Starco Brands, Inc.
For the period ended Dec 31, 2024. Filed Apr 18, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 18, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-03.
0001493152-24-013032
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-18.
0001641172-25-005354
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 77 previous paragraphs and 104 current paragraphs.
49 unchanged; 15 reworded; 38 added; 13 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 5 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (38)
Current report
For the year ended December 31, 2024, we recorded revenues of $52,527,130, compared to $51,948,733 for the year ended December 31, 2023 for an increase of $578,397 or 1%. The growth was largely due to recognition of a full twelve months of revenue from Soylent in the current period versus only ten and a half months of sales from Soylent in the prior period, as the Company acquired Soylent in February 2023. This increase in Soylent revenue was augmented by growth in sales of Winona.
Current report
Revenues, related parties
Current report
For the year ended December 31, 2024, the Company recorded related party revenues of $6,140,172 compared to $11,696,722 for the year ended December 31, 2023, resulting in a decrease of $5,556,550 or 48%. The decrease in the current period was largely driven by lower Whipshots sales due to industry de-stocking and lower levels of new retailer loading.
Current report
For the year ended December 31, 2024, we recorded cost of goods sold of $33,907,301, compared to $34,991,482 for the year ended December 13, 2023, a decrease of $1,084,181 or 3%. The decrease can be attributed to an inventory adjustment to fair value of approximately $3.0 million related to the Soylent acquisition that was incorporated into cost of goods sold in the prior year; such yields lower costs in the current year.
Current report
Cost of Goods Sold, Related Parties
Current report
For the year ended December 31, 2024, our cost of goods sold, related parties amounted to $3,896,551, reflecting an increase of $1,208,391 or 45%, compared to $2,688,160 for the year ended December 13, 2023. The increase can be attributed to increases in sales for Winona in the current year, which yielded increased costs of goods sold.
Current report
For the year ended December 31, 2024, our compensation expense amounted to $9,037,123, reflecting a decrease of $6,862,369 or 43%, compared to $15,899,492 for the year ended December 31, 2023. The decrease was primarily due to a decrease in stock-based compensation from the prior year, when shares of Whipshots Holdings in the amount of approximately $8.7 million were issued to Washpoppin at the end of the period.
Current report
For the year ended December 31, 2024, our marketing, general and administrative expenses amounted to $18,890,738, reflecting a decrease of $938,847 or 5%, compared to $19,829,585 for the year ended December 31, 2023. The decrease can be attributed to lower marketing expenses in the current year, as last year’s higher spending was driven by a business acquisition.
Current report
For the year ended December 31, 2024, we incurred a fair value share adjustment gain of $10,544,263 compared to a loss of $215,531 in the prior year; this was due to a decrease in the fair value of the Soylent sellers’ rights to potentially receive additional Starco shares
Current report
For the year ended December 31, 2024, we incurred goodwill impairment losses of $14,327,871; the Starco Brands segment and the Soylent segment were impaired by $2,944,871 and $11,383,000, respectively, and have remaining goodwill balances of $0 and $1,127,208, respectively, as of December 31, 2024.
Current report
For the year ended December 31, 2024, we incurred an intangibles impairment loss of $13,304 to the AOS component of the Starco Brands segment.
Current report
Other Expense
Current report
Net Loss
Current report
For the year ended December 31, 2024, we recorded a net loss of $17,334,549, compared to net loss of $46,402,121 for the year ended December 31, 2023. The change in net loss is primarily attributed to a $15,284,829 reduction in goodwill impairment compared to the prior year, a change in fair value adjustment from the prior year of $10,759,794 and a $6,862,369 decrease in compensation expense. The reduction in compensation expense in the current year stems from elevated stock-based compensation costs in the prior year, including shares issued to Whipshots Holdings for Washpoppin and higher warrants expenses. Additionally, prior year compensation expenses increased due to added costs associated with the acquisitions of AOS, Skylar, and Soylent.
Current report
(1)Note that $1,527,500 of this total was repaid to Mr. Sklar in 2024 from proceeds under the Gibraltar Loan (seeLoan and Security Agreement – Related Partybelow).
