CV Sciences, Inc.

Previous wording

The following discussion of our financial condition and results of operations for the three and six months ended June 30, 2025 and 2024, respectively, should be read in conjunction with our condensed consolidated financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Current wording

The following discussion of our financial condition and results of operations for the three months ended March 31, 2026 and 2025, respectively, should be read in conjunction with our condensed consolidated financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Previous wording

We had net product sales of $3.3 million and gross profit of $1.6 million, representing a gross margin of 48.5%, in the third quarter of 2025, compared to net product sales of $3.9 million and gross profit of $1.8 million, representing a gross margin of 46.0%, in the third quarter of 2024. Net product sales decreased in the third quarter of 2025 when compared to the third quarter 2024 driven by lower sales volume due to out-of-stock issues for some of our key products and restrictive regulation in certain states. The total number of units sold during the third quarter 2025 decreased by 15.8% compared to the third quarter 2024, partially offset by an increase of our average sales price per unit of 1.4% compared to the same period 2024. In addition, our net sales declined due to lower third-party contract manufacturing (“CMO”) revenue in the third quarter of 2025 compared to the same period in 2024.

Current wording

We had net product sales of $3.2 million and gross profit of $1.6 million, representing a gross margin of 48.9%, in the first quarter of 2026, compared to net product sales of $3.6 million and gross profit of $1.7 million, representing a gross margin of 46.0%, in the first quarter of 2025. Our net product sales decreased in the first quarter of 2026 when compared to the first quarter 2025 mostly due to lower sales volume. The total number of units sold during the first quarter 2026 decreased by 12.2% compared to the first quarter 2025, partially offset by an increase of our average sales price per unit of 0.9%. In addition, 42.7% of our net revenue for the first quarter 2026 was from new products launched since January 1, 2023. During this time, we launched 45 new products. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.

Previous wording

Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in the third quarter of 2025 compared to the third quarter of 2024 by $0.4 million, or 19.6%. The reduction is mostly due to the lower number of units sold in the third quarter of 2025. In addition, cost of goods sold in the third quarter of 2025 decreased as a percentage of revenue compared to the second quarter of 2024, mostly due lower freight, lower inventory losses and product mix, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods in the third quarter of 2025 compared to the prior year period. Our gross profit in the third quarter 2025 declined by $0.2 million, or 11.2% from the third quarter of 2024. Our gross margin improved from 46.0% in the third quarter 2024 to 48.5% in the third quarter of 2025. The improvement in our gross margin is primarily due to lower freight, lower inventory losses, and product and channel mix, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods.

Current wording

Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in the first quarter of 2026 compared to the first quarter of 2025 by $0.3 million, or 16.2%. The reduction is mostly due to the lower number of units sold in the first quarter of 2026. In addition, cost of goods sold in the first quarter of 2026 also decreased as a percentage of revenue compared to the first quarter of 2025, mostly due to lower product cost and reduced losses. Our gross profit declined to $1.6 million in the first quarter of 2026 from $1.7 million in the first quarter of 2025. However, our gross margin improved from 46.0% in the first quarter 2025 to 48.9% in the first quarter of 2026. The improvement in our gross margin is primarily due to our lower product cost, reduced losses and additional cost savings.

Previous wording

Selling, general and administrative (“SG&A”) expense decreased to $1.8 million in the third quarter of 2025 compared to $2.1 million in the third quarter of 2024, which was primarily a result of the following:

Current wording

Selling, general and administrative (“SG&A”) expense decreased to $1.9 million in the first quarter of 2026 compared to $2.1 million in the first quarter of 2025, which was primarily a result of the following:

Previous wording

Sales expense decreased due to lower payroll, commission, travel and other expense, partially offset by an increase in stock-based compensation expense.

Current wording

Sales expense decreased due to lower commission, payroll, travel and other sales related expense.

Previous wording

Marketing expense decreased due to lower digital advertising spend, partially offset by an increase in stock-based compensation expense. Our reduced digital marketing expense declined due to lower advertising activity during the first nine months of 2025.

Current wording

Marketing expense decreased due to lower digital advertising spend and reduced marketing and promotional activities. Our reduced digital marketing expense declined due to lower advertising activity during the first quarter of 2026.

