NOTE 9 – RELATED PARTY TRANSACTIONS

During the year ended December 31, 2017, Sanford Lang, the Company’s former Chairman and CEO, advanced $289,821 to STCB to cover general operating expenses. The advance carried a monthly interest payment of $2,545 and was payable on demand. In June 2021, Mr. Lang and Mr. Martin Goldrod, a former Board member and the Company’s Secretary, entered into agreements with STCB under which the advance from Mr. Lang, along with all other amounts owed to both parties, were fully repaid. Following this, both Mr. Lang and Mr. Goldrod resigned from the Board.

As part of the agreements, STCB repurchased shares from Mr. Lang and Mr. Goldrod at a rate of $10,950 per month. The purchase price for these shares was determined based on the volume-weighted average trading price of the common stock over the last 10 trading days of each month. During the years ended December 31, 2023, and December 31, 2022, STCB paid an aggregate of $131,400 in each year to Mr. Lang and Mr. Goldrod. By December 31, 2023, the Company completed the final repurchase of 1,862,154 shares valued at $328,500. The share repurchases are recorded as treasury stock payable on the balance sheet. The aforementioned agreements have since been terminated and are no longer in effect

Ross Sklar, CEO Notes

On August 11, 2023, the Company issued to Sklar a consolidated secured promissory note (the “Consolidated Secured Promissory Note”) in the principal sum of $4,000,000, with a maturity date of December 31, 2024. The Consolidated Secured Promissory Note carries a floating interest rate comprised of the Wall Street Journal Prime Rate (re-assessed on the first date of each month (plus 2%), and is secured by an amended and restated consolidated security agreement (the “Amended and Restated Consolidated Security Agreement”), by and between the Company and Sklar, dated August 11, 2023, The Consolidated Secured Promissory Note consolidated the outstanding loan obligations of the Company to Sklar evidenced pursuant to (i) the January 24, 2020 Amended Note, (ii) the June 28, 2021 Note, (iii) the September 17, 2021 Note, (iv) the December 13, 2021 Note, (v) the December 29, 2022 Note, and (vi) the March 3, 2023 Note, as summarized in the table below. The Amended and Restated Consolidated Security Agreement merged and integrated the December 29, 2022 Security Agreement and the March 3, 2023 Security Agreement, and provides a security interest in the Collateral (as defined in the Amended and Restated Consolidated Security Agreement) to secure the repayment of all principal, interest, costs, expenses and other amounts then or thereafter due under the Consolidated Secured Promissory Note until by the maturity date. Sklar was authorized to file financing statements to perfect the security interest in the Collateral without authentication by the Company. The following table represents Prior Notes that were part of the restructuring and related prior and updated terms (under the Consolidated Secured Promissory Note):

SCHEDULE OF DEBT 

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.

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 under it.

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. For 2023, this total includes the February 14, 2022 Note.

Loan and Security Agreement – Related Party

On May 24, 2024, the Company entered into the Loan and Security Agreement, which allowed the Company to reduce long-term debt and expand its access to working capital (see Note 6). In connection with the Loan and Security Agreement, the Lender required Mr. Sklar to enter into a subordination agreement pursuant to which Mr. Sklar’s rights under (i) the February 14, 2022 Note, as amended and (ii) the Consolidated Secured Promissory Note would be subordinated to the lender’s rights under the Loan and Security Agreement.

In exchange for the subordination of and the maturity extension reflected in the Amended Consolidated Secured Promissory Note, $2,000,000 of the revolving loan available cash under the Loan and Security Agreement was used to repay the February 14, 2022 Note in its entirety and to pay down the interest and a portion of principal balance on the Amended Consolidated Secured Promissory Note. As of December 31, 2024 and 2023, the outstanding principal due to Mr. Sklar under outstanding notes was $2,472,500 and $4,472,500, respectively. As of December 31, 2024 and December 31, 2023, there was no accrued interest due on these notes.

For the years ended December 31, 2024 and 2023, the outstanding notes held by Mr. Sklar incurred interest expense of $328,207 and $393,715, respectively.

Operating Lease – Related Party

On May 1, 2024, the Company entered into the Citrus Lease with a lessor who is a related party (see Note 3 and Note 13 for additional information) for the rental of the second and third floors of a premise containing approximately 3,000 square feet located at 706 N. Citrus Ave, Los Angeles, CA 90038. The lease was classified as an operating lease and has a monthly base rent of $10,000 per month, with a base rent increase of 5% each year. There is an option for the Company to renew for an additional three years with notice given within 90 days before the end of the term.

In accordance with ASC 842 - Leases, the Company recognized an ROU asset and corresponding lease liability for $587,914 on the consolidated balance sheet for long-term office leases, as well as lease expense of $90,692 for the year ended December 31, 2024. See Note 13 – Leases for further discussion, including the impact on the consolidated financial statements and related disclosures.

Other Related Party Transactions

During the years ended December 31, 2024 and 2023, the Company recognized revenue from related parties of $6,140,172 and $11,696,722, respectively. There were $2,250,379 and $2,742,508 of accounts receivable and accrued accounts receivable from TSG and Temperance as of December 31, 2024 and December 31, 2023, respectively. All revenues earned in relation to these accounts receivable are from related parties. Ross Sklar serves as the Chairman of Temperance.

During the years ended December 31, 2024 and 2023, the Company recognized cost of goods from products purchased from related parties of $3,896,551 and $2,688,160, respectively. There were $1,658,188 and $168,870 of accounts payable owing to TSG and other related parties as of December 31, 2024 and December 31, 2023, respectively.

During the years ended December 31, 2024 and 2023, the Company received contributed services at a value of approximately $0 and $334,572 (approximately $270,567 of stock compensation for shares vesting to advisors), respectively. These costs are expensed and recorded as additional paid-in capital in the period the services are provided.