OPERATING AND FINANCIAL REVIEW AND PROSPECTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this annual report. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in "Cautionary Note Regarding Forward-Looking Statements" and under "Risk Factors" elsewhere in this annual report.
Overview
We are a developer, manufacturer and exporter of a growing portfolio of 75 formulations across 14 alcoholic and non-alcoholic brands of beverages such as Australian Bitters Company. Our distribution capabilities include sales to large distributors and high-margin direct-to-consumer sales. We have partnered with Coca-Cola Europacific Partners (NASDAQ:CCEP), one of the world's largest Coca-Cola bottlers, to exclusively distribute "Australian Bitters Company" bitters in Australia while retaining the rights throughout the rest of the world, and we are negotiating distribution to new European markets, including expansion of our new brands into Australia and Europe. We focus on direct-to-consumer (DTC) sales through our network of eCommerce platforms. We launched BevMart, a DTC marketplace, in Australia in May 2021.
We have facilities, which are FDA certified, kosher compliant and meet Coca-Cola's stringent standards, and include the ability to engage in the process of making our products in-house, including innovation and development, maceration, blending, distillation, rectification and bottling. We believe that we currently have the capacity to increase production by 10x with minimal capital expenditures.
For more information regarding our business and operations, see "Item 4B. Business Overview" above.
Recent Offerings
On March 16, 2026, the Company closed a best-efforts public offering generating approximately $6 million in gross proceeds. The offering consisted of units comprised of ordinary shares (or pre-funded warrants) and Series A and Series B warrants. The Company used $2,500,000 of the net proceeds to fund a loan to BlockFuel in connection with the proposed merger transaction and intends to use the remaining proceeds for general corporate purposes.
On January 14, 2026, the Company entered into a sales agreement with Aegis Capital Corp. pursuant to which the Company may, from time to time, sell up to $2,500,000 of its ordinary shares in an "at-the-market" offering. As of the date of this Annual Report, the Company has sold an aggregate of approximately $2,013,687 of ordinary shares under this program.
A. Operating Results
Key Components of Our Results of Operations
We consider a variety of financial and operating measures in assessing the performance of our business. The key financial performance measures we use are revenue, gross profit and gross margin. Our review of these indicators facilitates timely evaluation of the performance of our business and effective communication of results and key decisions, allowing our business to respond promptly to competitive market conditions and different demands and preferences from our customers. The key measures that we use to evaluate the performance of our business are set forth below and are discussed in greater details under "Results of Operations".
Revenues
Our revenues are derived primarily from the sales of bitters products to Coca-Cola Europacific Partners and overseas customers and direct-to-consumer (DTC) sales through our on-line marketplaces.
Cost of Revenues
Cost of revenues includes the costs of direct materials and delivery costs, direct labor, import duties and other taxes, and an appropriate proportion of variable and fixed overhead expenditures based on normal operating capacity.
General and Administrative Expenses
General and administrative expenses consist primarily of insurance, public company and compliance costs, depreciation and amortization, occupancy-related costs and other corporate administrative expenses.
Salaries and Wages
Salaries and wages consist primarily of employee compensation, executive compensation, director fees, employee benefits and applicable stock-based compensation.
Sales and Marketing
Sales and marketing expenses consist primarily of advertising, promotional and other sales-related costs.
Contracted Services
Contracted services consist primarily of consulting, legal, accounting, audit and other professional service costs.
Interest Expense
Interest expense consists primarily of interest incurred on lines of credit and other financing arrangements, including insurance and equipment financing.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
Revenues
The following table summarizes the results of our revenues for the years ended December 31, 2025 and 2024.
| 12 Months Ended December 31, | Year-over-Year | |||||||||||||||||||
| 2025 | 2024 | Change | ||||||||||||||||||
| (As Restated) | ||||||||||||||||||||
| Australian Bitters Company | $ | 2,595,538 | 94 | % | $ | 2,795,537 | 96 | % | -7.2 | % | ||||||||||
| BitterTales and others | $ | 153,684 | 5 | % | $ | 81,536 | 2 | % | 88.5 | % | ||||||||||
| Total Brand Products | $ | 2,749,222 | 99 | % | $ | 2,877,073 | 98 | % | -4.4 | % | ||||||||||
| Spirits | $ | 23,019 | 1 | % | $ | 45,168 | 2 | % | -49.0 | % | ||||||||||
| Total E-Commerce | $ | 23,019 | 1 | % | $ | 45,168 | 2 | % | -49.0 | % | ||||||||||
| Total Revenues | $ | 2,772,241 | 100 | % | $ | 2,922,241 | 100 | % | -5.1 | % | ||||||||||
Revenues for the year ended December 31, 2025, were $2,772,241 compared to $2,922,241 for the year ended December 31, 2024, as restated, a decrease of $150,000, or 5.1%. The decrease in revenues was primarily attributable to lower Australian Bitters Company sales and was due to a missed order cycle from Coca-Cola Europacific Partners in 2025, resulting in 11 months of recognized sales in 2025 compared to a full 12-month period in 2024.