Current report
The restructuring is accounted for as a debt modification. On May 31, 2024, the Consolidated Secured Promissory Note was amended by that certain Amendment to Consolidated Secure Promissory Note, by and between STCB and Mr. Sklar, dated May 31, 2024 (the “2024 Consolidated Note Amendment” and together with the Consolidated Secured Promissory Note, the “Amended Consolidated Secured Promissory Note”). The 2024 Consolidated Note Amendment, among other things, extended the maturity date to August 31, 2026, provided that to the extent amounts remain due and payable on the maturity date, it will be extended until August 31, 2027.
Current report
On February 14, 2022, the Company issued an unsecured note to Sklar with a principal amount of $472,500, which was excluded from the note consolidation. The note carried an annual interest rate of 4% and was set to mature two years from its issuance. It was convertible into shares of Company common stock at a conversion price of $0.29 per share, based on the 10-day volume-weighted average trading price prior to issuance. On May 10, 2024, the Company and Sklar amended the note, extending its maturity date to December 31, 2024. The note was fully repaid in 2024 using proceeds from the Gibraltar Loan, and the Company no longer has any obligations for this note.
Current report
On May 24, 2024, (i) STCB, (ii) and each of STCB’s subsidiaries, Whipshots Holdings, Whipshots, AOS, Skylar, and Soylent (collectively, the “Borrowers” and each individually, a “Borrower”), and (iii) Gibraltar Business Capital, LLC, a Delaware limited liability company (the “Lender” or “Gibraltar”) entered into a Loan and Security Agreement (the “Loan and Security Agreement”), allowing STCB to reduce a portion of its long term debt (including retiring that certain revolving credit commitment which bore interest at a rate per annum equal to the greater of (a) two and half percent (2.5%) and (b) prime rate plus one percent (1%), which expanded its access to working capital. Capitalized terms not otherwise defined have the meanings set forth in the Loan and Security Agreement.
Current report
The Loan and Security Agreement provides for a revolving line of credit in the amount not to exceed $12.5 million at any one time, or the Revolving Loan Commitment Amount in return for a first priority security interest in the Collateral. The Revolving Commitment Amount is supplemented by a Permitted Overadvance Amount of $1.5 million. The first $1.5 million in Revolving Loans drawn on this line will be considered permitted overadvances, and the Permitted Overadvance Amount shall be reduced by $125,000 beginning on June 1, 2024, and the first day of each month thereafter. The aggregate principal balance of all Revolving Loans outstanding at any time shall not exceed the Revolving Loan Availability, which is equal to the lesser of the Revolving Loan Commitment Amount or the Borrowing Base Amount; if the aggregate principal balance does exceed the availability, the Company shall immediately make a repayment to eliminate such excess. The Revolving Line matures on May 24, 2026, and such Maturity Date will be automatically extended for one (1) year, subject to the satisfaction of certain terms and conditions described in the Loan and Security Agreement.
Current report
Each Revolving Loan advanced under the Revolving Loan Commitment bears interest at a rate per annum equal to One Month Term SOFR plus the Applicable Margin. If a Revolving Loan or any portion thereof is considered a part of the Permitted Overadvance Amount under the Loan and Security Agreement, the Applicable Margin for such loan shall be increased by an additional two percent (2.00%) per annum. Revolving Loans may be repaid at any time and reborrowed up to but not including the Maturity Date. On the Maturity Date, the outstanding aggregate principal balance of all Revolving Loans shall be due and payable. The interest rate for the revolving loan was 10.00% as of December 31, 2024.
Current report
Accrued and unpaid interest on the unpaid principal balance of the Revolving Loans shall be due and payable commencing on June 1, 2024 and on the first date of each calendar month thereafter. All accrued and unpaid interest shall be due and payable on the maturity date.
Current report
Subject to the satisfaction of certain terms and conditions described in the Loan and Security Agreement, the Borrowers may request to increase the Revolving Loan Commitment by an aggregate amount not less than $1 million not exceeding $2.5 million. Such request may be accepted by Lender in its sole and absolute discretion.
