Starco Brands, Inc.
For the period ended Jun 30, 2025. Filed Aug 14, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 14, 2025
STCBStored price and day change unavailable
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-20.
0001641172-25-011687
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-14.
0001641172-25-023891
Item 2. 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 128 previous paragraphs and 149 current paragraphs.
104 unchanged; 18 reworded; 26 added; 6 removed; 0 previous and 1 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 (26)
Current report
Revenue for the three months ended June 30, 2025, was $10,586,121, representing a 24% decrease, or $3,423,586, compared to $14,009,707 in the same period of 2024. The decrease was primarily due to lower product sales of Soylent, driven by inventory constraints that limited our ability to accept and fulfill orders.
Current report
Related party revenue totaled $421,379 for the three months ended June 30, 2025, reflecting a 55% decrease, or $519,848, compared to $941,227 in the prior-year period. The decline was primarily driven by lower royalty income received during the current quarter.
Current report
Compensation expense was $1,661,971 for the three months ended June 30, 2025, representing a 32% decrease, or $773,977, compared to $2,435,948 in the same period of 2024. The reduction was primarily due to workforce reductions undertaken by the Company during the second half of 2024.
Current report
Professional fees totaled $911,927 for the three months ended June 30, 2025, representing a 20% decrease, or $228,865, from $1,140,792 in the prior-year period. These fees primarily reflect costs related to contractors, consultants, accounting, auditing, legal, advisory, and valuation services, which support business operations, merger activity, and quarterly public company reporting. The reduction in expense was primarily driven by lower consulting and contractor service costs during the current period.
Current report
No fair value share adjustment was recorded for the three months ended June 30, 2025, compared to a loss of $8,675,565 in the same period of 2024. The absence of an adjustment reflects the full settlement of the outstanding liability to Soylent shareholders in May 2025.
Current report
Total other expense for the three months ended June 30, 2025, was $494,694, compared to $493,535 in the same period of 2024. The increase was driven by higher interest expense, which rose to $257,538 from $208,976, and decreased other expense, which totaled $237,156, down from $284,559 in the prior-year quarter.
Current report
Net Loss
Current report
Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024
Current report
Revenues
Current report
Revenue for the six months ended June 30, 2025, was $20,404,878, representing a 24% decrease, or $6,534,020, compared to $26,938,898 in the same period of 2024. The year-over-year decline was primarily driven by reduced product sales of Soylent, resulting from inventory constraints that limited our capacity to accept and fulfill customer orders.
Current report
Revenues, related parties
Current report
Operating Expenses
Current report
Professional fees totaled $1,692,151 for the six months ended June 30, 2025, a 28% decrease, or $644,759, from $2,336,910 in the same period of 2024. These fees primarily relate to contractor services, as well as accounting, auditing, legal, advisory, consulting and valuation services supporting ongoing operations, merger activities, and quarterly reporting requirements as a public company. The decline was mainly driven by a reduction in consulting and contractor services during the current period.
Current report
For the six months ended June 30, 2025, marketing, general and administrative expenses totaled $6,578,307, a decrease of $3,258,324, or 33%, compared to $9,836,631 for the same period in 2024. The year-over-year reduction was primarily driven by lower royalty costs and the termination of several vendor services, implemented as part of a broader cost-savings initiative.
Current report
Other Expense
Current report
Total other expense for the six months ended June 30, 2025, was $1,053,526, compared to $769,487 in the same period of 2024. The year-over-year increase was primarily driven by a rise in interest expense, which increased to $494,174 from $408,149 in the prior-year period, and a higher level of other expense, totaling $559,352 in 2025 compared to $361,338 in 2024.
Current report
Net Loss
Current report
For the six months ended June 30, 2025, we reported a net income of $28,839, representing a significant improvement compared to the net loss of $16,022,160 for the same period in 2024. The year-over-year reduction was primarily driven by a fair value gain of $3,692,529 related to share-based adjustments recognized in the current period. The prior-year results were negatively impacted by a loss of $10,597,514, associated with changes in the fair value of stock payable to Soylent stockholders, as well as the changes described above.
Current report
Gibraltar Loan and Security Agreement – Revolving Loan
Current report
As of June 30, 2025, 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 and its lender entered into an amendment and waiver to the Loan and Security Agreement, waiving (i) specified defaults therein, (ii) allowing additional permitted liens relating to the Company’s credit cards and credit card processing services as set forth therein, and (iii) adjusting certain financial and reporting covenants. Additionally, the Company and its lender entered into a forbearance agreement, effective July 18, 2025, with its lender related to its revolving loan facility (the “Forbearance Agreement”). The Forbearance Agreement acknowledges the existence of certain continuing Events of Default and provides that, subject to specified conditions, the lender will forbear from exercising remedies related to those defaults through September 16, 2025. The forbearance period may be extended to October 16, 2025 and November 15, 2025, respectively, if the Company meets minimum EBITDA thresholds of $300,000 for the periods ending July 31, 2025 and August 31, 2025. The Forbearance Agreement does not constitute a waiver of any defaults, and the lender reserves all rights and remedies under the loan documents.