Previous wording

General and administrative ("G&A") expense for the third quarter of 2025 decreased from the prior year period due to lower legal and professional fees, insurance expense, depreciation and other administrative cost reductions, partially offset by an increase in stock-based compensation expense. In addition, we also recognized a gain in fair-value of contingent consideration liabilities of $0.2 million during the third quarter of 2024.

Current wording

General and administrative ("G&A") expense for the first quarter of 2026 decreased from the prior year period due to lower legal and professional fees, insurance expense, depreciation expense and other administrative cost reductions, partially offset by an increase in stock-based compensation expense.

Previous wording

We previously recorded a contingent liability for payroll taxes associated with the RSU release to our founder. On April 15, 2025, the statute of limitations for employer and employee Medicare portion of FICA taxes expired. As a result of the expiration of the relevant statutes of limitations, the IRS does not have the rights to assess and collect the $0.5 million of employer and employee Medicare portion of FICA taxes from the Company and we have made a change in accounting estimate and no longer expect to incur a loss with respect to this matter. As a result, we derecognized the contingent liability of $0.5 million during the nine months ended September 30, 2025. For more information, please see Note 12, Related Parties, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

We previously recorded a contingent liability for payroll taxes associated with the RSU release to our founder. On April 15, 2025, the statute of limitations for employer and employee Medicare portion of FICA taxes expired. As a result of the expiration of the relevant statutes of limitations, the IRS does not have the rights to assess and collect the $0.5 million of employer and employee Medicare portion of FICA taxes from the Company and we have made a change in accounting estimate and no longer expect to incur a loss with respect to this matter. As a result, we derecognized the contingent liability of $0.5 million during the three months ended March 31, 2025. For more information, please see Note 11, Related Parties, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Interest expense, net consists of interest expense and interest income. Interest expense, net was $0.1 million in the three months ended September 30, 2025 and 2024. Interest expense increased from $0.1 million for the nine months ended September 30, 2024 to $0.3 million for the nine months ended September 30, 2025 due to the amortization of debt discount and debt issuance costs for the note payable with an institutional investor.

Current wording

Interest expense, net consists of interest expense and interest income. Interest expense increased due to the amortization of debt discount and debt issuance costs for the notes payable with an institutional investor. Interest income was immaterial.

Previous wording

Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Quarterly Report on Form 10-Q, including our condensed financial statements, to aid in their analysis and understanding of our performance and in making comparisons.

Current wording

Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements, to aid in their analysis and understanding of our performance and in making comparisons.

Previous wording

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three and nine months ended September 30, 2025 and 2024 is detailed below:

Current wording

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three months ended March 31, 2026 and 2025 is detailed below:

Previous wording

Represents gain on extinguishment of debt related to our Streeterville note payable. For more information, please see Note 6, Debt, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Represents gain on extinguishment of debt related to our Streeterville note payable in 2025 and the extinguishment of our note payable with an Investor in 2026. For more information, please see Note 5, Debt, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

During the nine months ended September 30, 2025 and the year ended December 31, 2024, our primary sources of capital came from (i) cash generated from our operations, (ii) existing cash, and (iii) proceeds from note payable financings. As of September 30, 2025, we had approximately $0.4 million of cash and working capital of approximately $0.3 million.

Current wording

During the three months ended March 31, 2026 and the year ended December 31, 2025, our primary sources of capital came from (i) cash generated from our operations, (ii) existing cash, and (iii) proceeds from note payable financings. As of March 31, 2026, we had approximately $0.3 million of cash and a working capital deficit of approximately $0.2 million.

Previous wording

For the nine months ended September 30, 2025, the Company generated negative cash flows from operations of $0.1 million and had an accumulated deficit of $87.7 million as of September 30, 2025.

Current wording

For the three months ended March 31, 2026, the Company generated cash flows from operations of $0.1 million. However, the Company generated negative cash flows from operations for the last several years, and we had an accumulated deficit of $88.6 million as of March 31, 2026.