Current report
The Loan and Security Agreement contains customary limitations, including limitations on indebtedness, liens, fundamental changes to business or organizational structure, investments, loans, advances, guarantees, and acquisitions, asset sales, dividends, stock repurchases, stock redemptions, and the redemption, payment or prepayment of other debt, and transactions with affiliates. We are also subject to financial covenants, including a minimum EBITDA covenant and a maximum Unfinanced Capital Expenditures covenant.
Current report
The Loan and Security Agreement also contains customary events of default, including nonpayment of principal, interest, fees, or other amounts when due, violation of covenants, breaches of representations or warranties, cross defaults, change of control, insolvency, bankruptcy events, and material judgments. Some of these events of default allow for grace periods or are qualified by materiality concepts. Upon the occurrence of an event of default, the outstanding obligations under the Loan and Security Agreement may be accelerated and become due and payable immediately. As of December 31, 2024, the Company had several Events of Default under the Loan and Security Agreement, due to reporting deficiencies and failure to maintain the minimum EBITDA financial covenant. The Company is not in payment default. The Company is exploring options with Lender to reset the financial covenant in line with its current forecast and Lender is in discussions with the Company regarding a waiver of existing defaults. The balance of the revolving loan was $3,917,956 with a debt discount of $266,626, for a net balance of $3,651,330, with interest expense on the loan for the year ended December 31, 2024 of $395,184.
Current report
Working Capital Deficit
Current report
Net cash provided by operating activities was $2,215,446 for the year ended December 31, 2024 and was primarily due to a combined decrease in accounts receivable and accounts receivable-related parties of $2,240,241, a decrease in inventory in the amount of $2,425,895 and a combined increase in accounts payable and accounts payable-related parties of $2,344,959. The net loss for the year of $17,334,549 was mostly offset by non-cash expenses of goodwill impairment, amortization of intangible assets and fair value share adjustment gain in the amounts of $14,327,871, $2,831,972 and $10,544,263, respectively.
Current report
For the year ended December 31, 2024, net cash used in financing activities was $2,329,940 which primarily resulted from $3,541,543 of net proceeds from the revolving loan, offset by payments made on loans from related parties and on the line of credit of $2,000,000 and $3,835,247, respectively.
Current report
As of December 31, 2024 and December 31, 2023, goodwill was $12,361,520 and $26,689,391, respectively.
Current report
The Company experienced triggering events in 2024 due to lower-than-expected revenue for the AOS component of its Starco Brands segment, prompting a qualitative impairment assessment of its definite-lived intangible assets as of November 30, 2024. The Company recorded a loss on impairment for the definite-lived intangible assets of its AOS subsidiary in the net amount of $13,304 for the year ended December 31, 2024.
Current report
During the year ended December 31, 2023, the Company did not record asset impairment charges related to its intangible assets.
Current report
Accounts Receivable
Current report
We measure accounts receivable at net realizable value. This value includes an appropriate allowance for credit losses to present the net amount expected to be collected on the financial asset. We calculate the allowance for credit losses based on available relevant information, in addition to historical loss information, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our partners and customers.
Current report
Inventory
Current report
Inventory consists of premium body and skincare products, fragrances and nutritional products. Inventory is measured using the first-in, first-out method and stated at average cost as of December 31, 2024. The value of inventories is reduced for excess and obsolete inventories. We monitor inventory to identify events that would require impairment due to obsolete inventory and adjust the value of inventory when required.
Current report
Fair Value of Financial Instruments
Current report
We follow paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Current report
The carrying amount of our consolidated financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable, prepaid expenses, and accrued expenses approximate their fair value because of the short maturity of those instruments. Our notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2024 and December 31, 2023.
Current report
We may be required to contemplate the fair value of certain share-based adjustments, which require assumptions about market conditions, volatility and other relevant factors which are often obtained from third-party valuation firms. Significant changes to any unobservable input may result in a significant change in the fair value measurement.
