and require monthly payments. As of June 30, 2026 and December 31, 2025, the remaining balances of these loans were $334,425 and $113,158, respectively. These insurance loans incurred interest expense of approximately $2,253 and $3,718 for the three months ended June 30, 2026 and 2025, respectively, and approximately $18,900 and $4,685 for the six months ended June 30, 2026 and 2025, respectively.

Gibraltar Loan and Security Agreement – Revolving Loan

As of June 30, 2026, the Company did not have any outstanding borrowings under the Loan and Security Agreement with Gibraltar Business Capital, LLC (the “Gibraltar Loan”). The Company fully repaid all obligations under the Gibraltar Loan in December 2025, and the agreement, including the related forbearance arrangements, was terminated at that time. There was no activity related to the Gibraltar Loan during the six months ended June 30, 2026.

Notes Payable – Related Parties

The Company’s notes payable as of June 30, 2026 consisted of (i) the Consolidated Secured Promissory Note issued to Ross Sklar on August 11, 2023, as amended by Amendment Number One dated May 31, 2024, and as further amended by Amendment Number Two, dated August 13, 2025 (collectively, the “Consolidated Secured Note”) and (ii) the Bridge Term Loan Promissory Note entered into with The Starco Group, Inc. on December 22, 2025 (the “Bridge Loan”). Both of these financing arrangements are with related parties and are described in Note 9 - Related Party Transactions. There were no amendments, additional borrowings, or repayments under these related-party notes during the six months ended June 30, 2026, other than the accrual and payment of interest in accordance with their terms.

CEO Notes

See Note 9 for loans to STCB from the Company’s CEO.

NOTE 7 –OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities consist of the following:

These liabilities represent obligations incurred as of the reporting date but not yet paid; accrued compensation includes wages and bonuses earned by employees, and accrued royalties include royalty payments that are potentially owed but not yet paid. Deferred revenue is for amounts received but not yet earned, primarily related to gift card liabilities and loyalty rewards obligations, and trade payables consist of amounts owed to suppliers for goods or services purchased. Other accrued expenses primarily consist of operational costs incurred but not yet invoiced**.**

NOTE 8–COMMITMENTS & CONTINGENCIES

The Company is not currently involved in any legal proceedings that, in management’s opinion, would have a material adverse effect on its financial position, results of operations, or cash flows. The Company regularly evaluates contingencies to determine the probability and estimability of potential losses in accordance with ASC 450, Contingencies. As of June 30, 2026 and December 31, 2025, the Company had no accruals recorded for loss contingencies, as it was not a defendant in any claims or legal actions which met the criteria for accrual.

Whipshots Agreements

In 2021, Whipshots LLC entered into an Intellectual Property Purchase Agreement with Penguins Fly, LLC, under which it acquired trademarks, domains, social media handles, and other assets related to Whipshots® and Whipshotz®. The purchase price is based on a sliding-scale percentage of gross revenue from Whipshots® and Whipshotz® product sales, payable over seven years. Amounts incurred under this agreement are recorded as indefinite-lived intangible assets. The carrying amount of the related indefinite-lived intangible asset was $505,404 as of both June 30, 2026 and December 31, 2025.

Whipshots Holdings, LLC also entered into a License Agreement with Washpoppin Inc. in 2021, licensing certain intellectual property of artist Cardi B for product promotion and brand collaboration. An amended agreement, effective November 27, 2023, formalized promotional obligations and established a minimum aggregate royalty payment of $3.3 million. The amendment also accelerated the vesting of equity for Washpoppin, resulting in equity-based compensation expense of $8.63 million in 2023. The Company did not incur expenses related to this agreement during the six months ended June 30, 2026 or the year ended December 31, 2025.

Sklyar License Agreement – Blue UTA-I LLC (Leah Kateb)

Effective July 1, 2025, Skylar entered into a license agreement with BlueUTA – I LLC (“BlueUTA”), granting Skylar the right to use the likeness and trademarks of artist Leah Kateb for commercial purposes, including manufacturing, marketing, promotion, advertising, distribution, and sale of specified products. The agreement is effective through June 30, 2029, unless terminated earlier. Under the agreement, Skylar is obligated to pay BlueUTA base compensation of $240,000 annually, payable in monthly installments of $20,000, which will be recognized as license expense over the term of the agreement. Skylar will also pay royalties at a rate of 4 percent on annual net sales exceeding $11 million. These royalties will be recognized as variable expenses and accrued when probable and reasonably estimable. No royalties were accrued as of June 30, 2026 or December 31, 2025.