Cost of Revenues
Cost of revenues for the year ended December 31, 2025 was $1,546,570 compared to $697,182 for the year ended December 31, 2024, as restated, an increase of $849,388, or 122%. The increase in cost of revenues was primarily attributable to inventory-related adjustments, including a $330,250 inventory writedown, and higher raw material costs.
Gross Profit and Gross Margin
Gross profit for the year ended December 31, 2025 was $1,225,671 compared to $2,225,059 for the year ended December 31, 2024, as restated, a decrease of $999,388, or 44.9%. Gross margin decreased to 44.2% for 2025 from 76.1% for 2024. The decrease in gross margin was primarily attributable to the increase in cost of revenues described above, including inventory-related adjustments and higher raw material costs, while revenues decreased by 5.1%.
Operating Expenses
The following table summarizes our operating expenses for the years ended December 31, 2025 and 2024.
| 12 Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| (As Restated) | ||||||||||||||||
| General and administrative | $ | 1,514,464 | 23 | % | $ | 1,342,468 | 18 | % | ||||||||
| Salaries and wages | $ | 2,243,852 | 34 | % | $ | 2,459,586 | 34 | % | ||||||||
| Sales and marketing | $ | 293,317 | 4 | % | $ | 154,895 | 2 | % | ||||||||
| Contracted services | $ | 2,559,979 | 39 | % | $ | 1,470,782 | 20 | % | ||||||||
| Impairment expense | $ | - | - | % | $ | 1,861,833 | 26 | % | ||||||||
| Gain on disposal of equipment | $ | (3,046 | ) | 0 | % | $ | - | - | % | |||||||
| Total Operating Expenses | $ | 6,608,566 | 100 | % | $ | 7,289,564 | 100 | % | ||||||||
Operating expenses for the year ended December 31, 2025, were $6,608,566 compared to $7,289,564 for the year ended December 31, 2024, as restated, a decrease of $680,998, or 9.3%. The decrease was primarily attributable to the absence of impairment expense in 2025, partially offset by higher contracted services, general and administrative expenses, and sales and marketing expenses.
| ● | General and administrative expenses increased by $171,996, or 12.8%, primarily due to increases in insurance, filing fees, compliance costs and other public-company and administrative expenses, partially offset by lower amortization expense. | |
| ● | Salaries and wages decreased by $215,734, or 8.8%, primarily due to lower wages and executive remuneration, partially offset by higher director fees. | |
| ● | Sales and marketing increased by $138,422, or 89.4%, primarily due to increased advertising and marketing activity, including an increase in advertising costs of approximately $70,000. | |
| ● | Contracted services increased by $1,089,197, or 74.1%, primarily due to an approximately $1.2 million increase in consultancy expense, including a one-time share-based compensation charge of $795,300 and approximately $240,000 of consulting expense related to a related-party consulting engagement that commenced in January 2025. Legal costs also increased, including costs associated with merger and acquisition activities and accruals related to legal matters. These increases were partially offset by lower contract labor costs. | |
| ● | Impairment expense decreased by $1,861,833, or 100%, because no impairment expense was recognized in 2025. During 2024, as restated, the Company recognized impairment expense of $1,031,967 related to intangible assets, $716,453 related to a related-party loan receivable and accrued interest, and $113,413 related to prepaid expenses. |
Loss from Operations
Loss from operations for the year ended December 31, 2025 was $5,382,895 compared to $5,064,505 for the year ended December 31, 2024, as restated, an increase of $318,390, or 6.3%. The increase in loss from operations was primarily attributable to the $999,388 decrease in gross profit, partially offset by the $680,998 decrease in operating expenses.