Removed paragraphs (13)
Previous report
For the year ended December 31, 2023, we recorded revenues of $65,211,238, compared to $7,812,728 the year ended December 31, 2022, an increase of $57,398,510 or 735%. The bulk of revenue growth came from acquisitions, primarily revenue from Soylent’s acquisition date forward and a full year of revenue for Skylar, representing 59% and 16% of total revenue, or $38,218,444 and $10,670,619, respectively, for the year ended December 31, 2023. Royalty revenue represented 18% and 87% of total revenue, or $11,696,722 and $6,786,051, with the current period royalty revenue growth largely due to the growth in royalties from sales of Whipshots™. The royalty rate that the we paid varies on a per product basis of wholesale sales of our branded and non-corporate owned licensed products. Royalty revenues, not related to our acquisitions, are from our marketing licensing agreements with TSG and other affiliated companies, and primarily are for Whipshots®and Winona®.
Previous report
For the year ended December 31, 2023, we recorded cost of goods sold of $37,431,277, compared to $776,127 for the year ended December 13, 2022, an increase of $36,665,150 or 4723%. The increase of cost of goods sold came almost entirely from acquisitions, primarily cost of goods sold from Soylent’s acquisition date forward and a full year of cost of goods sold for Skylar, representing 82% and 8% of total cost of goods sold, or $30,745,840 and $2,314,732, respectively.
Previous report
For the year ended December 31, 2023, compensation expense increased $14,724,225, or 1253% to $15,899,492 compared to $1,175,267 for the year ended December 31, 2022. The increase was primarily due to stock-based compensation increasing to $10,469,018 in the year ended December 31, 2023, from $529,400 for the year ended December 31, 2022, representing an increase of $9,939,618. The increase in stock-based compensation is due primarily to shares of Whipshots Holdings being issued to Washpoppin and increased warrants expense. Compensation expense also increased from the addition of compensation costs from the acquisitions of AOS, Skylar and Soylent.
Previous report
For the year ended December 31, 2023, we incurred $21,643,733 in marketing, general and administrative expense as compared to $2,756,808 for the year ended December 31, 2022, an increase of $18,886,925, or 685%. The increase can be attributed to addition of the acquired businesses and an increase in spending on marketing and increased amortization expense.
Previous report
For the year ended December 31, 2023, we incurred a fair value share adjustment loss of $215,531. This was due to the fair value of the Soylent sellers’ rights to receive additional Starco shares decreasing as described below. The fair value of the rights to receive these shares were estimated by a third-party valuation firm to be $0.189 per share on the acquisition date or an approximate share adjustment value of $36,715,800. For the Soylent Shareholders that did not join the Stockholder Agreement, the fair value of the rights to receive these shares were $0.136 per share on December 31, 2023, or the Company’s stock price as of February 14, 2024, the “Adjustment Date”, or a share adjustment value of $6,101,455. For the Consenting Stockholders, the fair value of the rights to receive these shares were estimated by a third-party valuation firm to be $0.186 per share on December 31, 2023 or an approximate share adjustment value of 30,829,876. Included in the Consenting Stockholders approximate share adjustment value of $30,829,876, are the fair value rights to receive shares under the First Adjustment Date in the Stockholder Agreement of $15,506,101, or $0.16 per share, the 30-day wvap of the Company’s stock price as of February 14, 2024. The total share adjustment value as of December 31, 2023 is $36,931,330.
Previous report
For the year ended December 31, 2023, we incurred a goodwill impairment loss of $29,612,700. The Starco Brands segments was impaired $9,145,000 and has a remaining goodwill balance of $2,944,871. The Soylent segment goodwill was impaired $20,467,700 and has a remaining goodwill balance of $12,510,208.
Previous report
Other Income and Expense
Previous report
Net Income (Loss)
Previous report
For the year ended December 31, 2023, we recorded a net loss of $46,402,121, compared to net income of $977,858 for the year ended December 31, 2022. The change from net income to net loss is primarily due to goodwill impairment loss of $29,612,700, which is a non-cash expense, in addition to increased expenses from the acquired businesses AOS, Skylar and Soylent.
Previous report
The Company did not include the February 14, 2022 Note with amount of $472,500 in the note consolidation. As of the date of this filing, the $472,500 principal amount of the February 14, 2022 Note is in default with the Company paying interest only payments. The Company and Sklar intend to extend the February 14, 2022 Note to have a maturity date that coincides with the maturity date of the Consolidated Secured Promissory Note. This extension has not been effected as of the date of this report.
