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 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 March 31, 2026 and December 31, 2025, the outstanding principal balance owed to Mr. Sklar under the amended note was $3,472,500 as of both dates. Interest expense related to notes held by Mr. Sklar was $84,921 and $59,312 for the three months ended March 31, 2026 and 2025, respectively.

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 March 31, 2026 and December 31, 2025, the outstanding principal balance under the Bridge Loan was $4,362,500 and $4,500,000, respectively, and interest expense related to the loan was $137,500 and $0 for the three months ended March 31, 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 March 31, 2026 and 2025, respectively. See Note 12 – Leases for additional information.

Other Related Party Transactions

During the three months ended March 31, 2026 and 2025, the Company recognized revenue from related parties of $283,158 and $1,050,312, respectively. There were no accounts receivable or accrued accounts receivable from TSG or Temperance as of March 31, 2026 or December 31, 2025. All revenues associated with these balances were generated from related parties. Temperance is chaired by Ross Sklar.

During the three months ended March 31, 2026 and the year ended December 31, 2025, the Company recorded related party advances of $806,549 and $487,599, 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 March 31, 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 three months ended March 31, 2026 and 2025, the Company’s Winona segment purchased finished goods inventory of approximately $786,279 and $1,060,349, respectively, from TSG and Temperance, both related parties. As of March 31, 2026 and December 31, 2025, accounts payable owing to TSG, Temperance and other related parties were $1,568,687 and $1,238,693, respectively.