Skylar issued 3,000 Class B units to BlueUTA, representing a 30 percent ownership interest in Skylar. These units are non-voting, subject to time-based and performance-based vesting conditions and were issued for past and future services. The units are intended to qualify as profits interests under IRS Revenue Procedures 93-27 and 2001-43 and are subject to a distribution threshold. Compensation expense related to these units will be recognized over the requisite service period. The Company recognized compensation expense related to these units of approximately $177,882 and $0 for the three months ended June 30, 2026 and 2025, respectively, and approximately $381,634 and $0 for the six months ended June 30, 2026 and 2025, respectively.

The agreement also provides for bonus compensation ranging from $400,000 to $600,000 annually for three years following the agreement term, contingent upon the achievement of specified net sales thresholds. These amounts will be recognized when achievement becomes probable and reasonably estimable. In addition, the Company granted BlueUTA stock options under the Starco Brands 2023 Equity Incentive Plan for up to 2 million shares of common stock, vesting in equal monthly installments over four years. The fair value of these options was measured at the grant date and will be recognized as expense over the vesting period. Compensation expense recognized during the three and six months ended June 30, 2026 was $2,564 and $5,128, respectively, and unrecognized compensation cost as of June 30, 2026 was $31,623, which will be recognized over the remaining vesting period of approximately 3.00 years.

Royalties and Minimum Guarantees

The Company has licensing agreements that include minimum guaranteed royalty payments. When no performance obligations remain with the licensor, minimum guarantees are recorded as both an asset and a liability at the contractual amount. When performance obligations remain, amounts are recorded as assets when paid and liabilities when incurred. Minimum contractual royalty-based obligations as of June 30, 2026 are approximately $20,000 for each of the years ending December 31, 2026, 2027, and 2028. Additional information regarding royalty-based assets and liabilities is included in Note 3.

General Commitments

The Company enters into various contracts in the normal course of business, including agreements for manufacturing, licensing, marketing, distribution, and other operational activities. These agreements may include minimum purchase requirements, royalty obligations, or other future payment commitments. Such arrangements are typical for the Company’s industry and are generally short-term or cancelable without significant penalty. As of June 30, 2026, management does not believe these commitments, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

In addition to the specific agreements described below, the Company is party to other routine commercial contracts that do not meet the criteria for recognition on the consolidated balance sheets under U.S. GAAP. Future obligations under these arrangements will be recognized as expenses in the periods in which the related goods or services are received.

Letter of Intent – Starco Group

On July 29, 2025, the Company announced the execution of a non-binding exclusive Letter of Intent to acquire its contract manufacturers, collectively referred to as The Starco Group. The Starco Group operates three U.S. manufacturing facilities focused on personal care, household, food, and beverage products. The proposed transaction contemplates reorganizing the Company into two operating subsidiaries - Starco Brands and Starco Manufacturing - under a renamed parent entity, “STARCO.” The Letter of Intent is non-binding, and no definitive agreement had been executed as of June 30, 2026. Accordingly, no amounts have been recognized in the condensed consolidated financial statements related to the proposed transaction.

NOTE 9–RELATED PARTY TRANSACTIONS

Notes Payable - Ross Sklar (Chief Executive Officer)

On August 11, 2023, the Company issued a Consolidated Secured Promissory Note to Ross Sklar in the principal amount of $4,000,000, consolidating several prior notes (the Consolidated Secured Note). The Consolidated Secured Note bore interest at the Wall Street Journal Prime Rate plus 2 percent, reassessed monthly, and was secured by substantially all assets of the Company pursuant to an Amended and Restated Consolidated Security Agreement, dated August 11, 2023. On May 31, 2024, the Company and Mr. Sklar entered into an amendment extending the maturity date of the Consolidated Note to August 31, 2026, with an automatic extension to August 31, 2027 if amounts remain outstanding at maturity. The restructuring was accounted for as a debt modification.