Current report
Management has evaluated the principal conditions that initially gave rise to substantial doubt regarding our ability to continue as a going concern. 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.
Current report
As of June 30, 2025, total debt on the balance sheet was approximately $7.0 million, which includes $2,472,500 in notes payable to Ross Sklar (“Sklar”), a significant minority shareholder. Mr. Sklar’s ownership interest provides an incentive to be supportive of the Company regarding repayment of the notes, as has occurred in prior periods (see Note 9). In addition, on July 18, 2025, the Company and its lender entered into a forbearance agreement (the “Forbearance Agreement”) related to its revolving loan facility. The Forbearance Agreement acknowledges the existence of certain continuing Events of Default and provides that, subject to specified conditions, the lender will forbear from exercising remedies related to those defaults through September 16, 2025.
Current report
To address these conditions, management intends to pursue alternative financing sources to enhance liquidity, provide additional working capital, and support repayment of existing debts, if necessary. In support of these objectives, management will continue to pursue strategic initiatives aimed at increasing top-line revenue in the most profitable sales channels across all segments and to reduce overall expenses as a percentage of revenue. Improvements to date have and are expected to continue to result from operational synergies gained through the Company’s back-end shared services model and focus on profitable sales channels.
Current report
Despite these plans and the temporary relief provided by the Forbearance Agreement, the conditions described above continue to raise substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that may result from the resolution of these uncertainties.
Current report
Working Capital Deficit
Current report
Net cash provided by operating activities was $101,258 for the six months ended June 30, 2024 and was primarily due to the impact of the net loss for the six month period, offset by loss on stock payable share adjustment of $10,597,514, an increase in accounts payable and other payables/accrued liabilities of $4,931,205 and a decrease in accounts receivable of $580,189.
Removed paragraphs (6)
Previous report
For the three months ended March 31, 2025, we recorded revenues of $9,818,757, compared to $12,929,191 for the three months ended March 31, 2024 for a decrease of $3,110,434 or 24%. The decrease in the current period was largely due to lower products sales from both Soylent and Skylar as compared to the prior year period.
Previous report
For the three months ended March 31, 2025, our professional fees totaled $780,224, representing a decrease of $415,894 or 35%, compared to $1,196,118 in the prior period. 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 recruiting fees, legal fees and accounting/audit fees in the current year period.
Previous report
For the three months ended March 31, 2025, we had total other expense of $558,832 compared to other expense of $275,952 for the three months ended March 31, 2024. For the three months ended March 31, 2025, the Company had interest expense of $236,636 compared to interest expense of $199,173 for the three months ended March 31, 2024. For the three months ended March 31, 2025, the Company had other expense of $322,196 compared to other expense of $76,779 for the three months ended March 31, 2024.
Previous report
Net Income (Loss)
Previous report
Working Capital Surplus Deficit
Previous report
Net cash provided by operating activities was $839,143 for the three months ended March 31, 2025 and was primarily due to a decrease in accounts receivable of $3,099,686, stock-based compensation of $471,236 and amortization of intangible assets of $704,508, offset by an increase in prepaid expenses and other assets of $1,936,521 and a gain on stock payable share adjustment of $3,692,529.
Reworded paragraphs (18)
Previous wording
STCB and its subsidiarieshad 29 full-time employees as of March 31, 2025 and used independent contractors, consultants and contributed services from related parties on an as needed basis.
Current wording
STCB and its subsidiaries had 29 full-time employees as of June 30, 2025 and used independent contractors, consultants and contributed services from related parties on an as needed basis.
Previous wording
For the three months ended March 31, 2025, our marketing, general and administrative expenses amounted to $3,384,418, reflecting a decrease of $1,931,535 or 36%, compared to $5,315,953 for the three months ended March 31, 2024. The decline in expenses for the current period is primarily due to reduced royalty costs and the discontinuation of several vendor services as part of a broader cost-saving initiative.
Current wording
Marketing, general and administrative expenses totaled $3,193,889 for the three months ended June 30, 2025, a 29% decrease, or $1,326,789, compared to $4,520,678 in the same period of 2024. The reduction primarily reflects lower royalty costs and the elimination of several vendor services as part of a broader cost-reduction initiative implemented during the current period.
