cbdMD, Inc.

PART 1**–** FINANCIAL INFORMATION**

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2025 AND SEPTEMBER 30, 2025

(Unaudited)

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2025 AND SEPTEMBER 30, 2025

(Unaudited)

(continued)

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE Three MONTHS ENDED December 31, 2025 and 2024

(Unaudited)

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE Three MONTHS ENDED December 31, 2025 and 2024

(Unaudited)

Supplemental Disclosures of Cash Flow Information:

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE three months ended December 31, 2025

(Unaudited)

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE three months ended December 31, 2024

(Unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(unaudited)

NOTE1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

cbdMD, Inc. (“cbdMD,” “we,” “us,” “our,” or the “Company”) is a corporation organized under the laws of the State of North Carolina, formed on* March 17, 2015as Level Beauty Group, Inc. In November 2016we changed the name of the Company to Level Brands, Inc. and on May 1, 2019we changed the name of our Company to cbdMD, Inc. We operate from offices located in Charlotte, North Carolina. Our fiscal year end is established as September 30.*

There have beenno material changes in the Company's significant accounting policies from those previously disclosed in the Annual Report as of and for the fiscal year ended* September 30, 2025* as filed on Form10-K, as amended (the*“2025* 10-K”).

The accompanying unaudited interim condensed consolidated financial statements of cbdMD have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the2025 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of consolidated financial position and the consolidated results of operations for the interim periods presented have been reflected herein.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries; CBDI, Paw CBD, Proline and Therapeutics. All material intercompany transactions and balances have been eliminated in consolidation.

Reverse Stock Split

On* April 17, 2025,the Board of Directors effected a reverse stock split at a ratio ofone*-for-eight, effective as of* May 6, 2025**.* Unless otherwise indicated, all share numbers in this filing, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the reverse stock split (the “Reverse Stock Split”).

Use of Estimates

The Company’s condensed consolidated financial statements have been prepared in accordance with US GAAP and requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying condensed consolidated financial statements include, but arenot limited to, allowances for credit losses, inventory valuation reserves, expected sales returns and allowances, certain assumptions related to the valuation of investments and other securities, acquired intangibles and long-lived assets, the recoverability of intangible and long-lived assets, and income taxes, including deferred tax valuation allowances and reserves for estimated tax liabilities. Actual results could differ from these estimates. The Company continues to monitor macroeconomic conditions to remain flexible and to optimize and evolve its business as appropriate.

Cash and Cash Equivalents

For financial statements purposes, the Company considers all highly liquid investments with a maturity of less thanthree months when purchased to be cash equivalents.

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Accounts Receivable

Accounts receivables are stated at cost less an allowance for credit losses, if applicable. Credit is extended to customers after an evaluation of the customer’s financial condition, and generally collateral isnot required as a condition of credit extension. Management’s determination of the allowance for credit losses is based on an evaluation of the receivables, past experience, current economic conditions, and other risks inherent in the receivables portfolio. The balance for allowance for credit losses was $600,983 and $599,521 on* December 31, 2025and September 30, 2025,*respectively.

The following table represents a summary of the allowance for credit losses for the periods ended* December 31, 2025and September 30, 2025:*

Merchant Receivable and Reserve

The Company primarily sells its products through the internet and has an arrangement to process customer payments withthird-party payment processors and negotiate the fee based on the market. The arrangement with the payment processors requires that the Company pay a fee between 2.5% and 4.0% of the transaction amounts processed. Pursuant to this agreement, there can be a waiting period between2 to5 days prior to reimbursement to the Company, as well as a calculated reserve which some payment processors hold back. Fees and reserves can change periodically with notice from the processors. At* December 31, 2025* and* September 30, 2025*, the receivable from payment processors included approximately $744,662 and $786,449, respectively, for the waiting period amount and is recorded as accounts receivable in the accompanying condensed consolidated balance sheet.