Previous wording

We believe that a combination of factors have adversely impacted our business operations for the nine months ended September 30, 2025 and the year ended December 31, 2024. Due to a low barrier entry market with a lack of a clear regulatory framework, we face intense competition from both licensed and illicit market operators that may also sell herbal supplements and hemp-based CBD consumer products. Because we operate in a market that is rapidly evolving and expanding globally, our customers may choose to obtain CBD products from our competitors, and our success depends on our ability to attract and retain our customers from purchasing CBD products elsewhere. To remain competitive, we intend to continue to innovate new products, build brand awareness, and make significant investments in our business strategy by introducing new products into the markets in which we operate, adopt quality assurance protocols and procedures, build our market presence, and undertake further research and development. In addition, we intend to make additional acquisitions to further diversify our product offerings.

Current wording

We believe that a combination of factors have adversely impacted our business operations for the three months ended March 31, 2026 and the year ended December 31, 2025. Due to a low barrier entry market with a lack of a clear regulatory framework, we face intense competition from both licensed and illicit market operators that may also sell herbal supplements and hemp-based CBD consumer products. Because we operate in a market that is rapidly evolving and expanding globally, our customers may choose to obtain CBD products from our competitors, and our success depends on our ability to attract and retain our customers from purchasing CBD products elsewhere. To remain competitive, we intend to continue to innovate new products, build brand awareness, and make significant investments in our business strategy by introducing new products into the markets in which we operate, adopt quality assurance protocols and procedures, build our market presence, and undertake further research and development. In addition, we intend to make additional acquisitions to further diversify our product offerings.

Previous wording

In February 2025, we entered into a securities purchase agreement with an institutional investor (the “Investor”), pursuant to which we issued and sold to the Investor a secured promissory note in the original principal amount of $1,600,000 (the “Note”). The Note carries an original issuance discount of $400,000 and we paid $10,000 to the Investor to cover legal fees. We incurred additional legal and professional fees of $72,424. The original issuance discount was deducted from the proceeds of the Note received by us which resulted in a purchase price received by us of $1,200,000.

Current wording

In February 2025, we entered into a securities purchase agreement with an institutional investor (the “Investor”), pursuant to which we issued and sold to the Investor a secured promissory note in the original principal amount of $1,600,000 (the “Note”). The Note carried an original issuance discount of $400,000 and the Company agreed to pay $10,000 to the Investor to cover legal fees. The Company incurred additional legal and professional fees of $72,424. The original issuance discount was deducted from the proceeds of the Note received by the Company which resulted in a purchase price received by the Company of $1,200,000.

Previous wording

We can pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we paid the Note in full on or before August 12, 2025, we would have received a $100,000 discount from the outstanding balance. The Note is secured by all of our assets pursuant to a security agreement and intellectual property security agreement entered into with the Investor on February 12, 2025. Our obligations under the Note are guaranteed by each of our subsidiaries. No interest will accrue on the Note unless and until an occurrence of an event of default, as defined in the Note.

Current wording

We were able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we would have repaid the Note in full on or before August 12, 2025, we would have received a $100,000 discount from the outstanding balance. The Note was secured by all of the Company's assets pursuant to a security agreement and intellectual property security agreement entered into with the Investor on February 12, 2025. The Company's obligations under the Note were guaranteed by each of the Company's subsidiaries.

Previous wording

No interest was to accrue on the Streeterville Note until an occurrence of an Event of Default, as defined in Section 4 of the Streeterville Note, if ever. The Streeterville Note provided for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified period of time, a cross-default to certain other indebtedness of the Company, the bankruptcy or insolvency of the Company or any significant subsidiary, monetary judgment defaults of a specified amount and other defaults resulting in liability of a specified amount. In the event of an occurrence of an Event of Default by us, Streeterville could have declaree all amounts owed under the Streeterville Note immediately due and payable. Also, a late fee and interest penalty of equal to either 22% per annum or the maximum rate allowable under law, whichever is lesser, could have been applied to any outstanding amount not paid when due or that remained outstanding while an Event of Default exists. The Streeterville Note was secured by all of our assets as set forth in the Security Agreement dated July 3, 2024.

