CV Sciences, Inc.

Previous 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.

Current wording

The following discussion of our financial condition and results of operations for the three and six months ended June 30, 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 $3.2 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.

Current wording

We had net product sales of $3.0 million and gross profit of $1.5 million, representing a gross margin of 48.6%, in the second quarter of 2026, compared to net product sales of $3.6 million and gross profit of $1.8 million, representing a gross margin of 50.9%, in the second quarter of 2025. Net product sales decreased in the second quarter of 2026 when compared to the second quarter 2025 driven by lower sales volume due to restrictive regulation in certain states. The total number of units sold during the second quarter 2026 decreased by 14.9% compared to the second quarter 2025. Average sales price per unit also decreased by 1.9% compared to the same period 2025. In addition, our net sales declined due to lower third-party contract manufacturing (“CMO”) revenue in the second quarter of 2026 compared to the same period in 2025.

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 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.

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 second quarter of 2026 compared to the second quarter of 2025 by $0.2 million, or 13.6%. The reduction is mostly due to the lower number of units sold in the second quarter of 2026. In addition, cost of goods sold in the second quarter of 2026 increased as a percentage of revenue compared to the second quarter of 2025, mostly due higher freight, product mix, and higher cost of goods sold for Elevated Softgels and Cultured Foods in the second quarter of 2026 compared to the prior year period, partially offset by lower product cost. Our gross profit in the second quarter 2026 declined by $0.4 million, or 21.4% from the second quarter of 2025. Our gross margin declined from 50.9% in the second quarter 2025 to 48.6% in the second quarter of 2026. The decline in our gross margin is primarily due to higher freight, product and channel mix, and higher cost of goods sold for Elevated Softgels and Cultured Foods, partially offset by lower product cost.

Previous 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:

Current wording

Selling, general and administrative (“SG&A”) expense decreased to $1.7 million in the second quarter of 2026 compared to $1.9 million in the second quarter of 2025, which was primarily a result of the following:

Previous wording

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

Current wording

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

Previous 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.

Current wording

General and administrative ("G&A") expense for the second quarter of 2026 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.

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 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.

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 six months ended June 30, 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 increased due to the amortization of debt discount and debt issuance costs for the notes payable with an institutional investor. Interest income was immaterial.

Current wording

Other expense consists of interest expense, net, gain on debt extinguishment, loss on conversion and change in fair value of convertible notes. Interest expense, net consists of interest expense and interest income. Interest expense was mostly related to the amortization of debt discount and debt issuance costs for the note payable with an institutional investor prior to its amendment to a convertible note. Gain on debt extinguishment relates to the recognized gain notes payable modification in 2026 and the refinancing of the Streeterville note payable in 2025. During the three and six months ended June 30, 2026, we recognized a loss on conversion related to the true-up feature in our convertible notes. In addition, we made an irrevocable election to measure the convertible notes at fair value. Any changes in fair value are recorded as change in fair value of convertible notes.

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 consolidated 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 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 months ended March 31, 2026 and 2025 is detailed below:

Current wording

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three and six months ended June 30, 2026 and 2025 is detailed below:

Previous wording

Represents the change in fair value of our convertible notes. For more information, please see Note 6, Convertible Notes, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Represents change in fair value of our convertible notes. For more information, please see Note 6, Convertible Note, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous 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.

Current wording

Represents gain on extinguishment of debt related to our notes payable. 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 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.

Current wording

During the six months ended June 30, 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 June 30, 2026, we had approximately $0.3 million of cash and working capital deficit of approximately $64,000.

Previous 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.

Current wording

For the six months ended June 30, 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 had an accumulated deficit of $89.4 million as of June 30, 2026.

Previous 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.

Current wording

We believe that a combination of factors have adversely impacted our business operations for the six months ended June 30, 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

The Company has until November 13, 2026 to assess and, if necessary, modify its product formulations, labeling, and related compliance measures in response to this legislation. While management cannot reasonably estimate the financial effect of this legislation at this time, it could have a material adverse impact on the Company's business, results of operations, and cash flows.

Current wording

The Company is evaluating the potential impact of this legislation on its product portfolio, supply chain, and future operating results. The Company is in the process to assess and, if necessary, modify its product formulations, labeling, and related compliance measures in response to this legislation. While management cannot reasonably estimate the financial effect of this legislation at this time, it could have a material adverse impact on the Company's business, results of operations, and cash flows.

Previous wording

The Company made an irrevocable election to measure the Amended Notes at fair value as it believes the fair value option provides a greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the common stock. As of March 31, 2026, the fair value of the Amended Notes was $1.1 million.

Current wording

The Company made an irrevocable election to measure the Amended Notes at fair value as it believes the fair value option provides a greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the common stock. As of June 30, 2026, the fair value of the Amended Notes was $1.0 million.