Inventory

Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis. The cost of inventory includes product cost, freight-in, and production fill and labor. Write-offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, forecasted future sales volume and pricing and through specific identification of obsolete or damaged products. We assess inventory quarterly for slow moving products and potential impairments and at a minimum perform a physical inventory count annually near fiscal year end. The reserve for inventory was $46,848 and $48,738 for* December 31, 2025* and* September 30, 2025*, respectively.

Property and Equipment

Property and equipment items are stated at cost, less accumulated depreciation. Expenditures on routine maintenance and repairs are charged to operations as incurred. Depreciation is charged to expense over the estimated useful lives of the assets using the straight-line method. Generally, the useful lives arefive years for manufacturing equipment and automobiles andthree years for software, computer, and furniture and equipment. The useful life for leasehold improvements are over the term of the lease, or the remaining economic life of the asset, whichever is shorter. The cost and accumulated depreciation of property are eliminated from the accounts upon disposal, and any resulting gain or loss is included in the consolidated statements of operations for the applicable period. Long-lived assets held and used by the Company are reviewed for impairment whenever changes in circumstance indicate the carrying value of an asset* may**not* be recoverable.

Fair Value Accounting

The Company utilizes relevant accounting standards for fair value, which include the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements. Fair value is a market-based measurement,not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels1 and2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level3 of the hierarchy).

Level1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level2 inputs are inputs other than quoted prices included in Level1 that are directly or indirectly observable for the asset or liability. Level2 inputs* mayinclude quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability. Level3* inputs are unobservable inputs for the asset or liability, which are based on an entity’s own assumptions, as there is little, if any, observable market activity. In instances where the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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When the Company records an investment in marketable securities the carrying value is assigned at fair value. Any changes in fair value for marketable securities during a given period will be recorded as an unrealized gain or loss in the consolidated statement of operations. For investment in other securities without a readily determinable fair value, the Company* may*elect to estimate its fair value at cost less impairment plus or minus changes resulting from observable price changes.

The Company elected the fair value option for its convertible notes. The convertible notes were initially recognized at fair value on the balance sheet. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk, are recorded in non-operating income (loss). The changes in fair value related to instrument-specific credit risk are recorded through other comprehensive loss. See Note11 for more information related to the convertible notes.

Intangible Assets

Trademarks, tradenames, and technology relief from royalty are amortized over an estimated useful life of5-10 years. The Company performs impairment tests whenever events or changes in circumstances indicate that the asset group's carrying value* may**not* be recoverable.

Revenue Recognition

The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following thefive-step model including: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Performance Obligations

Contract liabilities represent unearned revenues and are presented as deferred revenue on the condensed consolidated balance sheets.

Other than accounts receivable, the Company hasno material contract assets at* December 31, 2025*.

The following tables represent a disaggregation of revenue by sales channel:

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Cost of Sales

The Company’s cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead,third-party providers, and outbound freight for the Company’s products sales. For the Company’s product sales, cost of sales also includes the cost of refurbishing products returned by customers that will be offered for resale, if any, and the cost of inventory write-downs associated with adjustments of held inventories to their net realizable value. These expenses are reflected in the Company’s consolidated statements of operations when the product is sold and net sales revenues are recognized or, in the case of inventory write-downs, when circumstances indicate that the carrying value of inventories is in excess of their net realizable value.

Income Taxes

The Company is a North Carolina corporation that is treated as a corporation for federal and state income tax purposes. CBDI, Therapeutics, Proline Global, and Paw CBD are wholly owned subsidiaries and are disregarded entities for tax purposes and their entire share of taxable income or loss is included in the tax return of the Company.

The Company accounts for income taxes utilizing the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company uses the inside basis approach to determine deferred tax assets and liabilities associated with its investment in a consolidated pass-through entity. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely thannot that the net deferred asset willnot be realized.

Concentrations

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and securities.

The Company places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers*$250,000* for substantially all depository accounts. The Company from time to time* may*have amounts on deposit in excess of the insured limits.

Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies. Management considers these customer receivables to represent normal business risk. The Company didnot have any customers that represented a significant amount of our sales for thethree months ended* December 31, 2025*.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date fair value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that** may** be settled by the issuance of those equity instruments.

The Company uses the Black-Scholes model for measuring the fair value of options and warrants. The fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. The Company recognizes forfeitures when they occur.

Earnings (Loss) Per Share

The Company computes basic loss per share by dividing net loss and net loss attributable to common shareholders, after deducting preferred stock dividends, by the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.

Liquidity and Going Concern Considerations

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company experienced a loss of $283,131 for thethree months ended* December 31, 2025*, and an accumulated deficit of approximately $179.8 million at* December 31, 2025.*

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While the Company believes in the viability of its strategy and path to profitability, and in its ability to raise additional funds, there can beno assurance that these actions will be successful. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding on commercially reasonable terms, if required. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern fortwelve months after the date that the accompanying condensed consolidated financial statements are issued. These condensed consolidated financial statements and notes donot include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that* may*result in the Company's inability to continue as a going concern.

Convertible Notes

Effective* February 1, 2024,the Company entered into a Securities Purchase Agreement dated January 30, 2024withfive* institutional investors (the “Investors”) pursuant to which the Investors advanced the Company an aggregate of $1,250,000 in gross proceeds and the Company issued to each Investor an 8% Senior Secured Original Issue 20% Discount Convertible Promissory Note, in the aggregate principal amount of $1,541,666 (the “Notes”). The Company is using the proceeds from the issuance of the Notes for working capital and general corporate purposes. During the fiscal year ended* September 30, 2025the Notes were converted and satisfied in full and areno* longer an obligation of the Company.

New Accounting Standards

In* November 2023,the FASB issued guidance that updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance on an annual and interim basis. The Company adopted this guidance for its annual period ending September 30, 2025.While the adoption of this standard didnot* have a material impact on the Company’s Consolidated Financial Statements, the new guidance resulted in increased disclosures on reportable segments in Note15 of the Notes to the Consolidated Financial Statements.

In* November 2024,the FASB issued guidance that requires disaggregation of specific expense categories in disclosures within the footnotes to the financial statements on an annual and interim basis. The Company is required to adopt this guidance for its annual period ending September 30, 2028*and all interim periods thereafter on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

In* December 2023,the FASB issued guidance that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The Company is required to adopt this guidance for its annual period ending September 30, 2026,*which will result in increased disclosures in the Notes to its Consolidated Financial Statements.

NOTE2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES

The Company has, from time to time, entered into contracts where a portion of the consideration provided by the counterparty in exchange for the Company’s products or services was common stock, options or warrants (an equity position). In these situations, upon invoicing the customer for the stock or other instruments, the Company recorded the receivable as accounts receivable other, and used the value of the stock or other instrument upon invoicing to determine the value. In determining fair value of marketable securities and investment other securities, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. The Company determines the fair value of marketable securities and investment other securities based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the fair value hierarchy distinguishes between observable and unobservable inputs.

On* April 7, 2022,CBD Industries, LLC entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC (“Steady State”). The equipment sale is initially valued at approximately $1.8 million for accounting purposes, the sale price consisting of products to be provided to the Company under the manufacturing and supply agreement and $1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's completed Series C financing. In Septemberof2023,* the Company impaired this investment by $700,000. The Company has classified this investment as Level3 for fair value measurement purposes as there areno observable inputs and has included it in non-current assets on the accompanying condensed consolidated balance sheets as the Company plans to hold this investment.

In valuing the investments, the Company used the value paid, which was the price offered to allthird-party investors.

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NOTE3 - INVENTORY

Inventory at* December 31, 2025* and* September 30, 2025* consists of the following:

Abnormal amounts of idle facility expense, freight, handling costs, scrap and wasted material (spoilage) are expensed in the period they are incurred andno material expenses related to these items occurred in thethree months ended* December 31, 2025*.