Previous report
Working Capital Surplus
Previous report
Net cash provided by operating activities was $377,777 for the year ended December 31, 2022 and was primarily due to an increase of accounts receivable of $1,932,956, which was partially offset by an increase of other payables and accrued liabilities of $772,074 and a decrease of prepaid expenses and other assets of $700,061.
Previous report
For the year ended December 31, 2022, net cash provided by financing activities was $2,223,392, which includes $2,472,500 from advances from related parties and $150,494 from the proceeds of common stock.
Reworded paragraphs (15)
Previous wording
Starco Brands, Inc. (formerly Insynergy Products, Inc.), which we refer to as “the Company,” “our Company,” “STCB”, “we,” “us” or “our,” was incorporated in the State of Nevada on January 26, 2010 under the name Insynergy, Inc. On September 7, 2017, the Company filed an Amendment to the Articles of Incorporation to change the corporate name to Starco Brands, Inc. The Board determined the change of the Company’s name was in the best interests of the Company due to changes in our current and anticipated business operations at that time. In July 2017, the Company entered into a licensing agreement with The Starco Group (“TSG”), located in Los Angeles, California. 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. Upon entering into the licensing agreement with TSG, the Company pivoted to commercializing novel consumer products manufactured by TSG.
Current wording
Starco Brands, Inc. (formerly Insynergy Products, Inc.), which we refer to as “the Company,” “our Company,” “STCB”, “we,” “us” or “our,” was incorporated in the State of Nevada on January 26, 2010 under the name Insynergy, Inc. On September 7, 2017, the Company filed an Amendment to the Articles of Incorporation to change the corporate name to Starco Brands, Inc. The Board determined the change of the Company’s name was in the best interests of the Company due to changes in our current and anticipated business operations at that time. In July 2017, the Company entered into a licensing agreement with The Starco Group (“TSG”), a related party entity, located in Los Angeles, California. 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. Upon entering into the licensing agreement with TSG, the Company pivoted to commercializing novel consumer products manufactured by TSG.
Previous wording
In July 2017, our Board of Directors entered into a licensing agreement with TSG to pursue a new strategic marketing plan involving commercializing leading edge products with the intent to sell them through brick and mortar and online retailers. We are a company whose mission is to create behavior-changing products and brands. Our core competency is inventing brands, marketing, building trends, pushing awareness and social marketing. The licensing agreement with TSG provided STCB with certain products on an exclusive and royalty-free basis and other products on a non-exclusive and royalty basis, in the categories of food, household cleaning, air care, spirits and personal care.
Current wording
In July 2017, our Board entered into a licensing agreement with TSG to pursue a new strategic marketing plan involving commercializing leading edge products with the intent to sell them through brick and mortar and online retailers. We are a company whose mission is to create behavior-changing products and brands. Our core competency is inventing brands, marketing, building trends, pushing awareness and social marketing. The licensing agreement with TSG provided STCB with certain products on an exclusive and royalty-free basis and other products on a non-exclusive and royalty basis, in the categories of food, household cleaning, air care, spirits and personal care.
Previous wording
For the year ended December 31, 2023, we incurred $5,861,649 in professional fees compared to $1,822,927 in the prior period, an increase of $4,038,722, or 222%. Professional fees are mainly for contractors, accounting, auditing and legal services associated with business operations, merger activity, and our quarterly filings as a public company, and advisory and valuation services. The increase in the year ended December 31, 2023 is primarily due to an increase in contractor fees, banking, legal, valuation and audit fees related to the acquired businesses Soylent, Skylar, and AOS.
Current wording
For the year ended December 31, 2024, our professional fees totaled $3,533,052, representing a decrease of $2,328,597 or 40%, compared to $5,861,649 in the prior year. Professional fees are mainly for contractors, accounting, auditing and legal services associated with business operations, merger activity, and our quarterly filings as a public company, and advisory and valuation services. The decrease is primarily due to a decrease in expenses (contractor fees, legal, and audit fees) in the current year period compared to expenses related to the acquisitions of Soylent, Skylar, and AOS in the prior year period.