Previous wording
For the three months ended March 31, 2025, we reported a net income of $1,976,105, a significant improvement from the $4,270,556 net loss recorded in the same period of 2024. This reduction is attributed to the change in fair value adjustment from the prior year of $5,614,478, as well as prior-period impacts, which include a loss from changes in the fair value of stock payable to Soylent Stockholders and higher expenses related to the acquisitions of AOS, Skylar, and Soylent.
Current wording
For the three months ended June 30, 2025, we reported a net loss of $1,850,017, representing a substantial improvement compared to the net loss of $11,559,482 recorded in the same period of 2024. The year-over-year reduction was primarily attributable to non-recurring prior-period impacts, including an $8,675,565 loss from changes in the fair value of stock payable to Soylent stockholders as well as the changes described above.
Previous wording
For the three months ended March 31, 2025, we recorded related party revenues of $1,050,312 compared to $2,310,196 for the three months ended March 31, 2024 for a decrease of $1,259,884 or 55%. This decline was primarily driven by lower royalties received during the current period.
Current wording
For the six months ended June 30, 2025, we generated related party revenues of $1,471,691, reflecting a 55% decrease, or $1,779,732, from $3,251,423 in the same period of 2024. This decline was primarily attributable to a reduction in royalties received during the current period.
Previous wording
For the three months ended March 31, 2025, our compensation expense amounted to $1,736,188, reflecting a decrease of $838,540 or 33%, compared to $2,574,728 for the three months ended March 31, 2024. This decline is primarily attributable to workforce reductions implemented by Soylent in the second half of 2024, as well as the absence of bonus awards in fiscal year 2025.
Current wording
Compensation expense totaled $3,398,159 for the six months ended June 30, 2025, representing a 32% decrease, or $1,612,517, compared to $5,010,676 in the prior-year period. The decline primarily reflects workforce reductions implemented by the Company during the second half of 2024, as well as the absence of bonus awards in the first quarter of fiscal year 2025.
Previous wording
For the three months ended March 31, 2025, the Company incurred a change in fair value share adjustment gain of $3,692,529, compared to a loss on fair value share adjustment of $1,921,949 in the three months ended March 31, 2024; this was due to a decrease in the fair value of the Soylent sellers’ rights to potentially receive additional Starco shares.
Current wording
For the six months ended June 30, 2025, there was a gain on fair value share adjustment of $3,692,529, compared to a loss of $10,597,514 for the six months ended June 30, 2024. This was due to a decrease in the fair value of the Soylent sellers’ rights to potentially receive additional Starco shares.
Previous wording
As reflected in the accompanying condensed consolidated financial statements, we have an accumulated deficit of $79,541,501 at March 31, 2025. We used $293,307 in cash from financing activities for the three months ended March 31, 2025, primarily due to $268,397 of net payments toward the revolving loan and $24,910 in payments on notes payable. Our net cash used in financing activities was $763,219 for the three months ended March 31 2024, due primarily to payments on the line of credit and notes payable of approximately $876,000, offset by proceeds from notes payable of approximately $113,000.
Current wording
As reflected in the accompanying condensed consolidated financial statements, we have an accumulated deficit of $81,391,518 at June 30, 2025. We generated $693,062 in cash from financing activities for the six months ended June 30, 2025, primarily due to $362,194 of net proceeds from the revolving loan and $330,868 in net proceeds from notes payable. Our net cash provided by financing activities was $206,614 for the six months ended June 30, 2024, due primarily to proceeds from the Gibraltar revolving loan and insurance notes payable of approximately $6,200,000, offset by the payoff of the prior line of credit and payments toward the Sklar notes, the revolving loan and notes payable of approximately $5,800,000.
Previous wording
Our net cash provided by operating activities was $839,143 for the three months ended March 31, 2025 compared to $822,453 for the three months ended March 31, 2024. Operating expenses for the three months ended March 31, 2025 were $2,208,301, including items such as marketing, advertising and administrative costs, consultant compensation, gain on share fair value adjustment, insurance, legal and other professional fees, stock based compensation, compliance, website maintenance and investor relations. Operating expenses for the three months ended March 31, 2024 were $11,008,748, including items such as marketing and administrative costs, consultant compensation, loss on share fair value adjustment, insurance, legal and other professional fees, compliance and website maintenance.
Current wording
Our net cash used in operating activities was $859,889 for the six months ended June 30, 2025 compared to net cash provided of $124,729 for the six months ended June 30, 2024. Operating expenses for the six months ended June 30, 2025 were $7,976,088, including items such as marketing, advertising and administrative costs, consultant compensation, gain on share fair value adjustment, insurance, legal and other professional fees, stock based compensation, compliance, website maintenance and investor relations. Operating expenses for the six months ended June 30, 2024 were $27,781,731, including items such as marketing and administrative costs, consultant compensation, loss on share fair value adjustment, insurance, legal and other professional fees, compliance and website maintenance.