Other Income (Expense)
Other income (expense), net, for the year ended December 31, 2025 was $114,137 compared to $(120,594) for the year ended December 31, 2024, as restated, an improvement of $234,731. The improvement was primarily attributable to a $186,292 credit from the Australian Tax Office and a $174,402 decrease in interest expense, partially offset by a $144,849 decrease in gains on settlement of liabilities.
Income Tax Benefit (Expense)
The income tax benefit (expense) for the year ended December 31, 2025, was ($925,459) compared to $484,784 for the year ended December 31, 2024, as restated, a change of $1,410,243, primarily due to the change from a tax benefit in 2024 to tax expense in 2025.
Net Loss
The net loss for the year ended December 31, 2025 was $6,194,217 compared to $4,700,315 for the year ended December 31, 2024, as restated, an increase of $1,493,902, or 31.8%. The increase was primarily attributable to the change from an income tax benefit in 2024 to income tax expense in 2025, together with the $318,390 increase in loss from operations, partially offset by the $234,731 improvement in other income (expense), net.
Reportable Segments
We have two reportable segments: Australia and the United States. The Australia segment primarily consists of our Australian beverage operations and corporate activities, while the United States segment consists of the operations of our United States subsidiaries. Management evaluates the performance of the reportable segments primarily based on revenues and loss from operations. Intercompany transactions and balances are eliminated in consolidation.
Summary information with respect to our reportable segments is as follows:
| 12 Months Ended December 31, | ||||||||||||||||
| Revenues | 2025 | 2024 | ||||||||||||||
| (As Restated) | ||||||||||||||||
| Australia | $ | 2,743,510 | 99 | % | $ | 2,920,941 | 100 | % | ||||||||
| United States | $ | 28,731 | 1 | % | $ | 1,300 | 0 | % | ||||||||
| Total Revenue | $ | 2,772,241 | 100 | % | $ | 2,922,241 | 100 | % | ||||||||
Revenue from the Australia segment decreased to $2,743,510 in 2025 from $2,920,941 in 2024, as restated, primarily due to a missed order cycle from Coca-Cola Europacific Partners in 2025, resulting in 11 months of recognized sales in 2025 compared to a full 12-month period in 2024.
| 12 Months Ended December 31, | ||||||||
| Loss from operations | 2025 | 2024 | ||||||
| (As Restated) | ||||||||
| Australia | $ | (4,703,076 | ) | $ | (3,924,549 | ) | ||
| United States | $ | (679,819 | ) | $ | (1,139,956 | ) | ||
| Total loss from operations | $ | (5,382,895 | ) | $ | (5,064,505 | ) | ||
Loss from operations for the Australia segment increased by $778,527, or 19.8%, to $4,703,076 in 2025 from $3,924,549 in 2024, as restated. Loss from operations for the United States segment decreased by $460,137, or 40.4%, to $679,819 in 2025 from $1,139,956 in 2024, as restated.
B. Liquidity and Capital Resources
For the year ended December 31, 2025, we incurred a net loss of $6,194,217 and used $1,561,456 of net cash in operating activities. As of December 31, 2025, we had cash of $127,756, a working capital deficit of $1,994,231 and an accumulated deficit of $17,327,110. These conditions raise substantial doubt about our ability to continue as a going concern for one year from the issuance of our consolidated financial statements.
To date, we have funded our operating activities through the issuance of debt and equity securities and revenues generated from our business operations. During the year ended December 31, 2025, we received $750,000 of proceeds from the issuance of convertible promissory notes to a related party and $242,308 from notes and loans payable to related parties.
Subsequent to December 31, 2025, we completed a registered public offering on March 16, 2026 that generated approximately $6.0 million of gross proceeds, a portion of which was used to fund a $2.5 million non-interest-bearing loan to BlockFuel Energy Inc. In addition, on August 25, 2026, we issued a convertible promissory note with a principal amount of $1.15 million for cash proceeds of $1.0 million. In addition, as of the date of this Annual Report, we had sold approximately $2.0 million of ordinary shares under our at-the-market offering program. Management continues to evaluate financing alternatives, pursue revenue growth initiatives and manage operating cash outflows in order to address our liquidity requirements.
The outcome of management's plans cannot be determined with any degree of certainty. Accordingly, our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern.