Current wording

No interest was to accrue on the Note unless and until an occurrence of an event of default, as defined in the Note. The Note provided for customary events of default (an “Event of Default”), including, among other things, the nonpayment when due of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified cure period, a cross-default to certain other indebtedness and material agreements of the Company, and the occurrence of a bankruptcy, insolvency or similar event affecting the Company. Upon the occurrence of certain significant Events of Default as specified in the Note, the Investor could have increased the outstanding balance of the Note by 20%, and upon the occurrence of certain Events of Default, the Investor could have increased the outstanding balance of the Note by 5%. Upon the occurrence of an Event of Default, the Investor could have declared all amounts owed under the Note immediately due and payable. In addition, upon the occurrence of an Event of Default, interest were to begin accruing on the outstanding balance of the Note from the date of the Event of Default equal to the lesser of 18% per annum and the maximum rate allowable under law.

Previous wording

In July 2024, we entered into a note purchase agreement with Streeterville, pursuant to which we issued and sold to Streeterville a Secured Promissory Note (the "Streeterville Note") in the original principal amount of $1.2 million. The Streeterville Note carried an original issuance discount of $283,500. We incurred additional debt issuance costs of $5,000. As a result, we received aggregate net proceeds of approximately $0.9 million in connection with the sale and issuance of the Streeterville Note. The Streeterville Note was to mature on July 3, 2025 and we were required to make weekly repayments to Streeterville on the note in the amount of $22,856 until the Streeterville Note was paid in full. We were able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we repaid the Streeterville Note in full on or before December 31, 2024, we would have received a $75,000 discount from the outstanding balance.

Current wording

The New Note was due and payable on April 6, 2027 and we were required to make monthly repayments to the Investor of $46,154 starting on April 6, 2026. We were able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we would have repaid the New Note in full on or before April 6, 2026, we would have received an 8% discount from the outstanding balance. The New Note was secured by all of the Company's assets pursuant to a security agreement and intellectual property security agreement entered into with the Investor in October 2025. The Company's obligations under the New Note were guaranteed by each of the Company's subsidiaries. No interest was to accrue on the New Note unless and until an occurrence of an event of default, as defined in the New Note.

Previous wording

In October 2025, we entered into a financing agreement with First Insurance Funding in order to fund a portion of our insurance policies for the upcoming policy year. The amount financed was $0.2 million, which incurs interest at a rate of 7.72% per annum. We are required to make monthly payments of $18,299 from November 2025 through July 2026.

Current wording

In October 2025, we entered into a new finance agreement with First Insurance Funding in order to fund a portion of our insurance policies for the upcoming policy year. The amount financed is $0.2 million and incurs interest at an annual rate of 7.72%. We are required to make monthly payments of $18,299 from November 2025 through July 2026. The outstanding balance as of March 31, 2026 was $0.1 million.

Previous wording

In October 2024, we entered into a finance agreement with First Insurance Funding in order to fund a portion of our insurance policies. The amount financed is $0.2 million, which incurred interest at an annual rate of 8.42%. We were required to make monthly payments of $20,396 from November 2024 through July 2025. There was no outstanding balance as of September 30, 2025.

Current wording

In October 2024, we entered into a finance agreement with First Insurance Funding in order to fund a portion of our insurance policies for the most recent policy year. The amount financed was $0.2 million, which incurred interest at an annual rate of 8.42%. We were required to make monthly payments of $20,396 from November 2024 through July 2025. There was no outstanding balance as of March 31, 2026.

Previous wording

U.S. GAAP requires management to assess a company's ability to continue as a going concern within one year from the financial statement issuance date and to provide related note disclosure in certain circumstances. Our condensed consolidated financial statements and corresponding notes have been prepared assuming the Company will continue as a going concern. We generated negative cash flows from operations of $0.1 million for the nine months ended September 30, 2025 and had an accumulated deficit of $87.7 million as of September 30, 2025. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund our operations and growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit in order to continue its operations. However, there can be no assurances that additional working capital will be available to us on favorable terms, or at all, which would be likely to have a material adverse effect on the Company's ability to continue its operations.