Previous wording
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 March 31, 2025, 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 $3,649,559 with a debt discount of $219,575, for a net balance of $3,429,984, with interest expense on the loan for the three months ended March 31, 2025 of $59,312.
Current wording
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.
Previous wording
The audited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q 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 $79,541,501 at March 31, 2025 including the impact of its net income of $1,976,105 for the three months ended March 31, 2025 and a working capital deficiency of approximately $11.2 million at March 31, 2025. 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 $5,928,057 on the balance sheet as of March 31, 2025 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. Management plans include, (i) continuing to increase net cash provided by operating activities, which was $839,143 for the three months ended March 31, 2025, 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 condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
Current wording
The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q 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 contributing to substantial doubt regarding the Company’s ability to continue as a going concern include its history of recurring net losses and continued working capital deficiencies. As of June 30, 2025, the Company reported an accumulated deficit of $81,391,518, which includes net loss of $1,850,201 and net income of $125,904 for the three and six months ended June 30, 2025, respectively. Additionally, the Company had a working capital deficit of approximately $6.3 million at June 30, 2025.
Previous wording
The decrease in current assets is primarily due to a decrease in accounts receivable of $3,099,686, offset by an increase in prepaid expenses and other assets of $1,936,521. The decrease in current liabilities is primarily the result of a decrease in fair value of share adjustment of $3,692,529.
Current wording
The decrease in current assets is primarily due to a decrease in accounts receivable of $2,321,089, offset by an increase in prepaid expenses and other assets of $1,601,476. The decrease in current liabilities is primarily the result of a decrease in fair value of share adjustment of $9,299,703.
Previous wording
Net cash provided by operating activities was $822,453 for the three months ended March 31, 2024 and was primarily due to the loss on stock payable share adjustment of $1,921,949, a decrease in accounts receivable of $1,769,887, an increase in accounts payable of $827,692, and a decrease in prepaid expenses and other assets of $590,876, which was partially offset by an increase in inventory of $585,128 and a decrease in other payables and accrued liabilities of $824,939.
Current wording
Net cash used in operating activities was $859,889 for the six months ended June 30, 2025 and was primarily due to the impact of the net loss for the six month period, a gain on stock payable share adjustment of $3,692,529 and a decrease in accounts payable of $1,117,059, offset by a decrease in accounts receivable of $2,321,089, an increase in other payables and accrued liabilities of $835,130 and amortization of intangible assets of $1,423,588.
Previous wording
Net cash used in investing activities was $128,350 for the three months ended March 31, 2025 and was due to the purchase of property and equipment and intangibles.
Current wording
Net cash used in investing activities was $130,951 for the six months ended June 30, 2025 and was due to the purchase of property and equipment and intangibles.
Previous wording
Net cash used in investing activities was $53,499 for the three months ended March 31, 2024 and was due to the purchase of property and equipment and intangibles.
Current wording
Net cash used in investing activities was $82,049 for the six months ended June 30, 2024 and was due to the purchase of property, equipment and intangibles.
Previous wording
For the three months ended March 31, 2025 net cash used in financing activities was $293,307, which includes net payments of $268,397 on the revolving loan and payments of $24,910 on notes payable.
Current wording
For the six months ended June 30, 2025, net cash provided by financing activities was $693,062, which includes net proceeds of $362,194 on the revolving loan and net proceeds of $330,868 on a notes payable.
Previous wording
For the three months ended March 31, 2024 net cash used in financing activities was $763,219, which primarily includes payments of $876,357 on the line of credit and notes payable, which was partially offset by proceeds of $113,138 from notes payable.
Current wording
For the six months ended June 30, 2024 net cash provided by financing activities was $206,614, which primarily includes payments of approximately $5.8 million on the line of credit and notes payable, offset by proceeds of approximately $6.2 million from the revolving loan and notes payable.
Previous wording
No impairment losses related to goodwill were recognized for the three months ended March 31, 2025 and 2024.
Current wording
No impairment losses related to goodwill were recognized for the six months ended June 30, 2025 and 2024.
Previous wording
There were no impairment losses related to long-lived assets for the three months ended March 31, 2025 and 2024.
Current wording
There were no impairment losses related to long-lived assets for the six months ended June 30, 2025 and 2024.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
As of June 30, 2025, the balance of the revolving loan was $4,280,150 with a debt discount of $172,523, for a net balance of $4,107,627, with interest expense on the loan for the six months ended June 30, 2025 of $277,408.