10-K: Starco Brands Reports 2025 Financials, Faces Going Concern Doubt

Starco Brands, Inc. filed its annual report for the fiscal year ended December 31, 2025, detailing a significant net loss and ongoing concerns about its ability to continue as a going concern.

Summary

• Starco Brands, Inc. reported revenues of $37.3 million for the year ended December 31, 2025, a decrease of 29% from $52.5 million in 2024.
• The company incurred a net loss of $20.7 million for 2025, an increase from a net loss of $17.3 million in 2024.
• Significant factors contributing to the net loss include a $14 million intangibles impairment charge related to the Soylent segment and a $1.1 million goodwill impairment.
• The company has an accumulated deficit of $102.3 million as of December 31, 2025.
• Management has identified substantial doubt about the company's ability to continue as a going concern due to recurring losses and working capital deficiencies.
• The company repaid its Gibraltar Loan in full in December 2025 and secured a $4.5 million bridge loan from The Starco Group, Inc. (owned by CEO Ross Sklar) to cover obligations and working capital.
• The company's Class A common stock is listed on the OTCQB under the symbol STCB and is subject to penny stock rules.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as negative due to the significant revenue decline, increased net loss, substantial impairment charges, and the explicit statement of substantial doubt regarding the company's ability to continue as a going concern.

Positives

• The company repaid its Gibraltar Loan in full in December 2025, terminating the agreement and releasing liens.
• A new bridge loan of $4.5 million was secured from The Starco Group, Inc. to provide liquidity and working capital.
• Compensation expenses decreased by 20% to $7.2 million, and marketing, general, and administrative expenses decreased by 30% to $13.2 million, reflecting cost-saving initiatives.
• The company's principal executive offices are located in Los Angeles, California.
• The company has a strategy to launch new products in various categories over the next 36 months, contingent on capital availability.

Negatives

• Revenues decreased by 29% to $37.3 million in 2025 compared to $52.5 million in 2024.
• The company reported a net loss of $20.7 million for 2025, an increase from $17.3 million in 2024.
• A significant $14 million intangibles impairment charge was recognized for the Soylent segment.
• Goodwill impairment of $1.1 million was recorded for the Soylent segment.
• The company has an accumulated deficit of $102.3 million as of December 31, 2025.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company experienced covenant violations with its lender, Gibraltar Business Capital, LLC, prior to repaying the loan.
• Related party revenues decreased by 48% to $3.2 million in 2025.
• The company has material weaknesses in internal controls over financial reporting, including a lack of corporate documentation and segregation of duties.

Risks

• The company is highly dependent on the services of its CEO, Ross Sklar, who also holds other executive positions.
• The company relies on related parties, specifically TSG and Temperance, for manufacturing and supply, which could adversely affect operations if these relationships change or terminate.
• The company has historically incurred significant net losses and may not be able to achieve or maintain profitability.
• An impairment in the carrying value of goodwill, trade names, and other long-lived assets could negatively affect results.
• Failure to obtain adequate capital funding or improve financial performance could impact the company's ability to continue as a going concern.
• The company's brand reputation and sales could be adversely affected by negative publicity regarding production methods or product quality.
• The company may not be able to anticipate consumer preferences and successfully develop and introduce new products.
• Economic downturns or uncertainty in the United States may adversely affect consumer discretionary spending and demand for products.
• Changes in trade policies, including tariffs and import/export regulations, could materially impact the business.
• Fluctuations in the prices of raw materials and other inputs may adversely impact results.
• The company's results of operations could be materially harmed if it cannot accurately forecast demand for its products.
• The company operates in a highly competitive market with larger competitors possessing greater resources.
• The company relies on licensing agreements and single manufacturers for certain products, creating dependency.
• Increasing product costs and freight costs may adversely impact margins.
• Failure to adequately protect intellectual property rights could lead to competitors marketing similar products.
• The company faces potential product liability claims and may not be able to maintain adequate insurance.
• Failure to comply with trade and other regulations could lead to investigations or actions by government regulators.
• The company's future success depends on its key executive officers and its ability to attract and retain qualified personnel.
• Technology-based systems for online shopping must function effectively to avoid adverse impacts on operating results.
• Security breaches and other disruptions could compromise information and expose the company to liability.
• The company has reported material weaknesses in internal controls over financial reporting.

