TAP Real Estate Technologies, Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained herein. In addition to historical information, the following discussion contains forward looking statements based upon current expectations that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including, but not limited to, risks described in the section entitled “Risk Factors”.

General

Our executive offices are located at 101 W. Broadway, Suite 1450, San Diego, California 92101, telephone (786) 738-9012. Our corporate website address is www.humbl.com (http://www.humbl.com).

Overview

On December 2, 2024, HUMBL, Inc. (the “Company” or “HUMBL”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with WSCG, Inc. (“WSCG”), and WSCG Humbl SPV, a series of SPV Management, LLC (“HoldCo”). Pursuant to Asset Purchase Agreement, the Company sold all of its assets to WSCG. In consideration for the purchase of the Company’s assets, WSCG agreed to: (a) pay the Company $3,025,000; (b) issue 2,455,556 shares of WSCG Class B Common Stock to HoldCo; and (c) grant 24,555,556 membership units of HoldCo to the Company (the “HoldCo Units”). Of the $3,037,500 payable in cash to the Company, $500,000 was paid in cash by WSCG to the Company prior to the closing date, and $537,500 of indebtedness previously funded to the Company by affiliates of WSCG was cancelled. The remaining $2,000,000 of the cash purchase price was paid by WSCG on April 1, 2025. The value of the HoldCo Units held by the Company at the time of the acquisition by WSCG is $17,000,000 based on the percentage that HoldCo owns in WSCG based on the last valuation of WSCG. The Company agreed that WSCG would not contribute any real estate assets and WSCG would be solely a technology company in exchange for a larger percentage of WSCG owned by the Company through HoldCo.

The HoldCo Units represent approximately 48.6% of the outstanding equity in WSCG. Upon transfer of the HoldCo Units, the Company will own 100% of HoldCo. The Company intends to keep a portion of the HoldCo Units to maintain exposure to WSCG’s performance and the Company assets purchased by WSCG. The Company will also offer to exchange some of the HoldCo Units to holders of Series C Preferred Stock as a way to reduce potential future dilution to common stockholders. The transfer of the Company assets to WSCG took place on February 27, 2025.

On December 2, 2024, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Ybyrá Capital S.A. (“Ybyrá”) and Brian Foote, the Company’s former CEO and current director. Pursuant to the Stock Purchase Agreement: (a) HUMBL purchased 99% of the outstanding equity interests of FinCapital Credito Pagamentos e Servicos LTDA, a Brazilian company (“FinCapital”), from Ybyrá; and (b) Brian Foote sold his 7,000,000 shares of Series A Preferred Stock and 100,000 shares of Series D Preferred Stock of the Company (the “Control Shares”) to Ybyrá. With the purchase of the Control Shares, Ybyrá is now the controlling stockholder of the Company. FinCapital had at the time of the purchase one asset which consisted of 41,500 tons of magnesium silicate with a book value of $20,000,000. Magnesium silicate is a raw material used in industrial sectors such as fertilizer, construction, ceramics, and fireproofing

FinCapital is now a 99% owned subsidiary of the Company. The Company agreed to issue $20,000,000 in common shares to Ybyrá for the purchase of the FinCapital equity interest. HUMBL will pay $4,000,000 of the purchase price through the issuance of 10,000,000,000 common share to Ybyrá ($0.0004 per share). The remaining $16,000,000 in common shares will be issued following a recapitalization event that provides sufficient authorized shares to make the issuance.

As a result of the WSCG purchase of the Company assets, the previous operations of the Company will be reflected as discontinued operations, and the assets that were sold are all reflected as assets under discontinued operations.

Following the purchase of FinCapital and the change of control associated with such acquisition, the Company’s business model has changed. For the 2025 fiscal year, HUMBL will no longer be pursuing Web 3 and related technologies. Instead, the Company will adopt a holding a company model. HUMBL will be the parent holding company and will own and operate various subsidiaries, with a particular focus in Brazil and Latin America. FinCapital will be first business operated by HUMBL under the new holding company structure.

FinCapital owns 41,500 tons of magnesium silicate. Magnesium silicate is a raw material that can be used in fertilizer and other industrial applications. FinCapital is currently looking to sell the magnesium silicate and acquire other raw materials or other mining interests.

On April 3, 2025, HUMBL entered into a Joint Venture Agreement with Multicortex, LLC. Multicortex is a company focusing on artificial intelligence and high-performance computing. Pursuant to the agreement, HUMBL acquired a 51% interest in Multicortex. In exchange, HUMBL will contribute 15% of any funds it raises in any Regulation A+ offering (up to $3,000,000) to fund development of Multicortex’s suite of products.

HUMBL’s controlling shareholder, Ybyrá, is a Brazilian holding company with interests in mining, real estate, oil and gas, and related fields. Our CEO, Thiago Moura, is an experienced entrepreneur with deep connections in Brazil and throughout Latin America. Our plan is to find and acquire undervalued assets and business in North and South America, with a particular focus in Brazil, and then operate those businesses as subsidiaries under our corporate umbrella.

