Endovia Health Sciences, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements and Notes to Audited Consolidated Financial Statements filed herewith. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties, and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Annual Report, and other factors that we may not know. Business Overview From 2020, we have been engaged in the beverage businesses, although we have not generated revenue since February 2025. The Company’s efforts to commercialize its beverage products as described under “Business”. In addition, the Company is pursuing potential strategic alternatives, including a potential acquisition as described above under “Business-Letter of Intent.” RESULTS OF OPERATIONS Our consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operation. Our results of operations reflect our continuing operations and reflect losses from discontinued operations related to the discontinuation of our Copa Di Vino businesses. All financial information has been restated to reflect our discontinued operations for all periods presented. 25 For the year ended December 31, 2025 compared with the year ended December 31, 2024 The following table sets forth our revenues, expenses and net loss for the years ended December 31, 2025 and 2024. For the Year Ended December 31, 2025 2024 Revenues $ 73,066 $ 801,273 Cost of goods sold (56,168 ) (921,070 ) Operating expenses (14,203,118 ) (9,780,643 ) Loss from operations (14,186,220 ) (9,900,440 ) Other income (expenses), net (10,163,051 ) (7,708,634 ) Income (loss) from continuing operations (24,349,271 ) (2,105,961 ) Loss from discontinued operations (885,563 ) (17,609,074 ) Net income (loss) (25,234,834 ) (17,609,074 ) Foreign currency translation gain (loss) (47,532 ) (6,147,477 ) Comprehensive loss $ (25,282,186 ) $ (23,756,551 ) Results of Operations for the Year Ended December 31, 2025, compared to Year Ended December 31, 2024. Revenue Revenues for the year ended December 31, 2025 were $0.07 million compared to revenues of $0.8 million for the year ended December 31, 2024. The $0.73 million decrease in sales primarily due to a shortage of operating capital which hindered our ability to obtain inventory and generate sales. The Company did not make any sales in the 2025 calendar year after March 2025 due to its lack of capital resources. The Company is seeking to raise at least $ 3 million in the fiscal year ending December 31, 2026 in order to re-establish portions of its prior business through the sale of tequila products. Cost of Goods Sold Cost of goods sold for the year ended December 31, 2025 were $0.06 million compared to cost of goods sold for the year ended December 31, 2024 of $0.29 million. The $0.23 million decrease in cost of goods sold was due to our decreased sales. The Company did not make any sales in the 2025 calendar year after March 2025 due to its lack of capital resources. Operating Expenses Operating expenses for the year ended December 31, 2025 were $14.2 million compared to $9.8 million for the year ended December 31, 2024. The increase in operating expenses was primarily due to an increase of approximately $8.6 million of Non-cash share-based compensation partially offset by decreased by a reduced contract services of $0.17 million and reduced salary and wages of $0.32 million and reduced sales and marketing of $0.4 million. The reductions in operational and general and administrative expenses related to our lack of sales activities in 2025 due to the lack of adequate capital. Other Income/(Expense) Other expenses for the year ended December 31, 2025 were $10.2 million compared to $7.7 million for the year ended December 31, 2024. The other expense increased of $2.5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. 26 During 2025, the Company recognized a $5.6 million loss on extinguishment of debt in connection with the exchange of certain outstanding loans, including principal and accrued interest totaling approximately $12.6 million, for preferred stock. This non-cash expense significantly contributed to the increase in other expense. Interest expense for the year ended December 31, 2025 was $2.6 million compared to $3.7 million for the year ended December 31, 2024, representing a decrease of approximately $1.8 million. The decrease was primarily attributable to the debt exchange transaction described above, which reduced outstanding borrowings and related interest obligations. Amortization of debt discount decreased from $3.7 million in 2024 to $1.9 million in 2025 due to the reduction in debt balances following the exchange transactions. In addition, the Company recorded a $0.5 million inventory write-off during 2025. These increases in expense were partially offset by the absence of a $0.3 million legal settlement reserve recorded in 2024 that did not recur in 2025. Discontinued Operations Due to the lack of working capital to fund operations, it formed a license agreement with a 3 rd party to allow the continued production and flow of product to the customers so that it could later be recovered as the funding challenges were then deemed as only temporary. As the lack of funding persisted through the full year of 2025 the company subsequently determined it no longer intends to relaunch the product line. As a result, accordingly, the Company has classified the related assets and liabilities associated with its CdV as discontinued operations in its consolidated balance sheets and the results of its logistics and transportation services business has been presented as discontinued operations in its consolidated statements of operations for all periods presented as the discontinuation of its business had a major effect on its operations and financial results. Unless otherwise noted, discussion in the other notes to consolidated financial statements refers to the Company’s continuing operations. The following table summarizes the results of operations of discontinued operations: Year Ended December 31, 2025 2024 Revenues $ 369,666 $ 3,353,935 Cost of revenues, excluding depreciation and amortization 416,913 2,878,688 Gross loss (47,247 ) 475,247 Operating expenses (669,760 ) (2,296,979 ) Impairment loss — (4,324,064 ) Other expenses (168,557 ) (1,681 ) Loss from discontinued operations $ (885,564 ) $ (6,147,477 ) LIQUIDITY AND CAPITAL RESOURCES Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. Due to our lack of capital, we did not generate any revenue between March 2025 and February of 2026. In order to generate material revenue, we require at least $3,000,000 of working capital in order to acquire inventory and re-commence minimal operations. This includes our plans for our Chispo business and general and administrative expenses. Our lack of cash resources has prevented us from carrying on our commercialization activities. In addition, our lack of working capital has prevented us from marketing our products. 