Current wording

U.S. GAAP requires management to assess a company's ability to continue as a going concern within one year from the financial statement issuance date and to provide related note disclosure in certain circumstances. Our condensed consolidated financial statements and corresponding notes have been prepared assuming the Company will continue as a going concern. We generated cash flows from operations of $0.1 million for the three months ended March 31, 2026. However, we generated negative cash flows from operations for the last several years and had an accumulated deficit of $88.6 million as of March 31, 2026. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund our operations and growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit in order to continue its operations. However, there can be no assurances that additional working capital will be available to us on favorable terms, or at all, which would be likely to have a material adverse effect on the Company's ability to continue its operations.

Previous wording

A summary of our changes in cash flows for the three and nine months ended September 30, 2025 and 2024 is provided below:

Current wording

A summary of our changes in cash flows for the three months ended March 31, 2026 and 2025 is provided below:

Previous wording

Net cash used in operating activities includes net loss adjusted for non-cash items such as depreciation, amortization, bad debt expense, stock-based compensation, benefit of reversal of payroll tax liability, interest expense related to our promissory notes, and gain on debt extinguishment. Operating assets and liabilities primarily include balances related to funding of inventory purchases and customer accounts receivable. Operating assets and liabilities that arise from the funding of inventory purchases and customer accounts receivable can fluctuate significantly from day to day and period to period depending on the timing of inventory purchases and customer payment behavior.

Current wording

Net cash used in operating activities includes net loss adjusted for non-cash items such as depreciation, amortization, credit losses, stock-based compensation, benefit of reversal of payroll tax liability, interest expense related to our promissory notes, change in fair value of our convertible notes, and gain on debt extinguishment. Operating assets and liabilities primarily include balances related to funding of inventory purchases and customer accounts receivable. Operating assets and liabilities that arise from the funding of inventory purchases and customer accounts receivable can fluctuate significantly from day to day and period to period depending on the timing of inventory purchases and customer payment behavior.

Previous wording

Cash flows used in operating activities was $0.1 million in the nine months ended September 30, 2025, compared to $0.7 million in the nine months ended September 30, 2024. Our net loss of $0.8 million for the nine months ended September 30, 2025, adjusted for non-cash items of $0.7 million, resulted in a net loss, adjusted for non-cash items of $0.1 million, compared to a net loss, adjusted for non-cash items, of $1.0 million in the prior year period, an improvement of $0.9 million. Our non-cash adjustments increased by $0.1 million from $0.6 million in the nine months ended September 30, 2024 to $0.7 million in the nine months ended September 30, 2025. Non-cash adjustments increased due to higher stock-based compensation and interest expense, partially offset by the benefit for the reversal of accrued payroll tax of $0.5 million related to the RSU's previously issued to Mona during the nine months ended September 30, 2025. Recurring non-cash adjustments consists of depreciation, amortization, interest expense and stock-based compensation. Changes in working capital generated $0.3 million during the first nine months of 2024, but did not provide a material amount during the first nine months of 2025. Our net loss declined by $0.9 million, mostly due to the benefit for the reversal of accrued payroll taxes of $0.5 million and our improved operating performance and reduced SG&A expenses.

Current wording

Cash generated in operating activities was $0.1 million in the three months ended March 31, 2026, compared to cash used in operating activities was $0.1 million in the three months ended March 31, 2025. Our net loss for the three months ended March 31, 2026, adjusted for non-cash items, resulted in a net loss of $0.1 million, compared to a net loss, adjusted for non-cash items, of $0.2 million in the prior year period, an improvement of $0.1 million. Changes in working capital generated $0.2 million during the first three months of 2026, compared to $0.1 million during the same period of 2025, an improvement of $0.1 million. Our changes in working capital improved primarily due to continued usage and conversion of our inventory, partially offset by increased payments to our accounts payable. Our net loss increased by $0.5 million, mostly due to the non-recurring benefit for the reversal of accrued payroll taxes in the prior year. Non-cash adjustments increased by $0.5 million, as we recognized a benefit for the reversal of accrued payroll tax of $0.5 million related to the RSU's previously issued to Mona during the three months ended March 31, 2025. Recurring non-cash adjustments consists of depreciation, amortization, interest expense and stock-based compensation.