Previous wording
For the year ended December 31, 2023, we had total other expense of $948,977 compared to other expense of $172,127 for the year ended December 31, 2022. For the year ended December 31, 2023, we had interest expense of $ 850,105 compared to $68,721 for the year ended December 31, 2022. The increase in interest expense is a result of the addition of the Soylent line of credit and higher outstanding borrowing from Ross Sklar. Other expenses, primarily related to acquisition related expenses decreased to $98,872 in the year ended December 31, 2023 compared to $103,406 in the year ended December 31, 2022.
Current wording
For the year ended December 31, 2024, we had total other expenses of $2,940,174 compared to other expenses of $948,977 for the year ended December 31, 2023. For the year ended December 31, 2024, we had interest expense of $961,588 compared to $850,105 for the year ended December 31, 2023; such increase in interest expense is a result of the addition of the Gibraltar revolving loan in the current year. Other expenses, primarily related to the write-off of disputed receivables and settlements with vendors relating to prior years, increased to $1,978,586 for the year ended December 31, 2024 from $98,872 in the prior year.
Previous wording
As reflected in the accompanying consolidated financial statements, we have an accumulated deficit of $63,769,469 at December 31, 2023. We used $175,796 in cash from financing activities for the year ended December 31, 2023, primarily due to $964,753 of net payments on the line of credit and $131,400 of repurchases of common stock, which was partially offset by $800,000 of loan advances from Ross Sklar and $127,148 of borrowings for insurance policies. This compared to net cash received of $2,223,392 from financing activities for the year ended December 31, 2022, due primarily to $2,472,500 of loan advances from Ross Sklar, our CEO and $151,250 of equity investments from unaffiliated parties, less share repurchases of $131,400 and other repayment activity.
Current wording
As reflected in the accompanying consolidated financial statements, we have an accumulated deficit of $81,420,357 at December 31, 2024. We used $2,329,940 in cash from financing activities for the year ended December 31, 2024, primarily due to $3,541,543 of net proceeds from the revolving loan, offset by payments made on loans from related parties and on the line of credit of $2,000,000 and $3,835,247, respectively. We used cash from financing activities of $175,796 for the year ended December 31, 2023, primarily due to $964,753 of net payments on the line of credit and $131,400 of repurchases of common stock, which was partially offset by $800,000 of loan advances from Ross Sklar and $127,148 of borrowings for insurance policies.
Previous wording
Our net cash provided by operating activities was $686,657 for the year ended December 31, 2023 compared to $377,777 for the year ended December 31, 2022. Operating expenses for the year ended December 31, 2023 totaling $73,233,105 include items such as marketing and administrative costs, consultant compensation, insurance, legal and other professional fees, compliance, website maintenance, loss on share fair value adjustment and goodwill impairment loss. Operating expenses for the year ended December 31, 2022 totaling $5,886,616 include items such as marketing and administrative costs, consultant compensation, insurance, legal and other professional fees, compliance and website maintenance.
Current wording
Our net cash provided by operating activities was $2,215,446 for the year ended December 31, 2024 compared to $686,657 for the year ended December 31, 2023. Operating expenses for the year ended December 31, 2024 were $35,257,825, including items such as marketing, advertising and administrative costs, consultant compensation, insurance, legal and other professional fees, compliance, website maintenance, investor relations, loss on share fair value adjustment, goodwill impairment loss and intangible impairment loss. Operating expenses for the year ended December 31, 2023 were $71,418,957, including items such as marketing and administrative costs, consultant compensation, insurance, legal and other professional fees, compliance, website maintenance, loss on share fair value adjustment and goodwill impairment loss.
Previous wording
As of December 31, 2023 and December 31, 2022, the outstanding principal due to Mr. Sklar was $4,472,500 and $3,672,500, respectively.
Current wording
As of December 31, 2024 and 2023, the outstanding principal owed to Mr. Sklar under the referenced notes amounted to $2,472,500 and $4,472,500, respectively.