During 2024, the Company repaid $1,527,500 of principal under the Consolidated Secured Note using proceeds from the Gibraltar Loan. As of December 31, 2024, the outstanding principal balance under the Consolidated Secured Note was $2,472,500, with no accrued interest outstanding.

On August 13, 2025, the Company and Mr. Sklar entered into a Second Amendment to the Consolidated Secured Note. The Second Amendment consolidated two additional loans made by Mr. Sklar to the Company in the aggregate principal amount of $1,000,000, consisting of a $500,000 loan funded on July 15, 2025 and a $500,000 loan funded on August 15, 2025. After giving effect to these additional loans and prior repayments, the principal balance under the Consolidated Secured Note was adjusted to $3,472,500. The Second Amendment reaffirmed that the Consolidated Secured Note remained subject to that Subordination Agreement, dated May 24, 2024 between Mr. Sklar and Gibraltar Business Capital, LLC. Except as modified by the Second Amendment, all other terms of the Consolidated Secured Note, including interest rate, repayment provisions, and maturity, remained unchanged.

As of June 30, 2026 and December 31, 2025, the outstanding principal balance owed to Mr. Sklar under the Consolidated Secured Note was $3,472,500 as of both dates. This loan incurred interest expense of approximately $87,792 and $61,393 for the three months ended June 30, 2026 and 2025, respectively, and approximately $172,713 and $120,705 for the six months ended June 30, 2026 and 2025, respectively.

Related Party Bridge Loan – The Starco Group, Inc.

On December 22, 2025, the Company entered into the Bridge Loan with TSGI, a company wholly-owned by Ross Sklar, the Company’s Chief Executive Officer. The Bridge Loan provides for a bridge term loan of up to $5,000,000, including an initial disbursement of $4,500,000 and additional delayed drawdowns of up to $500,000 through December 31, 2026. The initial proceeds were used to repay the Company’s outstanding obligations under the Gibraltar Loan and to support working capital needs.

The Bridge Loan bears interest at the lesser of (i) the Highest Lawful Rate or (ii) the Prime Rate (not less than 6.00 percent) plus 4.25 percent. Interest is payable monthly beginning January 1, 2026. Principal payments begin January 1, 2027 and continue through 2030, with scheduled monthly payments ranging from $28,000 to $66,000. The Company may prepay the Bridge Loan at any time without penalty. The Bridge Loan matures on the earlier of (i) five years from issuance, (ii) acceleration upon default, or (iii) full repayment.

As of June 30, 2026 and December 31, 2025, the outstanding principal balance under the Bridge Loan was $4,500,000 and $4,500,000, respectively, and interest expense related to the loan was $83,875 and $0 for the three months ended June 30, 2026 and 2025, respectively, and was $221,375 and $0 for the six months ended June 30, 2026 and 2025, respectively.

Related Party Lease

On May 1, 2024, the Company entered into an operating lease for office space with Ralks Corporation, a related-party lessor. The lease covers approximately 3,000 square feet located at 706 N. Citrus Ave., Los Angeles, California, with monthly base rent of $10,000 and annual increases of 5 percent. The Company recognized a right-of-use asset and corresponding lease liability of $587,914 upon lease commencement. Lease expense was $34,010 and $34,010 for the three months ended June 30, 2026 and 2025, respectively, and was $68,019 and $68,019 for the six months ended June 30, 2026 and 2025, respectively. See Note 12 – Leases for additional information.

Other Related Party Transactions

During the three months ended June 30, 2026 and 2025, the Company recognized revenue from related parties of $229,752 and $421,379, respectively, and during the six months ended June 30, 2026 and 2025, the Company recognized revenue from related parties of $512,911 and $1,471,691, respectively. There were no accounts receivable or accrued accounts receivable from TSG or Temperance as of June 30, 2026 or December 31, 2025. All revenues associated with these balances were generated from related parties. Temperance is chaired by Ross Sklar.

During the six months ended June 30, 2026 and the year ended December 31, 2025, the Company recorded related party advances of $806,549 and $487,600, respectively, which are included in accrued liabilities and other current liabilities on the condensed consolidated balance sheet. Of the total, $318,950 and $100,000 was advanced by Ross Sklar to pay for certain expenses of the Company as of June 30, 2026 and December 31, 2025, respectively; the remaining advances were made by Temperance to suppliers on the Company’s behalf and are repayable on demand. No interest is charged on these advances and there are no formal repayment terms.