Previous wording

The following table summarizes the change in fair value of the Company’s convertible notes recorded as Level 3 liabilities for the three months ended March 31, 2026:

Current wording

The following table summarizes the change in fair value of the Company’s convertible notes recorded as Level 3 liabilities:

Previous wording

During the three months ended March 31, 2026, the Investor converted amounts payable under such Amended Notes into an aggregate of 9,194,757 shares of the Company common stock at a weighted average conversion price of $0.06 per share, resulting in a reduction of the Amended Notes balance of $551,685. The Company recorded its estimated true-up obligation associated converted shares during the three months ended March 31, 2026 of $146,000 as accrued expenses, which is included in “Changes in fair value of convertible notes” in the Condensed Consolidated Statement of Operations.

Current wording

During the three months ended June 30, 2026, the Investor converted amounts payable under such Amended Notes into an aggregate of 19,664,108 shares of the Company common stock at a weighted average conversion price of $0.04 per share, resulting in a reduction of the Amended Notes balance of $705,998. During the six months ended June 30, 2026, the Investor converted amounts payable under such Amended Notes into an aggregate of 28,858,865 shares of the Company common stock at a weighted average conversion price of $0.04 per share, resulting in a reduction of the Amended Notes balance of $1,257,684. The Company recorded its estimated true-up obligation associated with converted shares during the six months ended June 30, 2026 of $25,633 as accrued expenses, which is included in “Change in fair value of convertible notes payable” in the Condensed Consolidated Statement of Operations.

Previous wording

Subsequent to March 31, 2026, the Company issued the Investor two Third Notes in the aggregate principal amount of $256,164, representing the aggregate shortfall of shares sold by the Investor in excess of $94,000. Also, subsequent to March 31, 2026, the Investor converted amounts payable under such Amended Notes into an additional 10,519,108 shares of the Company common stock at a weighted average conversion price of $0.04 per share, resulting in a further reduction of the Amended Notes balance of $431,648.

Current wording

Subsequent to June 30, 2026, the Company issued the Investor a new Third Note in the aggregate principal amount of $71,811, representing the aggregate shortfall of shares sold by the Investor in excess of $94,000. Also, subsequent to June 30, 2026, the Investor converted amounts payable under such Amended Notes into an additional 12,706,600 shares of the Company common stock at a weighted average conversion price of $0.03 per share, resulting in a further reduction of the Amended Note balance of $381,198. As a result of these conversions subsequent to June 30, 2026, one of the two Amended Notes has been fully repaid and satisfied.

Previous 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.

Current 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.

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 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.

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. 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 June 30, 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 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.

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 six months ended June 30, 2026. However, we generated negative cash flows from operations for the last several years and had an accumulated deficit of $89.4 million as of June 30, 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 months ended March 31, 2026 and 2025 is provided below:

Current wording

A summary of our changes in cash flows for the three and six months ended June 30, 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, 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.

Current 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, change in fair value of our convertible notes, loss on note conversions 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 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.

Current wording

Cash generated in operating activities was $0.1 million in the six months ended June 30, 2026, compared to $0.2 million in the six months ended June 30, 2025. Our net loss of $1.4 million for the six months ended June 30, 2026, adjusted for non-cash items, resulted in a net loss of $0.2 million, compared to a net loss, adjusted for non-cash items, of $44,000 in the prior year period. Changes in working capital generated $0.4 million during the first six months of 2026 and 2025. Our changes in working capital are mostly related to continued usage and conversion of our inventory. Our net loss increased by $1.0 million, mostly due to the non-recurring benefit for the reversal of accrued payroll taxes in the prior year of $0.5 million and the non-cash charges related to our convertible notes of $0.7 million. Recurring non-cash adjustments consists of depreciation, amortization, interest expense and stock-based compensation.

Previous 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.

Current wording

Cash used in investing activities was $10,000 and $89,000 in the six months ended June 30, 2026 and 2025, respectively, and related to improvements to our manufacturing facilities in Poland and at Elevated Softgels.

Previous 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.

Current wording

Net cash used in financing activities was $0.1 million for the six months ended June 30, 2026 compared to net cash provided by financing activities of $0.3 million for the six months ended June 30, 2025. Our financing activities for the six months ended June 30, 2026 consisted of payments for our insurance financing and debt issuance costs related to the amendment of our notes payable. Our financing activities for the six months ended June 30, 2025 consisted of net proceeds from our note payable financing of $1.1 million, offset by repayments of Streeterville note of $0.7 million and our insurance financing of $0.1 million.

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 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.

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 have impacted our ability to sell certain of our products in these states. These various state regulations have had a negative impact on our operating results for the year ended December 31, 2025 and the three and six months ended June 30, 2026 and we expect that these regulations 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 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.

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. We are currently incurring 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 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.

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. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to GAAP.