Future Outlook

The company plans to launch other products in various categories over the next 36 months, contingent on its ability to raise capital. Financing growth and launching new products through its subsidiaries is key to raising further capital. The company will continue to evaluate opportunities to set its strategy for 2026 and beyond.

Management Comments

• Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated.
• Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
• Management has evaluated the factors contributing to these conditions. Our historical net losses and accumulated deficit are primarily attributable to non-cash or one-time, non-recurring expenses, including goodwill impairment, stock-based compensation, fair value share adjustment losses, and acquisition-related transaction costs.
• Management intends to pursue additional financing sources to enhance liquidity, provide working capital, and support repayment of existing obligations, if necessary.
• Management also continues to implement strategic initiatives to increase revenue in our most profitable sales channels and reduce overall expenses as a percentage of revenue.

Industry Context

StockSavvy.ai notes that Starco Brands operates in the highly competitive consumer products market, facing established multinational corporations. The company's strategy of acquiring subsidiaries and expanding its product line is a common approach in this sector to gain market share and diversify revenue streams. However, the significant net losses and going concern issues highlight the challenges of scaling in this competitive landscape.

Corporate Governance

Legal Proceedings

• Global Brands, Ltd. vs. Starco Brands, Inc.: Lawsuit for breach of contract related to a distribution agreement for Whipshots in the UK. Starco Brands has filed an answer and counterclaims.
• Nesco Resource, LLC vs. The Starco Group, Inc.: Complaint seeking approximately $150,000 for staffing services. The matter is being informally negotiated for resolution.

Related Party Transactions

• Notes Payable to Ross Sklar: As of December 31, 2025, the outstanding principal balance owed to CEO Ross Sklar was $3,472,500, with interest expense of $286,144 for the year.
• Bridge Term Loan from The Starco Group, Inc.: On December 22, 2025, the company entered into a bridge loan agreement with The Starco Group, Inc. (wholly owned by Ross Sklar) for up to $5,000,000, with an initial disbursement of $4,500,000.
• Related Party Lease: The company entered into an operating lease for office space with a related-party lessor, with lease expense of $136,038 for 2025.
• Other Related Party Transactions: Revenues from related parties were $3,164,581 in 2025, and cost of goods sold from related parties was $3,249,562.
• Related Party Advances: The company recorded related party advances of $487,600 in 2025 from Ross Sklar and Temperance.

Stakeholder Impact

• Shareholders: The company's financial performance, net losses, and going concern issues may negatively impact shareholder value. The potential for future capital raises through stock issuance could dilute existing shareholders.
• Employees: Workforce reductions were implemented in 2025, impacting compensation expenses. The company's financial stability could affect job security.
• Creditors: The company's repayment of the Gibraltar Loan and securing a new bridge loan indicates efforts to manage debt obligations. However, the going concern status may raise concerns for creditors.
• Suppliers: The company's financial health could impact its ability to meet payment obligations to suppliers, including related parties.

Next Steps

• Continue implementing measures to remediate control deficiencies.
• Pursue additional financing sources to enhance liquidity and working capital.
• Implement strategic initiatives to increase revenue and reduce expenses.
• Evaluate opportunities to set strategy for 2026 and beyond.
• Complete the potential acquisition of The Starco Group, if a definitive agreement is reached.

Key Dates

Recommendation

The company's significant revenue decline, increased net loss, substantial impairment charges, and the explicit statement of substantial doubt regarding its ability to continue as a going concern present a high-risk investment profile. The reliance on related parties and the ongoing need for capital raises further amplify these concerns. While cost-saving measures are being implemented, the overall financial trajectory suggests a sell recommendation.

Keywords

Starco Brands, Form 10-K, Annual Report, Consumer Products, Whipshots, Soylent, Skylar, AOS, Financial Results, Net Loss, Going Concern, Impairment, Related Party Transactions, Ross Sklar, Nevada