Years Ended December 31, 2025, and 2024
As of December 31, 2025, we had total cash of $127,756 compared to $619,945 as of December 31, 2024. The following table summarizes our sources and uses of cash for each of the periods presented:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| (As Restated) | ||||||||
| Net cash (used in) operating activities | $ | (1,561,456 | ) | $ | (1,921,400 | ) | ||
| Net cash provided by (used in) investing activities | $ | 325 | $ | (7,105 | ) | |||
| Net cash provided by financing activities | $ | 1,022,574 | $ | 2,657,968 | ||||
| Impact of changes in foreign currency on cash | $ | 46,368 | $ | (123,656 | ) | |||
| Net increase (decrease) in cash | $ | (492,189 | ) | $ | 605,807 | |||
Net cash used in operating activities
Net cash used in operating activities was $1,561,456 for 2025 compared to $1,921,400 for 2024, as restated, a decrease in cash used of $359,944. The decrease in cash used in operating activities reflected changes in working capital and other operating assets and liabilities, partially offset by the higher net loss in 2025. Significant noncash adjustments to net loss during 2025 included stock-based compensation of $1,969,723, depreciation and amortization of $70,012 and an inventory writedown of $330,250.
Net cash used in investing activities
Net cash provided by investing activities was $325 in 2025 compared to net cash used in investing activities of $7,105 in 2024, as restated. Investing activity in both periods was not significant.
Net cash provided by financing activities
Net cash provided by financing activities was $1,022,574 in 2025 compared to $2,657,968 in 2024, as restated, a decrease of $1,635,394. The decrease was primarily attributable to proceeds received from the Company's initial public offering in 2024, partially offset by $750,000 of proceeds from convertible notes in 2025 and lower repayments of notes payable and related-party notes payable.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2025 that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Indebtedness
As of December 31, 2025, we had aggregate notes and loans payable of $801,701, consisting of $478,780 of lines of credit, $242,308 of related-party loans, $43,696 of insurance financing and $36,917 of equipment financing. Of the total outstanding balance, $777,053 was classified as current and $24,648 was classified as non-current.
As of December 31, 2025, we had three lines of credit with third-party lenders with aggregate outstanding borrowings of $478,780. Based on interest accrued during 2025, the facilities bore effective interest rates ranging from approximately 15.7% to 16.3% per annum. The facilities had passed their original maturity dates and remained outstanding and, accordingly, were classified as current liabilities.
During 2025, we received three unsecured loans from related parties with an aggregate outstanding principal balance of $242,308 as of December 31, 2025. Of this amount, $101,995 bore interest at approximately 7.0% per annum and was due on demand, while the remaining $140,313 was non-interest bearing and due on demand.
During 2025, we also entered into an unsecured financing arrangement to finance an insurance policy. The arrangement bore interest at 12% per annum and had an outstanding balance of $43,696 as of December 31, 2025. In addition, we entered into an equipment financing arrangement during 2025 with an outstanding balance of $36,917 as of December 31, 2025. The equipment financing bears interest at approximately 13.9% per annum and matures in August 2028.
During 2025, we issued $750,000 of convertible notes to a related party for cash proceeds of $750,000. The notes were converted in full into ordinary shares during 2025 and, as of December 31, 2025, no amounts remained outstanding under the convertible notes.
C. Research and Development, Patents and Licenses, etc.
We did not incur material research and development expenses during the years ended December 31, 2025 and 2024. For information regarding our intellectual property, trademarks and licensing arrangements, see "Item 4.B. Information on the Company-Business Overview."
D. Trend Information
We continue to closely monitor macro-economic conditions, including the headwinds caused by supply chain problems, inflation, increased interest rates, geopolitical events, military conflicts and other trends that have been adversely impacting economic activity. We have been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and product orders, and will act in an effort to mitigate adverse consequences as needed. To the extent inflation increases our costs and expenses, we could consider price increases to offset those cost pressures. Other than as disclosed elsewhere in this annual report, we are not currently aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2025 to the present time that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our estimates on an ongoing basis, including those related to revenue recognition and income taxes. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making the judgments we make about the carrying values of our assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from the estimates.
The critical accounting policies summarized in this section are discussed in further detail in the notes to our consolidated financial statements appearing elsewhere in this annual report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Recently-Issued Accounting Pronouncements
Certain recently-issued accounting pronouncements are discussed in Note 4, Significant Accounting Policies, to the financial statements included in elsewhere in this Annual Report, regarding the impact of the U.S. GAAP standards as issued by the FASB that we will adopt in future periods in our financial statements.