Previous wording
The audited consolidated financial statements contained in this Annual Report on Form 10-K have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company identified that a substantial doubt exists if the Company is able to meet its obligations as they become due within one year of the date of the financial statements being issued. Principal conditions that gave rise to the substantial doubt include, the Company historically incurring net losses as indicated in the Company’s accumulated deficit of approximately $63,769,469 at December 31, 2023 including the impact of its net loss of $46,402,121 for the year ended December 31, 2023 and total debt on the balance sheet was $8,394,466, as of December 31, 2023, with all debt coming due within one year of the date of the financial statements being issued. Management evaluated the principal conditions that initially give rise to the substantial doubt and note that the historical net losses and accumulated deficit impact are primarily made up of non-cash expenses or one-time non-recurring expenses, such as goodwill impairment, stock-based compensation expense, fair value share adjustment loss and acquisition transaction expenses. Total debt of $8,394,466 on the balance sheet as of December 31, 2023 includes $4,472,500 of notes payable to Ross Sklar, who has a large minority ownership of the Company that provides incentive for Mr. Sklar to extend or refinance the notes before the notes become due, as seen historically (see Note 8). Management plans include, (i) continuing to increase net cash provided by operating activities, which was $686,657 for the year ended December 31, 2023, while decreasing net cash provided by financing activities, and (ii) obtaining an alternative financing source to pay off all current debt outstanding and provide additional working capital, if needed. In order to achieve these plans, management has created and approved plans to increase top line revenue for each segment, while decreasing overall expenses as a percent of revenue, which will be realized through realizing synergies from the acquisitions of AOS, Skylar and Soylent, while utilizing the Company’s back-end shared service model to reduce expenses. The Company is in ongoing negotiations to obtain additional financing to clear historical debt and provide additional working capital. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
Current wording
The audited consolidated financial statements contained in this Annual Report on Form 10-K have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company identified that a substantial doubt exists if the Company is able to meet its obligations as they become due within one year of the date of the financial statements being issued. Principal conditions that gave rise to the substantial doubt include, the Company historically incurring net losses as indicated in the Company’s accumulated deficit of $81,420,357 at December 31, 2024 including the impact of its net loss of $17,334,549 for the year ended December 31, 2024 and a working capital deficiency of approximately $14.2 million at December 31, 2024. Management evaluated the principal conditions that initially give rise to the substantial doubt and note that the historical net losses and accumulated deficit impact are primarily made up of non-cash expenses or one-time non-recurring expenses, such as goodwill impairment, stock-based compensation expense, fair value share adjustment loss and acquisition transaction expenses. Total debt of $6,174,313 on the balance sheet as of December 31, 2024 includes $2,472,500 of notes payable to the Company’s CEO, Ross Sklar, who has a large minority ownership of the Company which provides potential incentive for Mr. Sklar to extend or refinance such notes before the notes become due, as such notes have historically been extended and refinanced (see Note 9). Management plans include, (i) continuing to increase net cash provided by operating activities, which was $2,215,446 for the year ended December 31, 2024, while decreasing net cash provided by financing activities, and (ii) obtaining an alternative financing source to pay off all current debt outstanding and provide additional working capital, if needed. In order to achieve these plans, management has created and approved plans to increase top line revenue for each segment, while decreasing overall expenses as a percent of revenue, which will be realized through realizing synergies from the acquisitions of AOS, Skylar and Soylent, while utilizing the Company’s back-end shared service model to reduce expenses. The Company is in ongoing negotiations to obtain additional financing to clear historical debt and provide additional working capital. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
Previous wording
The increase in current assets is primarily due to the increase in accounts receivable of $7,105,138 as well as an increase in inventory on hand of $7,651,887. Both the increase of accounts receivable and inventory are primarily related to the Soylent acquisition. The increase in current liabilities is primarily a result of the increase in fair value of share adjustment of $36,931,330, the addition of a line of credit balance of $3,835,247 and an increase in accounts payable of $1,194,464. The increase of stock payable, line of credit, and accounts payable are primarily due to the Soylent acquisition
Current wording
The decrease in current assets is primarily due to a decrease in accounts receivable of $1,864,908, a decrease in prepaid expenses of $2,197,196 as well as a decrease in inventory on hand of $2,425,895. The decrease in current liabilities is primarily a result of a decrease in fair value of share adjustment of $27,631,627, the repayment of a line of credit balance of $3,835,247 from the prior year and the repayment of notes payable-related parties of approximately $2,000,000, offset by an increase in accounts payable/accounts payable-related parties of $2,344,959 and the addition of the revolving loan of $3,651,330.