NOTE4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

Depreciation expense related to property and equipment was $54,160 and $106,740 for thethree months ended* December 31, 2025and2024*, respectively.

NOTE5 – INTANGIBLE ASSETS

Intangible Assets

Intangible assets consisted of the following as of:

Amortization expense related to definite lived intangible assets was $191,282 and $191,267 for thethree months ended* December 31, 2025and2024*, respectively.

NOTE6 – RELATED PARTY TRANSACTIONS

None.

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NOTE7 – SHAREHOLDERS’** EQUITY**

Preferred Stock Conversion and Reverse Stock Split

In* October 2019,the Company designated 5,000,000 of it's 50,000,000 authorized shares of preferred stock as 8.0% Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”). Series A Preferred Stock ranked senior to common stock for liquidation or dividend and holders were entitled to receive cumulative cash dividends at an annual rate of8.0%* payable monthly in arrears for the prior month.

Among other matters, during the Company's annual meeting held on* April 10, 2025,*the shareholders of the Company approved:

The Board of Directors elected to effectuate the Automatic Preferred Conversion on* May 6, 2025at4:01* p.m. Eastern Time (the “Mandatory Exchange Date”). On the Mandatory Exchange Date, all Series A Preferred Stock, together with accrued and unpaid dividends, was converted in to 65,000,000 shares (pre-split) of Common Stock, dividends on converted shares ceased to accrue, and the Series A Preferred Stock ceased trading.

The Board of Directors elected to implement aone-for-eight (1:8) reverse stock split of the Company’s common stock (the “Reverse Stock Split”) on* May 6, 2025,effective at4:02* p.m. Eastern Time, immediately following and therefore inclusive of shares of common stock issued in connection with the Automatic Preferred Conversion. Following the Reverse Stock Split, holders of fractional shares received, in lieu of a fractional share, the number of shares rounded up to the next whole number (“Round Up Shares”).89 Round Up Shares were issued as a result of the Reverse Stock Split.

Preferred stock transactions

On* September 29, 2025,the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Series B Certificate of Designation”) designating 1,700,000 shares of the Company’s authorized preferred stock as Series B Convertible Preferred Stock, par value $0.001 per share and stated value of $1.00 per share. Each share of the Series B Preferred Stock is initially convertible into common stock at an initial conversion price of $1.00, subject to anti-dilution adjustments and price protection provisions, which may*be triggered upon the issuance of common stock options or convertible securities at a price below the then-applicable conversion price, and Alternate Conversion rights (as defined in the Series B Certificate of Designation) resulting from a Triggering Event (as defined in the Series B Certificate of Designation). The Series B Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Series B Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the Stated Value (as defined in the Series B Certificate of Designation) shall be increased by the amount of such unpaid dividends. The Series B Preferred Stock is further subject to repricing adjustments upon the effectiveness of a registration statement wherein the conversion price shall equal the lower of (a) the original conversion price or (b) the closing price of the common stock on the effective date of such registration statement. Additionally, the Series B Preferred Stock is subject to future financing exchange options upon any issuance by the Company, or subsidiaries, of any security with terms more favorable than those set forth in the Series B Certificate Designation.

With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series B Preferred Stock ranks pari passu with the Series C Convertible Preferred Stock and senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series B Preferred Stock. The holders of Series B Preferred Stock haveno voting power andno right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series B Preferred Stock. In addition, the Series B Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Series B Certificate of Designation contains various restrictive covenants and protective provisions, including restrictions on the Company’s ability to incur additional indebtedness, redeem capital stock, pay cash dividends, dispose of assets outside of the ordinary course of business or make certain issuances of securities. The complete rights, preferences and limitations of the Series B Preferred Stock are set forth in the Series B Certificate of Designation which is filed as Exhibit3.1 to the Company’s Form8-K Current Report filed on* October 6, 2025.*