During the six months ended June 30, 2026 and 2025, the Company’s Winona and Skylar segments purchased finished goods inventory of approximately $1,657,699 and $1,666,809, respectively, from TSG and Temperance, both related parties. As of June 30, 2026 and December 31, 2025, accounts payable owing to TSG, Temperance and other related parties were $1,384,909 and $1,238,693, respectively.

NOTE 10–STOCK WARRANTS

A summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below:

The following table summarizes information about stock warrants to purchase shares of the Company’s Class A common stock outstanding and exercisable as of June 30, 2026:

The compensation expense attributed to the issuance of the stock warrants is recognized as they are vested.

Total compensation expense related to the stock warrants was $8,525 and $389,179 for the three months ended June 30, 2026 and 2025, respectively, and total compensation expense related to the stock warrants was $18,217 and $778,359 for the six months ended June 30, 2026 and 2025, respectively and was included in compensation expense on the condensed consolidated statement of operations. As of June 30, 2026, there was $7,103 in future compensation cost related to non-vested stock warrants which will be recognized over the remaining vesting period of approximately 0.25 years.

The aggregate intrinsic value as of June 30, 2026 is $4,800 for total outstanding and exercisable warrants, which was based on the closing market price of the Class A common stock of $0.02, had all warrant holders exercised their warrants as of that date, net of the aggregate exercise price.

NOTE 11-STOCK OPTIONS

A summary of the status of the Company’s outstanding stock options and changes during the periods is presented below:

The compensation expense attributed to the issuance of stock options is recognized as they are vested. Total compensation expense related to the stock options was $24,640 and $40,750 for the three months ended June 30, 2026 and 2025, respectively, and total compensation expense related to the stock options was $64,030 and $122,807 for the six months ended June 30, 2026 and 2025, respectively was included in compensation expense on the condensed consolidated statement of operations. As of June 30, 2026, there was $132,388 in future compensation cost related to non-vested stock options which will be recognized over the remaining vesting period of approximately 3.00 years.

The aggregate intrinsic value as of June 30, 2026 iszero for total outstanding and exercisable warrants, which was based on the closing market price of the Class A common stock of $0.02, had all option holders exercised their options as of that date, net of the aggregate exercise price.

NOTE 12 –LEASES

The following tables present net related party lease costs and other supplemental lease information:

Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the six months ended June 30, 2026:

NOTE 13 –PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

Construction in Progress (“CIP”) represents costs incurred for ongoing projects that are not yet ready for their intended use. As of December 31, 2025, the balance of CIP was $154,850 and related to the implementation of a new enterprise resource planning (“ERP”) system. During the six months ended June 30, 2026, the Company completed the ERP implementation and placed the system into service. Accordingly, the full CIP balance was transferred to intangible assets. As of June 30, 2026, the Company hadno Construction in Progress.

Depreciation expense was approximately $1,553 and $1,880 for the three months ended June 30, 2026 and 2025, respectively, and approximately $3,262 and $3,893 for the six months ended June 30, 2026 and 2025, respectively.

NOTE 14 –INTANGIBLE ASSETS

Intangible assets, net consists of the following:

Amortization expense was approximately $354,314 and $719,080 for the three months ended June 30, 2026 and 2025, respectively, and approximately $708,628 and $1,423,588 for the six months ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, the remaining amortization schedule below reflects only finite-lived intangible assets. Indefinite-lived intangible assets, which are not subject to amortization under ASC 350, are presented as a reconciling item to reconcile to the total intangible assets, net.

NOTE 15 –INVENTORY

Inventory by major class is as follows:

NOTE 16–SUBSEQUENT EVENTS

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 from the balance sheet date through the date these condensed consolidated financial statements were issued. Other than as described below, management determined that no subsequent events require recognition or disclosure. Each of the transactions described below is a non-recognized subsequent event and, accordingly, is not reflected in the accompanying June 30, 2026 financial statements.