Results of Continuing Operations for the Three Months Ended March 31, 2025 and 2024

The following table sets forth the summary operations for the three months ended March 31, 2025 and 2024:

31

Revenues and Cost of Revenues and Gross Profit

Revenues, cost of revenues and gross profit for the three months ended March 31, 2025 and 2024 are related to our operations that are reflected in discontinued operations. The Company has recently acquired FinCapital which consisted of one singular asset which were minerals located in Brazil. The minerals are magnesium silicate.

Operating Expenses

Operating expenses for the three months ended March 31, 2024 were $1,532,936 as compared to $1,380,493 for the three months ended March 31, 2025, a decrease of $152,443. Operating expenses consists of professional fees and general and administrative expenses as fully described below. We expect our professional fees to continue to decrease in our next 12 months as we look to scale back on outside contract labor due to the change in our business operations.

Professional Fees

Professional fees which consist of contracted individuals and companies, legal, audit and accounting costs for the three months ended March 31, 2024 were $319,188 compared to $391,861 for the three months ended March 31, 2025. The increase in professional fees related to the professional fees incurred in regulatory filings including OTC compliance and reporting. We expect that these costs will decrease during the remainder of 2025 as we transition out of the HUMBL.com business.

General and Administrative

General and administrative expenses for the three months ended March 31, 2024 were $1,213,748 compared with $988,632 for the three months ended March 31, 2025. The decrease in general and administrative expenses was $225,116. Much of the decrease in general and administrative expenses relates to decreases in payroll and payroll-related expenses due to less personnel employed.

Other Income (Expense)

In the three months ended March 31, 2024 we incurred $2,333,708 in net other income, compared to $3,276,140 in other expenses in the three months ended March 31, 2025, an increase of $5,609,848 in other expenses. The other expenses relate to amortization of discounts, interest expense and losses on the conversion of convertible notes and exchanges in warrants and Series C Preferred Stock and a loss on investee. In 2024, we incurred other income from the gain on the sale of HUMBL financial assets in the amount of $2,800,000.

Net Income (Loss) from Continuing Operations

Net income from continuing operations for the three months ended March 31, 2024 was $800,772 as compared to a net loss of ($4,656,633) for the three months ended March 31, 2025. The $5,457,405 increase in the net loss was due to the changes noted herein.

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.

During the past two years, we devoted a substantial amount of capital to build out our platform and as a result our working capital deficit and accumulated deficit have increased significantly. In addition, we have incurred significant debt from both unrelated and related parties to assist in supporting our operations.

As of March 31, 2025, we had $2,099,252 in cash. During the last two years we built our platform and grew our operations by acquiring companies to support what we consolidated into HUMBL.com, prior to the sale to WSCG. The acquisitions of Tickeri and Monster, which have since been disposed of, increased our debt and our common shares issued as we spent very little cash in these acquisitions.

We had a working capital deficit of $6,592,161 and $23,693,753 as of March 31, 2025 and December 31, 2024, respectively. The majority of our current liabilities are in the form of our liability to issue common shares in the acquisition of FinCapital, long-term debt and notes payable, and accounts payable and accrued expenses. It is expected that a portion of these liabilities will require cash to settle them. The increase in working capital is the direct result of our investment in WSCG Holdco as well as reductions of notes payable, accrued interest and accrued expenses as well as the receipt of the remaining balance owed by WSCG received in the three months ended March 31, 2025. A significant portion of the investment in WSCG Holdco was exchanged for Series C Preferred shares in May 2025. The Company’s assets as of December 2, 2024 were sold and the Company commenced a new business with the purchase of the magnesium silicate. The Company anticipates entering into profitable businesses upon the sale of the magnesium silicate. As a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.

Net cash used in operating activities was $298,235 and $807,699 for the three months ended March 31, 2025 and 2024, respectively. The $509,464 decrease in net cash used in operating activities was primarily a result of the change in the net loss and the non-cash charges impacting our net loss from 2024 to 2025, such as the gain on sale of HUMBL Financial assets, losses on the conversion of convertible notes and decreases in our stock-based compensation.

We had no activities from investing activities in the three months ended March 31, 2025 and 2024 other than the balance of the proceeds received from WSCG for the sale of HUMBL.com in the amount of $2,000,000.

Cash provided by financing activities was $377,000 and $471,747 for the three months ended March 31, 2025 and 2024, respectively. In 2024, the Company raised $580,000 from the proceeds from convertible notes, as well as repayments of convertible notes payable of $108,253. In 2025, we raised $365,000 from proceeds of convertible notes payable and $12,000 from related party notes payable.

The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of the uncertainties.

Off-Balance Sheet Arrangements

As March 31, 2025 and December 31, 2024, we had no off-balance sheet arrangements.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results could differ from those estimates.

Fair Value of Financial Instruments

ASC 825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the short-term maturity of those instruments.

Fair Value Measurements

ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:

Level 1 inputs: Quoted prices for identical instruments in active markets.

Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 inputs: Instruments with primarily unobservable value drivers.

Recent Accounting Pronouncements

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of March 31, 2025. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.