What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-04-18 compared with 2022-04-15 · 45 added, 78 removed, 53 unchanged (70% of the section changed)

11 unchanged sentences

than 50 key, international markets.

the year ended December 31, 2021, our expanded business activities generated revenue of $2,923,269.

In 2020, we completed phase one and

two of our development of all HUSTLER®-branded products, which enabled us to generate revenue of $1,732,625 during the year ended

December 31, 2020, related to our 2019 five-year manufacturing and distribution agreement with an unrelated party to manufacture, distribute,

the year ended December 31, 2022, our business activities generated revenue of $1,719,358.

In 2020, we completed phase one and two of

our development of all HUSTLER®-branded products, which enabled us to generate revenue of $2,923,269 during the year ended December

31, 2021, related to our 2019 five-year manufacturing and distribution agreement with an unrelated party to manufacture, distribute,

and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using the HUSTLER®

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and Cost of Sales

had revenues of $2,923,269 and $1,732,625 during the years ended December 31, 2021 and 2020, respectively.

Revenues during the years

ended December 31, 2021 and 2020, were derived from the design, manufacture, and delivery of certain licensed products in accordance

with our GloBrands-HUSTLER® distribution agreement.

Costs of sales were $1,024,444, or 35% of revenue, and $896,273, or 51% of revenue,

during 2021 and 2020, respectively.

The improved margin in the latter year reflects production and purchasing efficiencies as our operations

the year ended December 31, 2021, selling, general, and administrative expenses and employee costs were approximately $2,139,000, as

compared to approximately $758,000 for the same period in 2020, an almost three-fold increase because of increased operations in 2021

from executing our business plan.

We had revenues of $1,719,358 and $2,923,269 during

the years ended December 31, 2022 and 2021, respectively, a decrease of $1,203,911 or 41.2%.

We had cost of sales of $696,548 and $1,024,444,

respectively, for gross profit of $1,022,810 and $1,898,825, respectively.

Revenues are derived from the design, manufacture, and delivery

of certain licensed products in accordance with our GloBrands-HUSTLER® distribution agreement.

The decrease in revenue in the current

period is due to a decrease in the sale of Vape products in California due to their ban on flavored tobacco.

During the year ended December 31, 2022, selling,

general, and administrative expenses and employee costs were approximately $1,596,000, as compared to approximately $2,127,000 for the

same period in 2021, a decrease of $531,000 or 25%.

Selling, general, and administrative expenses were $1,004,003 and $1,630,592, respectively,

a decrease of $626,589 or 38.4%.

The decrease in operating expenses period over period is the result of substantially increased activities

attributable to the development of products under the HUSTLER® brand name and selling certain tobacco products in states with lower

or no excise tax in the first quarter.

We also recognized a accrued tax liability expense in the current year of $50,888.

Income and Expense

Other income and expenses during the year ended December

31, 2022, consisted of interest expense of approximately $709,000 and a loss on the fair value of derivative liabilities of approximately

income and expenses during the year ended December 31, 2021, consisted of interest expense of approximately $680,000, loss on the fair

value of derivative liabilities of approximately $16,000, gain on forgiveness of debt of approximately $13,000, gains on the write-off

of accounts payable of approximately $1.2 million and other income of approximately $1,000.

Other income and expenses during the year

ended December 31, 2020, consisted of interest expense of approximately $658,000, a loss of disposal of equipment of approximately $10,000,

losses of the fair value of derivative liabilities of approximately $23,000, gains on the write-off of accounts payable of approximately

$1.0 million, and other income of $42,000.

a result of the foregoing, we had a net profit from continuing operations of approximately $267,000 during the year ended December

31, 2021, as compared to $453,000 during the year ended December 31, 2020.

of accounts payable of approximately $72,000 and other income of approximately $1,000.

a result of the foregoing, we had a net loss of approximately $1,349,000 from continuing operations, as compared to $838,000 in the prior

and Capital Resources

had a history of losses from operations prior to 2020, as our expenses had been greater than our revenues, which had ceased entirely

several years earlier.

Our accumulated deficit was approximately $77.8 million at December 31, 2021.

For the year ended December 31,

2021, we used approximately $103,000 of cash in operating, investing, and financing activities, compared to generating cash of approximately

$108,000 for the prior year from operating and financing activities.

the year ended December 31, 2021, we generated approximately $345,000 of net cash in operations, comprised of net income from continuing

operations of approximately $114,000, income from discontinued operations of approximately $153,500, noncash expenses of approximately

$1.1 mil, and changes in working capital of approximately $1.1 mil.