Corporate Reorganization

On July 2, 2026, the Company formed Starco Manufacturing, LLC, and on July 6, 2026, the Company formed Starco Brands, LLC, each of which are Nevada limited liability companies and wholly owned subsidiaries of the Company. On July 6, 2026, the Company contributed 100% of the equity interests of The AOS Group, Inc., Soylent Nutrition, Inc., Skylar Body, LLC, and Whipshots Holdings, LLC held by the Company down to Starco Brands, LLC, in exchange for 100% of the equity interests of Starco Brands, LLC (the “Contribution” and together with the formation of Starco Brands, LLC and Starco Manufacturing, LLC, the “Reorganization”). The Reorganization established a holding-company structure beneath the Company, was accounted for as a transaction between entities under common control at carryover basis and had no effect on the Company’s consolidated financial position, results of operations, cash flows, or reportable segments.

Acquisition of Custom Foods, LLC (Custom Bakehouse)

On July 15, 2026, the Company, through its wholly owned subsidiary Starco Manufacturing, LLC, acquired all of the outstanding securities of Custom Foods, LLC (dba Custom Bakehouse) for total consideration of $8.0 million in cash paid at closing and, if earned, up to $2.5 million of contingent earn-out consideration based on the achievement of specified net-revenue metrics for the year ending December 31, 2027 (the “Custom Foods Acquisition”). The Custom Foods Acquisition was funded with borrowings under the Pasadena Private Lending facility described below and is accounted for as a business combination under ASC 805, with contingent consideration recognized at fair value as part of the consideration transferred. The initial accounting for the business combination is incomplete as of the date of this report; accordingly, the amounts recognized for the major classes of assets acquired and liabilities assumed, including goodwill and the contingent-consideration liability, are not yet available. The Company will file the financial statements of the business acquired and the related pro forma financial information by amendment to its Current Report on Form 8-K, filed with the Commission on July 21, 2026, within the period required by Item 9.01 of Form 8-K.

Pasadena Private Lending Credit Facility

On July 15, 2026, the Company and each of its subsidiaries (including the newly acquired Custom Foods and its subsidiaries) entered into a Loan Agreement with Pasadena Private Lending Inc. providing for an $11.0 million initial term loan, a $4.0 million accordion term-loan feature, and a $3.0 million revolving line of credit (the “Pasadena Private Lending facility”). The obligations are cross-collateralized and secured by substantially all assets of the borrowers with pledges of equity interests of the Company’s securities and are further guaranteed by the Company’s Chief Executive Officer and certain family trusts. The Pasadena Private Lending facility contains customary affirmative and negative covenants and financial covenants, including a maximum senior debt-to-EBITDA ratio of 3.00 to 1.00 and a minimum fixed-charge coverage ratio of 2.00 to 1.00, tested quarterly. The Company paid a non-refundable closing fee of $220,000. Proceeds of the term loan were used to fund the Custom Foods acquisition and provide for working capital, with revolving and accordion amounts available for future use.

Related-Party Bridge Loan

The Company’s Bridge Term Loan Promissory Note dated December 22, 2025, issued in favor of The Starco Group, Inc., a related party, is reflected as a related-party note payable in the accompanying balance sheet (the “Bridge Loan”). In July 2026, in connection with the Pasadena Private Lending facility described above, the Bridge Loan was subordinated to the Pasadena Private Lending facility.

Amended and Restated Convertible Promissory Note - Related Party

On July 15, 2026, in connection with the credit facility and the required subordination of the Company’s indebtedness to its Chief Executive Officer, the Company amended and restated the Consolidated Secured Promissory Note, as amended by Amendment Number One, and further amended by Amendment Number Two, issued by the company to Ross Sklar (the “Sklar Note”) into an Amended and Restated Secured Convertible Promissory Note in the same principal amount of $3,472,500 (the “Restated Note”). The Restated Note bears the same interest of the Sklar Note at the Wall Street Journal Prime Rate plus 2.00% per annum, matures March 31, 2030, is subordinated to the Pasadena Private Lending facility, and is convertible, at the holder’s option, into shares of the Company’s Class A common stock at a conversion price of $0.04 per share. The Company is evaluating the accounting for the amendment under ASC 470-50 (modification versus extinguishment) and ASC 815-40 (conversion feature), the effects of which will be reflected in the Company’s third-quarter financial statements.