NOTE 9 – RELATED PARTY TRANSACTIONS

Former Executives

In prior years, the Company entered into agreements with its former Chairman and CEO, Sanford Lang, and its former Secretary and Board member, Martin Goldrod, relating to advances and share repurchases. All obligations under these agreements were fully settled by December 31, 2023, and the agreements were terminated. No amounts were owed to either party as of December 31, 2025 or December 31, 2024.

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 note bears interest at the Wall Street Journal Prime Rate plus 2 percent, reassessed monthly, and is secured by substantially all assets of the Company pursuant to an Amended and Restated Consolidated Security Agreement. On May 31, 2024, the Company and Mr. Sklar entered into an amendment extending the maturity date 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 using proceeds from the Gibraltar Loan. As of December 31, 2024, the outstanding principal balance under the Amended Consolidated Secured Promissory 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 Amended Consolidated Secured Promissory 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 note was adjusted to $3,472,500. The Second Amendment reaffirmed that the note remains subject to the 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 Amended Consolidated Secured Promissory Note, including interest rate, repayment provisions, and maturity, remained unchanged.

As of December 31, 2025, the outstanding principal balance owed to Mr. Sklar under the amended note was $3,472,500. Interest expense related to notes held by Mr. Sklar was $286,144 and $328,207 for the years ended December 31, 2025 and 2024, respectively.

The Company previously issued an unsecured note to Mr. Sklar on February 14, 2022 in the principal amount of $472,500. The note was amended on May 10, 2024 to extend its maturity to December 31, 2024 and was fully repaid during 2024 using proceeds from the Gibraltar Loan. No amounts were outstanding under this note as of December 31, 2025 or December 31, 2024.

Gibraltar Loan and Security Agreement – Subordination

In connection with the Company’s Loan and Security Agreement with Gibraltar Business Capital, LLC, on May 24, 2024, Mr. Sklar entered into a subordination agreement pursuant to which his rights under the Amended Consolidated Secured Promissory Note and the February 14, 2022 Note were subordinated to Gibraltar’s rights. The subordination agreement remained in effect throughout 2025 and terminated upon the Company’s repayment of the Gibraltar Loan in December 2025

Related Party Bridge Loan – The Starco Group, Inc.

On December 22, 2025, the Company entered into a Bridge Term Loan Promissory Note with TSGI, a company wholly owned by Ross Sklar, the Company’s Chief Executive Officer. The Promissory Note 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 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 loan at any time without penalty. The loan matures on the earlier of (i) five years from issuance, (ii) acceleration upon default, or (iii) full repayment.

As of December 31, 2025, the outstanding principal balance under the Bridge Loan was $4,500,000.

Related Party Lease

On May 1, 2024, the Company entered into an operating lease for office space with 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 $90,692 for the year ended December 31, 2024 and $136,038 for the year ended December 31, 2025. See Note 13 – Leases for additional information.

Other Related Party Transactions

During the years ended December 31, 2025 and 2024, the Company recognized revenue from related parties of $3,164,581 and $6,140,172, respectively. There were $0 and $2,250,379 of accounts receivable and accrued accounts receivable from TSG and Temperance as of December 31, 2025 and December 31, 2024, respectively. All revenues earned in relation to these accounts receivable are from related parties. Ross Sklar serves as the Chairman of Temperance.

During the year ended December 31, 2025, the Company recorded related party advances of $487,600, which are included in accrued liabilities and other current liabilities on the consolidated balance sheet. Of the total, $100,000 was advanced by Ross Sklar to pay for certain expenses related to Whipshots; 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. No such advances were made during the year ended December 31, 2024.

During the years ended December 31, 2025 and 2024, the Company recognized cost of goods from products purchased from related parties of $3,249,562 and $3,896,551, respectively. There were $1,238,693 and $1,658,188 of accounts payable owing to TSG and other related parties as of December 31, 2025 and December 31, 2024, respectively.