Previous wording

Cash used in investing activities was $0.1 million in the nine months ended September 30, 2025 related to improvements to our manufacturing facility at Elevated Softgels. We used cash in investing activities in the nine months ended September 30, 2024 for the acquisition of Elevated Softgels.

Current wording

Cash used in investing activities was $3,000 and $40,000 in the three months ended March 31, 2026 and 2025, respectively, and related to improvements to our manufacturing facility at Elevated Softgels.

Previous wording

Net cash provided by financing activities was $0.1 million for the nine months ended September 30, 2025 compared to $0.4 million for the nine months ended September 30, 2024. Our financing activities for the nine months ended September 30, 2025 consisted of proceeds from our note payable financing of $1.1 million, offset by repayments of Streeterville note of $0.6 million, repayments of our note financing of $0.3 million, and repayment of our insurance financing of $0.1 million. Our financing activities for the nine months ended September 30, 2024 consisted of proceeds from our Streeterville financing of $0.9 million, repayments of assumed debt for Cultured Foods of $0.1 million, repayments to Streeterville of $0.2 million and our insurance financing of $0.2 million.

Current wording

Net cash used in provided by financing activities was $0.1 million for the three months ended March 31, 2026 compared net cash provided by financing activities of $0.5 million for the three months ended March 31, 2025. Our financing activities for the three months ended March 31, 2026 consisted of payments for our insurance financing and debt issuance costs related to the amendment of our note payable. Our financing activities for the three months ended March 31, 2025 consisted of net proceeds from our note payable financing of $1.1 million, offset by repayments of Streeterville note of $0.6 million and our insurance financing.

Previous wording

There can be no assurance that the Company’s business and corresponding financial performance will not be adversely affected by general economic or consumer trends. In particular, global economic conditions remain constrained, and if such conditions continue, recur or worsen, this may have a material adverse effect on the Company’s business, financial condition and results of operations. Additionally, inflation has risen and Federal Reserve interest rates remain high, which may also materially adversely our business and corresponding financial position and cash flows.

Current wording

There can be no assurance that the Company’s business and corresponding financial performance will not be adversely affected by general economic or consumer trends, which may have a material adverse effect on the Company’s business, financial condition and results of operations. Additionally, inflation has risen, Federal Reserve interest rates remain high after increases during 2023, which may also materially adversely our business and corresponding financial position and cash flows.

Previous wording

Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations. If current levels of market disruption and volatility continue, the Company might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the market price of shares of our common stock, a decrease in asset values, additional write-downs and impairment charges and lower profitability.

Current wording

Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations. If current levels of market disruption and volatility continue, the Company might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the market price of our common stock, a decrease in asset values, additional write-downs and impairment charges and lower profitability.

Previous wording

There is currently a lack of a clear federal regulatory framework regarding the development, sale and use of CBD products in the United States. As a result, differing state regulations have emerged, which regulations are constantly evolving and differ significantly from state to state in many cases. Several states, including without limitation, California, Florida, Maryland, Minnesota, New York, Utah and Virginia, have recently adopted regulations that may impact our ability to sell certain of our products in these states. In September 2024, California Governor Gavin Newsom signed an emergency order into law, effectively banning the sale of hemp products intended for human use that contain detectable amounts of THC or certain other cannabinoids in California, amongst other things. The emergency order was originally in effect through March 25, 2025, and has been extended by one year. We have certain products which fall under this category that we have historically sold in California. It is currently unknown whether the duration of the emergency order will be extended, and/or whether it will be replaced with a permanent law with similar or more stringent prohibitions. This emergency order had a negative impact on our operating results for the three and nine months ended September 30, 2025 and we expect that it will continue to have a negative impact on our business going forward for so long as it, or any permanent law with similar or more stringent prohibitions, remains in effect; however, it is currently impossible to quantify the expected impact on our business. There is also substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the FDA and the extent to which manufacturers of products containing cannabinoids may engage in interstate commerce. These uncertainties have had, and may continue to have, an adverse effect on our business. Additionally, restrictive state regulations could adversely impact our revenue and earnings going forward.