27 In addition, we would need additional capital to acquire and fund the operations of any business we may acquire in a business combination in the future, including potentially Medterra if we can structure, negotiate and pursue a transaction under the Letter of Intent with that entity. See “Part I, Item 1-Business-Recent Developments-Letter of Intent” at page 2. See also Item 1A – “ Risk Factors”. We have historically raised capital to fund our operations and capital needs through the issuance of debt and equity securities. In August 2025, the Company issued convertible promissory notes with individuals in the aggregate principal amount of $424,560. These loans mature in May or June 2026 and have an interest rate of 22% per annum. In September 2025 we sold secured convertible promissory notes in the principal amount of $2,200,000 for total gross proceeds of $2,000,000, which notes do not bear any interest absent an event of default, and mature on September 22, 2026. In September 2025 we also entered into the ELOC Agreement which subject to certain conditions including obtaining and maintaining the registration of the shares on an effective registration statement allows us to access additional capital, we plan to access and deploy such capital to re-commence certain of our operations and to establish new operations as described in this Report. From January 27, 2026 through April 14, 2026, the Company has sold 4,840,254 shares under the ELOC Agreement for total gross proceeds of $1,917,709. The Company has recently been relying upon the ELOC Agreement as a source of liquidity. Its ability to generate material capital is in large part based on the future liquidity and the market price of our Common Stock. In November 2025, the Company borrowed $500,000 from two accredited investors and issued senior promissory notes with a combined original principal amount of $588,235, reflecting a 15% original issue discount. The notes mature on February 12, 2026, accrue interest at 6% starting 30 days after issuance, and include customary default provisions. The notes also permit the holders, at their discretion, to apply outstanding principal, accrued interest, and any Company securities they hold as consideration for participation in future equity, equity-linked, or debt financings. From June through December 2025, we raised a total of $1,300,000 from the sale of 1,300 shares of Series A-1 Convertible Preferred Stock (“Series A-1”), Class A Warrants to purchase 325,000 shares of Common Stock and Class B Warrants to purchase 325,000 shares of Common Stock. In December 2025, the Company entered into agreements to issue a total of 113,636 shares of Common Stock and 1,136 shares of Series D Convertible Preferred Stock to holders of options to purchase a total of up to $600,000 shares of Common Stock in exchange for the termination of such options. We intend to fund our future operations through the issuance of equity securities until such a time as our business achieves profitability. However, there can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. We will be required to pursue sources of additional capital through various means, including debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuance of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to pledge or relinquish valuable assets or rights on terms that may not be favorable to us and/or may reduce the value of our Common Stock. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible preferred stock and warrants, which will adversely impact our financial condition. Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to curtail or cease operations. 28 As such, we have concluded that such plans do not alleviate the substantial doubt about our ability to continue as a going concern for one year from the date the accompanying financial statements are issued. There is therefore substantial doubt about our ability to continue as a going concern. Because our Common Stock is listed on the NYSE American, we cannot issue any indebtedness while listed due to our negative stockholders’ equity as described in this Report. Further we need to raise material equity in order to complete the Medterra acquisition plan to use the ELOC to support our minimal working capital needs but that requires our stock to trade actively enough; otherwise the investor will sell any Common Stock we issue which will depress the price to a point where our Common Stock will automatically be delisted. As of April 14, 2026, the Company had total cash and cash equivalents of $732,307. Net cash used for continuing operating activities during the year ended December 31, 2025, was $4.8 million as compared to the net cash used by continuing operating activities for the year ended December 31, 2024, of $7.3 million. In 2025, we had a loss on debt extinguishment of $5.6 million arising from debt to equity exchanges, and non-cash share based compensation of $8.6 million related to warrants issued to our directors, officers and certain employees. Net cash provided by financing activities during the year ended December 31, 2025 was $5.1 million compared to $7.5 million provided from financing activities for the year ended December 31, 2024. The Company received $4.3 and $$9.5 million in proceeds from the issuance of debt in years ending December 31, 2025 and 2024, respectively. The Company received $1,300,000 and $0 in proceeds from the issuance of equity securities in years ending December 31, 2025 and 2024, respectively. Warrants Effective July 31, 2025, the Company issued 5,050,000 Warrants to its officers, directors and certain employees. As of April 14, 2026, our Board of Directors agreed to cancel the Warrants subject to each person as applicable agreeing to cancel them. As of the date of this Report, 1,350,000 Warrants held by former employees remain outstanding and all other Warrants have been canceled. The Company intends to pursue its remedies with respect to the remaining Warrants . Critical Accounting Estimates The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as the disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Revenue The Company faces significant judgment in revenue recognition due to the complexities of the beverage industry’s competitive landscape and diverse distribution channels. Determining the timing of revenue recognition involves assessing factors such as control transfer, returns, allowances, trade promotions, and distributor sell-through data. Historical analysis, market trends assessment, and contractual term evaluations inform revenue recognition judgments. However, inherent uncertainties persist, underscoring the critical nature of revenue recognition as it significantly impacts financial statements and performance evaluation. 29 Allowance for Doubtful Accounts The allowance for doubtful accounts is established based on historical experience, current economic conditions, and specific customer collection issues. Management evaluates the collectability of accounts receivable on an ongoing basis and adjusts the allowance as necessary. Changes in economic conditions or customer creditworthiness could result in adjustments to the allowance for doubtful accounts, impacting our reported financial results. Inventory Valuation We value inventory at the lower of cost or net realizable value. Estimating the net realizable value of inventory involves significant judgment, particularly when market conditions change rapidly or when excess or obsolete inventory exists. Management regularly assesses inventory quantities on hand, future demand forecasts, and market conditions to determine whether write-downs to inventory are necessary. Fair Value Measurements We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value measurements involve significant judgment and estimation, particularly when observable inputs are limited or not available. Management utilizes valuation techniques such as discounted cash flow models, market comparables, and third-party appraisals to determine fair values. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Not applicable for smaller reporting companies. 30