Previous wording
Net cash used in investing activities was $1,459,661 for the year ended December 31, 2022 and was due to cash paid in acquisition of business, net of $1,459,661.
Current wording
Net cash used in investing activities was $439,325 for the year ended December 31, 2024 and was primarily due to cash paid for purchase of property and equipment of $310,590.
Previous wording
For the year ended December 31, 2023, net cash used in financing activities was $175,796 primarily due to $964,753 of net payments on the line of credit and $131,400 of repurchases of common stock, which was partially offset by $800,000 of loan advances from Ross Sklar and $127,148 of borrowings for insurance policies.
Current wording
For the year ended December 31, 2023, net cash used in financing activities was $175,796 which primarily resulted from $964,753 of net payments on the line of credit and $131,400 of repurchases of common stock, partially offset by $800,000 of loan advances from Ross Sklar and $127,148 of borrowings for insurance policies.
Previous wording
We consider our critical accounting estimates to include the assumptions and estimates associated with timing for revenue recognition, testing for impairment, recoverability of long-lived assets, income taxes, fair value of contributed services, and assumptions used in the Black-Scholes valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate. Our significant accounting policies are more fully described in the notes to our Consolidated Financial Statements. We believe that the following accounting policies and estimates are critical to our business operations and understanding our financial results.
Current wording
We consider our critical accounting estimates to include the assumptions and estimates associated with timing for revenue recognition, testing of goodwill and intangibles for impairment, 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, income taxes, fair value of contributed services, and assumptions used in the Black-Scholes valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate. Our significant accounting policies are more fully described in the notes to our Consolidated Financial Statements. We believe that the following accounting policies and estimates are critical to our business operations and understanding our financial results.
Previous wording
STCB, excluding its subsidiaries, earns a majority of its revenues through the sale of food products, primarilty through Winona. Revenue from retail sales is recognized at shipment to the retailer.
Current wording
STCB, excluding its subsidiaries, earns a majority of its revenues through the sale of food products, primarily through Winona. Revenue from retail sales is recognized at shipment to the retailer.
Previous wording
The Company engaged a third-party valuation firm to determine the fair value of the reporting units under ASC 350. The Company recorded total goodwill impairment losses in the amount of $29,612,700 for the year ended December 31, 2023. The goodwill impairment losses are attributable as follows to the following segments: $9,145,000 to the Starco Brands segment and $20,467,700 to the Soylent segment. No impairment losses related to goodwill were recognized for the year ended December 31, 2022. As of December 31, 2023 and December 31, 2022 goodwill was $26,689,391 and $32,836,563, respectively.
Current wording
The Company engaged a third-party valuation firm to determine the fair value of the reporting units under ASC 350. The Company recorded total goodwill impairment losses in the amount of $29,612,700 for the year ended December 31, 2023. The goodwill impairment losses are attributable as follows to the following segments: $9,145,000 to the Starco Brands segment and $20,467,700 to the Soylent segment.
Previous wording
We review intangible assets, property, equipment and software with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted cash flows that the asset or asset group is expected to generate. If assets are determined to be impaired, the impairment loss to be recognized equals the amount by which the carrying value of the asset or group of assets exceeds its fair value. Significant estimates include but are not limited to future expected cash flows, replacement cost and discount rates. There were no impairment losses related to long-lived assets for the years ended December 31, 2023 and 2022.
Current wording
We review intangible assets, property, equipment and software with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted cash flows that the asset or asset group is expected to generate. If assets are determined to be impaired, the impairment loss to be recognized equals the amount by which the carrying value of the asset or group of assets exceeds its fair value. Significant estimates include but are not limited to future expected cash flows, replacement cost and discount rates.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Company engaged a third-party valuation firm to determine the fair value of the reporting units under ASC 350. The Company recorded total goodwill impairment losses in the amount of $14,327,871 for the year ended December 31, 2024. The goodwill impairment losses are allocated as follows: $2,944,871 to the Starco Brands segment and $11,383,000 to the Soylent segment.
Current report — wording carried from elsewhere
The Company experienced triggering events in 2023 due to lower-than-expected revenue for each segment, prompting impairment assessments of goodwill as of November 30, 2023.