Current wording

There is currently a lack of a clear federal regulatory framework regarding the development, sale and use of CBD products in the United States. As a result, differing state regulations have emerged, which regulations are constantly evolving and differ significantly from state to state in many cases. Several states, including without limitation, California, Florida, Maryland, Minnesota, New York, Utah and Virginia, have recently adopted regulations that may impact our ability to sell certain of our products in these states. In September 2024, California Governor Gavin Newsom signed an emergency order into law, effectively banning the sale of hemp products intended for human use that contain detectable amounts of THC or certain other cannabinoids in California, amongst other things. The emergency order was originally in effect through March 25, 2025, and has been extended by one year. We have certain products which fall under this category that we have historically sold in California. It is currently unknown whether the duration of the emergency order will be extended, and/or whether it will be replaced with a permanent law with similar or more stringent prohibitions. This emergency order had a negative impact on our operating results for the year ended December 31, 2025 and the three months ended March 31, 2026 and we expect that it will continue to have a negative impact on our business going forward for so long as it, or any permanent law with similar or more stringent prohibitions, remains in effect; however, it is currently impossible to quantify the expected impact on our business. There is also substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the FDA and the extent to which manufacturers of products containing cannabinoids may engage in interstate commerce. These uncertainties have had, and may continue to have, an adverse effect on our business. Additionally, restrictive state regulations could adversely impact our revenue and earnings going forward.

Previous wording

Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., among other restrictions. In February 2025, the U.S. administration announced increased tariff on imports from China, where certain components of our finished products are sourced. We are closely monitoring this evolving situation and evaluating our responses, which may include price adjustments or other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impact of such tariffs or trade restrictions. If further tariffs are imposed, we could be forced to raise prices on all or certain of our products or make changes to our operations, any of which could materially harm our revenue or operating results. Any additional future tariffs or quotas imposed may impact our sales, gross margin and profitability if we are unable to pass increased prices onto our customers. Currently, we cannot fully determine how these tariffs will affect our business operations. The overall impact on our business will be influenced by several variables, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, retaliatory measures by impacted trade partners, inflationary effects and broader macroeconomic responses, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.

Current wording

Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., among other restrictions. In February 2025, the U.S. administration announced increased tariffs on imports from China, where certain components of our finished products are sourced. We are closely monitoring this evolving situation and evaluating our responses, which may include price adjustments or other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impact of such tariffs or trade restrictions. If further tariffs are imposed, we could be forced to raise prices on all or certain of our products or make changes to our operations, any of which could materially harm our revenue or operating results. Any additional future tariffs or quotas imposed may impact our sales, gross margin and profitability if we are unable to pass increased prices onto our customers. Currently, we cannot fully determine how these tariffs will affect our business operations. The overall impact on our business will be influenced by several variables, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, retaliatory measures by impacted trade partners, inflationary effects and broader macroeconomic responses, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.

Previous wording

We are currently experiencing certain manufacturing constraints that are expected to result in temporary out-of-stock situations for some of our key products during the fourth quarter of 2025 and potentially in early 2026. We are working closely to resolve these issues and expect supply to normalize in 2026. While we do not currently anticipate a material long-term impact, these temporary shortages may affect our near-term revenue and customer order fulfillment.

Current wording

We have been experiencing certain manufacturing constraints that resulted in temporary out-of-stock situations for some of our key products. We are working closely to resolve these issues and expect inventory levels to normalize in 2026. While we do not currently anticipate a material long-term impact, these temporary shortages may affect our near-term revenue and customer order fulfillment.

Previous wording

We have disclosed in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report, filed with the SEC March 27, 2025, those accounting policies and estimates that we consider to be significant in determining our results of operation and financial condition. There have been no material changes to those policies and estimates that we consider to be significant since the filing of our 2024 Annual Report. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to GAAP.

Current wording

We have disclosed in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report, filed with the SEC March 26, 2026, those accounting policies and estimates that we consider to be significant in determining our results of operation and financial condition. There have been no material changes to those policies and estimates that we consider to be significant since the filing of our 2025 Annual Report, except for our election of the fair value option under ASC 825 for certain convertible notes during the three months ended March 31, 2026. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to U.S. GAAP.