The net change in working capital was primarily driven by increase

in accrued interest of approximately $574,000, accounts payable of approximately $540,000 and accrued payroll and compensation of approximately

the year ended December 31, 2020, we generated approximately $464,000 of net cash in operations, comprised of net income from continuing

operations of $452,000, noncash expenses of approximately $866,000, changes in working capital of approximately $1,000,000, and net cash

used in discontinued operations of approximately $115,000.

The net change in working capital was primarily driven by accrued interest

of approximately $543,000 and accrued liabilities of approximately $640,000.

have had a history of losses from operations, as our expenses have been greater than our revenue.

Our accumulated deficit is approximately

$79.3 million at December 31, 2022.

During the year ended December 31, 2022, operations

generated $159,304 of net cash, comprised of a loss from continuing operations of $1,502,091, noncash items totaling $337,367 consisting

primarily of losses recognized from the changes in fair values of derivative liabilities, debt discount amortization and discontinued

Changes in working capital totaled $1,273,140.

During the year ended December 31, 2021, operations generated $344,458 of net

cash, comprised of income from continuing operations of $126,212, a $964,685 loss from discontinued operations and other noncash items

totaling $51,373.

Changes in working capital of approximately $1.1 mil.

the year ended December 31, 2022, we used approximately $147,000 of net cash from financing activities mainly comprised of repayments

on related-party loans that totaled $448,000 and proceeds from non-related-party loans of $5,000.

the year ended December 31, 2020, we used $337,520 of net cash from financing activities mainly comprised of repayments on related-party

loans that totaled $467,409 and proceeds from non-related-party loans of $156,000.

on related-party loans that totaled $155,000 and proceeds from related-party loans of $8,000.

During the year ended December 31, 2021,

we used approximately $443,000 of net cash from financing activities mainly comprised of repayments on related-party loans that totaled

$448,000 and proceeds from non-related-party loans of $5,000.

Capital Resources and Anticipated Requirements

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with a maturity date of April 30, 2027, to the extent not previously converted.

The amended debenture had a total outstanding principal

The amended debenture has a total outstanding principal

balance of $2.4 million, with accrued interest of $1.7 million as of December 31, 2022.

5 unchanged sentences

as well as making repayments on related-party loans of $154,832 and $448,335 during the years ended December 31, 2022 and 2021, respectively.

Additionally, related parties paid expenses on our behalf of $1,940 during the years ended December 31, 2020.

The advances are non-interest-bearing,

due on demand, and are included in current liabilities.

Accounting Policies

methods, estimates, and judgments we use in applying our accounting policies have a significant impact on the results we report in our

financial statements, which we discuss under the heading “Results of Operations” in this Item 7.

Some of our accounting policies

require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently

set forth below those material accounting policies that we believe are the most critical to an investor’s understanding of our

financial results and condition and that require complex management judgment.

preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements

and the reported amount of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

filings with the Securities and Exchange Commission include, when applicable, disclosures of estimates, assumptions, and uncertainties

that could affect the financial statements and our future operations.

Value of Financial Instruments

carrying amounts reflected in the balance sheets for cash, accounts payable, and related-party payables approximate the respective fair

values due to the short maturities of these items.

We do not hold any investments that are available-for-sale.

Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements

and Disclosures , defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about

fair value measurements.

ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered

observable and the last unobservable, that may be used to measure fair value, which are the following:

inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date

inputs are quoted for similar assets or inputs that are observable, either directly or indirectly, for substantially the full term

through corroboration with observable market data.

Level 2 includes assets or liabilities valued at quoted prices adjusted for legal

or contractual restrictions specific to these investments.

inputs are unobservable for the assets or liabilities;

that is, the inputs reflect the reporting entity’s own assumptions about

the assumptions market participants would use in pricing the asset or liability.

do not currently have any financial instruments that we measure at fair value.

Issued Accounting Pronouncements

issued accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that require adoption and

that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

to Note 2 of our financial statements contained elsewhere in this Form 10-K for a summary of our critical accounting policies and recently

adopting and issued accounting standards.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

item is not applicable as we are currently considered a smaller reporting company.

are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information

under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis