{"url_path":"/sec/sntl/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-05","source_url":"https://www.sec.gov/Archives/edgar/data/889353/0001096906-26-000918-index.html","accession_number":"0001096906-26-000918","cik":"0000889353","ticker":"SNTL","issuer_name":"Sentinel Holdings Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/889353/0001096906-26-000918-index.html","primary_entity_key":"0000889353","primary_entity_name":"Sentinel Holdings Ltd."},"word_count":2882,"has_tables":true,"body_markdown":"**Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.**\n\n \n\n**Executive Overview**\n\n \n\nDuring the years ended December 31, 2025 and 2024, the Company’s primary business focused upon providing armed and unarmed security services through its Sentry and USS subsidiaries. They offer professional security personnel and services, including on-site protection, mobile patrol, and event security, enhanced by smartphone-based security applications. They operate primarily in California and serve a diverse clientele, including businesses, residential communities, and event organizers.\n\n \n\nThe Company’s remaining subsidiary, Gladiator, previously focused on the production and sale of personal protective products, including body armor and ballistic plates. However, as of mid-2023, the Company ceased selling personal protective equipment under the Gladiator brand due to ongoing litigation. Presently, Gladiator’s operations are limited, and the Company may relaunch the product line and expand its offerings once such litigation is resolved.\n\n \n\nEffective October 16, 2025 and through its newly formed Sentry subsidiary, the Company acquired the client contracts for professional security services of an entity located in California for cash consideration of $650,000 plus additional cash of $150,000 on April 16, 2026 provided those contracts continue to provide at least 80% of the level of revenue per month as they were as of the date of the closing. As part of the acquisition agreement, the Company agreed to retain the former principal of the seller as a consultant for a period of six months at the rate of $50,000 per month. Effective that same date, the Company combined the day-to-day activities of USS with Sentry for logistical and operational purposes.\n\n \n\nEffective December 31, 2025 and in conjunction with: a) the preparation of the Company’s consolidated financial statements as of that date and for the year then ended, and b) the growth strategy described in the following paragraph, Management reassessed the propriety of certain assets and liabilities previously carried on its balance sheet and made repositioning adjustments related thereto. Such adjustments had the net effect of recording a benefit of $2,205,292 in the Consolidated Statement of Operations for the year then ended as discussed in the footnotes to those financial statements presented elsewhere in this Report.\n\n \n\n**Critical Accounting Policies and Estimates**\n\n \n\nWe prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.\n\n \n\nCritical accounting policies consist of the following and are described in Note 4, *Summary of Significant Accounting Policies*, in the Company’s financial statements included elsewhere in this Report.\n\n \n\n·\n\nBasis of Presentation\n\n·\n\nUse of Estimates and Assumptions\n\n·\n\nPrinciples of Consolidation and Non-Controlling Interest\n\n·\n\nFair value of Financial Instruments\n\n·\n\nRevenue Recognition\n\n·\n\nIncome Taxes\n\n \n\nCritical accounting estimates consist primarily of those described in Note 17, *Business Reassessment and Repositioning Adjustment*, in the Company’s financial statements included elsewhere in this Report\n\n** **\n\n \n\n19\n\n*Table of Contents*\n\n \n\n**Results of Operations**\n\n \n\n**Year Ended December 31, 2025 Versus 2024**\n\n \n\n**Revenues** (Amounts not adjusted for reclassification of discontinued operations)\n\n \n\nRevenues were $5,066,543 for the year ended December 31, 2025 compared to $4,605,338 in the prior year, an increase of $461,205 or 10%. This increase was attributable to the rationalization of the Company’s customer portfolio representing a shift away from less profitable markets and a simultaneous emphasis upon higher margin services.\n\n \n\n**Cost of Revenues**(Amounts not adjusted for reclassification of discontinued operations)\n\n \n\nCost of revenues were $3,817,851 for the year ended December 31, 2025 compared to $4,191,878 in the prior year, a decrease of $374,027 or 9%. This decrease was attributable to the rationalization of the Company’s customer portfolio representing a shift away from less profitable markets and a simultaneous emphasis upon higher margin services.\n\n \n\n**Gross Profits **(Amounts not adjusted for reclassification of discontinued operations)\n\n \n\nGross profits were $1,248,692 or 26% for the year ended December 31, 2025 compared to $413,460 or 9% in the prior year, an increase of $835,232 or 202%. This increase was directly attributable to the changes in revenues and cost of revenues discussed immediately above.\n\n \n\n**General and Administrative**\n\n \n\nGeneral and administrative expenses were $4,899,761 for the year ended December 31, 2025 compared to $5,828,300 in the prior year, a decrease of $928,539 or 16%. This decrease is primarily attributable to a one-time non-cash expense charge of $2,500,000 during 2024 related to the issuance of shares to Padang Padang for services rendered. In the absence of that charge during 2024, general and administrative expenses would have increased by $1,571,461 or 47%. That increase was attributable to marketing and operational initiatives which resulted in the increases in revenues and gross profits discussed above.\n\n \n\n**Loss on Impairment of Intangible Assets**\n\n \n\nLoss on impairment of intangible assets was zero for the year ended December 31, 2025 compared to $2,088,274 in the prior year, a decrease of $2,088,274 or 100%. This decrease is attributable to a charge during 2024 of that amount related to the impairment of intangible assets acquired in connection with the business combination with Gladiator in 2021.\n\n \n\n**Loss From Operations**\n\n \n\nLoss from operations was $4,462,697 for the year ended December 31, 2025 compared to $7,916,572 in the prior year, a favorable decrease of $3,453,877 or 44%. This favorable decrease was attributable to the collective favorable changes in the gross profits, general and administrative expenses, and the loss on impairment of intangible assets discussed immediately above.\n\n \n\n**Other Income (Expense)**\n\n \n\nNet other income (expense) was a net income of $1,886,128 for the year ended December 31, 2025 as compared to a net loss of $947,438 for the prior year, a favorable swing of $2,833,566 or 299%. This favorable swing was primarily attributable to management’s evaluation of the propriety of certain assets and liabilities previously carried on its balance sheet totaling $2,205,292 and the gain on acquisition of the Opsec business of $571,00 as further discussed in the footnotes to the Company’s financial statements.\n\n \n\n \n\n20\n\n*Table of Contents*\n\n \n\nIn the absence of those two benefits during 2025, other income (expenses) would have favorably decreased by $57,274 or 6%. That decrease was primarily attributable to decreases in interest expense of $278,959 or 36% and the change in the fair value of derivative liabilities of $108,330 or 66%.\n\n \n\n**Net Income (Loss) From Continuing Operations Including Non-Controlling Interest**\n\n \n\nNet loss from continuing operations, including non-controlling interest, was $2,576,569 for the year ended December 31, 2025 as compared to a net loss of $8,864,012 for the prior year, a decrease of $6,287,443 or 71%. This decrease was primarily attributable to the favorable changes in both the loss from operations of $3,453,877 and other income of $2,833,566 as discussed in the preceding paragraphs.\n\n \n\n**Non-Controlling Interest**\n\n \n\nNon-controlling interest was a negative $107,796 for the year ended December 31, 2025 as compared to a negative of $74,959 for the prior year, an increase of $32,837 or 44%. This increase was attributable to the portion of the net benefit discussed in *Other Income (Expense)* above that was related to Gladiator, the Company’s subsidiary wherein there is a non-controlling interest.\n\n \n\n**Net Income (Loss) Available to Common Shareholders**\n\n \n\nNet income (loss) available to common shareholders was a net loss of $1,664,817 for the year ended December 31, 2025 as compared to a net loss of $8,375,593 for the prior year, a decrease of $6,710,776 or 80%. This decrease was attributable to the favorable changes in both the loss from operations of $3,453,877 and other income of $2,833,566 as discussed in the preceding paragraphs.\n\n \n\n**Year Ended December 31, 2024 Versus 2023**\n\n \n\n**Revenues**(Amounts not adjusted for reclassification of discontinued operations) \n\n \n\nRevenues were $4,605,338 for the year ended December 31, 2024 compared to $8,820,348 in the prior year, a decrease of $4,215,010 or 48%. This decrease was attributable to the loss of several key customers.\n\n \n\n**Cost of Revenues  **(Amounts not adjusted for reclassification of discontinued operations) \n\n \n\nCost of revenues were $4,191,878 for the year ended December 31, 2024 compared to $6,053,710 in the prior year, a decrease of $1,861,832 or 31%. This decrease was primarily attributable to the loss of several key higher margin customers.\n\n \n\n**Gross Profits** (Amounts not adjusted for reclassification of discontinued operations) \n\n \n\nGross profits were $413,460 or 9% for the year ended December 31, 2024 compared to $2,766,638 or 31% in the prior year, a decrease of $2,353,178 or 85%. This decrease was directly attributable to the changes in revenues and cost of revenues discussed immediately above.\n\n \n\n**General and Administrative**\n\n \n\nGeneral and administrative expenses were $5,828,300 for the year ended December 31, 2024 compared to $3,542,186 in the prior year, an increase of $2,286,114 or 65%. This increase is primarily attributable to a one-time non-cash expense charge of $2,500,000 during 2024 related to the issuance of warrants to a consultant for services rendered. In the absence of that charge during 2024, general and administrative expenses would have decreased by $213,886 or 6%. That decrease was attributable to cost saving operational initiatives which were implemented during 2024.\n\n \n\n \n\n21\n\n*Table of Contents*\n\n \n\n**Loss on Impairment of Intangible Assets**\n\n \n\nLoss on impairment of intangible assets for year ended December 31, 2024 was $2,088,274 compared to $911,467 in the prior year, an increase of $1,176,807 or 129%. This increase was attributable to the charges during 2024 and 2023 related to the impairment of intangible assets acquired in connection with the business combination with Gladiator in 2021.\n\n \n\n**Loss From Operations**\n\n \n\nLoss from operations was $7,503,114 for year ended December 31, 2024 compared to $1,687,015 in the prior year, an increase of $5,816,099 or 345%. This unfavorable increase was attributable to the collective unfavorable changes in the gross profits, general and administrative expenses, and the losses on the impairment of intangible assets discussed immediately above.\n\n \n\n**Other Income (Expense)**\n\n \n\nNet other income (expense) was a net loss of $947,438 for the year ended December 31, 2024 as compared to a net loss of $931,950 for the prior year, an increase of $15,488 or 2%. This change was primarily attributable to a favorable decrease in interest expense of $311,645 or 29% which was offset by an unfavorable increase in the change in the fair value of derivative liabilities of $319,370 or 204%.\n\n \n\n**Net Income (Loss) Including Non-Controlling Interest**\n\n \n\nNet income (loss), including non-controlling interest, was a net loss of $8,450,552 for the year ended December 31, 2024 as compared to a net loss of $2,618,965 for the prior year, an increase in net loss of $5,831,587 or 222%. This increase was primarily attributable to the increase in the loss from operations discussed in the preceding paragraphs.\n\n \n\n**Non-Controlling Interest**\n\n \n\nNon-controlling interest was $74,959 for the year ended December 31, 2024 as compared to $157,114 for the prior year, a decrease of $82,155 or 52%. This change was attributable to a decrease in the losses related to Gladiator, the Company’s subsidiary wherein there is a non-controlling interest.\n\n \n\n**Net Income (Loss) Available to Common Shareholders**\n\n \n\nNet income (loss) available to common shareholders was $8,375,593 for the year ended December 31, 2024 as compared to a net loss of $2,461,851 for the prior year, an increase of $5,913,742 or 240%. This increase was primarily attributable to the change in the loss from operations of $5,816,099 as discussed in the preceding paragraphs.\n\n \n\n \n\n22\n\n*Table of Contents*\n\n \n\n**Liquidity and Capital Resources**\n\n \n\nWe manage liquidity risk by reviewing our financial position, cash flows, sources of liquidity, and capital requirements on an ongoing basis. The Company had cash on hand of $197,165 on December 31, 2025.\n\n \n\nThe following table summarizes the Company’s working capital positions and cash flows as of and for the years ended December 31, 2025 and 2024:\n\n \n\n \n\n \n\n**2025**\n\n \n\n \n\n**2024**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nWorking capital deficit\n\n \n$(4,192,539 )\n \n$(4,419,731 )\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet cash provided by / used in operating activities\n\n \n$(1,320,175 )\n \n$(123,755 )\n\nNet cash provided by / used in investing activities\n\n \n\n \n(790,000 )\n \n\n \n0\n \n\nNet cash provided by / used in financing activities\n\n \n\n \n2,176,186\n \n\n \n\n \n209,358\n \n\nNet increase (decrease) in cash\n\n \n\n \n66,011\n \n\n \n\n \n85,603\n \n\nCash – Beginning of year\n\n \n\n \n131,154\n \n\n \n\n \n45,551\n \n\nCash – End of year\n\n \n$197,165\n \n\n \n$131,154\n \n\n \n\n***Working Capital Deficit***\n\n \n\nThe decrease in the working capital deficit of $227,192 during the year ended December 31, 2025 was primarily attributable to a use of working capital of $845,550 related to a net increase in accounts receivable and a source of working capital of $406,182 related to a net increase in liabilities.\n\n \n\n***Operating Activities***\n\n \n\nCash used in operating activities of $1,320,176 during the year ended December 31, 2025 was primarily attributable to a use of cash of $845,550 related to a net increase in accounts receivable.\n\n \n\nCash used in operating activities of $123,755 during the year ended December 31, 2024 was attributable to a source of cash of $453,459 related to a decrease in accounts receivable, a source of cash of $128,967 related to an increase in accounts payable and accrued expenses, and a source of cash of $1,729,780 related to refunds received from the Internal Revenue Service all offset by a use of cash of $2,344,913 related to the support of operations.\n\n \n\n***Investing Activities***\n\n \n\nCash used in investing activities of $940,000 during the year ended December 31, 2025 was attributable to a use of cash of $650,000 related to the October 2025 acquisition discussed elsewhere in this Report and a use of cash of $140,000 related to the acquisition of fixed assets.\n\n \n\n***Financing Activities***\n\n \n\nCash provided by financing activities of $2,176,186 during the year ended December 31, 2025 was attributable to a source of cash of $135,000 related to the sale of common stock, a source of cash of $1,685,000 related to the sale of warrants, and a source of cash of $356,186 related to the issuance of notes payable.\n\n \n\nCash provided by financing activities of $209,358 during the year ended December 31, 2024 was attributable to a source of cash of $805,408 related to the sale of common stock and a source of cash of $348,874 related to the issuance of various notes payable which were offset by a use of cash of $936,556 related to the repayments of various notes and loans payable.\n\n \n\n \n\n23\n\n*Table of Contents*\n\n \n\n**Future Capital Requirements**\n\n \n\nAdditional capital will likely be required in 2026 to support the Company’s growth strategy, which consists of the acquisition of complementary established businesses and the expansion of services, will vary depending upon several factors. Such factors include, but are not limited to, marketplace conditions which will affect our ability to identify and close acquisition opportunities, expand the range and profitability of security services we provide to our clients, and generate revenue and cash flow from operations to support those activities.\n\n \n\nThe sale of additional equity or debt securities may result in additional dilution to our shareholders. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay, or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.\n\n \n\n**Liquidity and Going Concern**\n\n \n\nAs indicated in the accompanying audited financial statements, the Company reported a net loss of $1,664,817 for the year ended December 31, 2025 and utilized net cash in operating activities of $1,320,176 during that same period. Such net loss included a non-cash benefit $2,205,292 as discussed above and, in the absence of that benefit, the Company would have reported a net loss of $3,870,109. Additionally, the Company reported an accumulated deficit of $23,956,377, a stockholders’ deficit of $2,847,685, and a working capital deficit of $4,192,539 as of December 31, 2025.\n\n \n\nThe Company has historically incurred significant losses since inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations.\n\n \n\nThe Company anticipates that it will need to raise additional capital in order to continue to fund its operations. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of available funds will depend on many factors, including the Company’s ability to successfully expand to new markets and to acquire other companies to enhance and/or complement its existing service offerings.\n\n \n\nThere is no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. There is no assurance that financing will be available on terms which are commercially acceptable, or available at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease operations.\n\n \n\nThe Company’s consolidated financial statements do not include any adjustments that might be necessary if it is unable to continue as a going concern. Accordingly, the financial statements have been prepared on the basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.\n\n \n\nIn summary, the Company has historically incurred significant losses since inception, has not yet attained profitable operations, and remains dependent upon obtaining financing to support operations and pursue its business plans.\n\n \n\n**Off-Balance Sheet Transactions**\n\n \n\nNone."}