On* December 19, 2025,the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Series C Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share and stated value of $2.25 per share. Each share of the Series C Preferred Stock is initially convertible into common stock at a conversion price of $2.25, subject to anti-dilution adjustments and price protection provisions, which may*be triggered upon the issuance of common stock options or convertible securities at a price below the then-applicable conversion price, and Alternate Conversion rights (as defined in the Series C Certificate of Designation) resulting from a Triggering Event (as defined in the Series C Certificate of Designation). The Series C Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Series C Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the Stated Value (as defined in the Series C Certificate of Designation) shall be increased by the amount of such dividends unpaid dividends. Further, the conversion price of the common stock is subject to adjustment on the effective date of the initial registration statement registering the shares of common stock issuable upon conversion of the Series C Preferred Stock, equal to the lower of the (a) original conversion price or (b) the closing sale price of the common stock on the date prior to the effective date of such registration statement subject to a floor price of $0.65 per share, and repricing adjustments upon the effectiveness of any subsequent registration statement wherein the conversion price shall equal the lower of the (a) original conversion price or (b) the closing price of the common stock on the effective date of such registration statement.

With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Convertible Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock haveno voting power andno right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Series C Certificate of Designation contains various restrictive covenants and protective provisions, including restrictions on the Company’s ability to incur additional indebtedness, redeem capital stock, pay cash dividends, dispose of assets outside of the ordinary course of business or make certain issuances of securities. The complete rights, preferences and limitations of the Series C Preferred Stock are set forth in the Series C Certificate of Designation which is filed as Exhibit3.12 to the Company’s Form10-K Annual Report for the year ended* September 30, 2025filed on December 19, 2025.*

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Securities Purchase Agreement

On* December 15, 2025,the Company entered into a Securities Purchase Agreement (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $20,000,000 (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99% of the outstanding shares of the Company’s common stock as of the date of the ELOC Agreement in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S-1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the30th* calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions. In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser 40,000 shares of common stock as commitment shares and thereafter an amount of shares equal to 0.5% of the Available Amount, which shall be issued in a pro rata fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company doesnot have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $0.50 (the “Purchase Date”), the Company* maydirect the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”)not to exceed on any single business day the lesser of (i) $500,000 of shares of common stock or (ii) $20,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95% of (A) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (B) the daily volume weighted average price of the common stock for thefive* trading days immediately preceding the applicable Purchase Date for such Fixed Purchase.

In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stocknot less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company* mayalso direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95% of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date. If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, inno* event* may*the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $10,000,000, unless such limitation is waived by the ELOC Purchaser.

Common Stock Transactions

During thethree months ended* December 31, 2025,the Company (i) issued 1,108,793 shares during late December 2025*in connection with the conversion of the Series B Preferred Stock and (ii)40,000 shares of common stock (commitment shares) in connection with the closing of the ELOC.

During thethree months ended* December 31, 2024,*the Company (i) issued 177,633 shares of common stock for conversion of the Notes and (ii)21,875 shares of common stock to a consultant for advisory services.

NOTE8 – STOCK BASED COMPENSATION

The following table summarizes stock option activity for thethree months ended* December 31, 2025*:

As of* December 31, 2025*, there wasno remaining unrecognized stock compensation costs as all stock options were vested.

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NOTE9 - WARRANTS

Transactions involving the Company equity-classified warrants for thethree months ended* December 31, 2025* are summarized as follows:

The following table summarizes outstanding common stock purchase warrants as of* December 31, 2025*:

NOTE10 – **** COMMITMENTS AND CONTINGENCIES

From time to time, the Company is involved in legal proceedings and subject to various claims that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company isnot currently a party to any legal proceedings the outcome of which, the Company believes, if determined adversely, would individually or in the aggregate have a material adverse effect on the Company’s Consolidated Financial Statements.

During2025, the Company continued to expand distribution of its hemp-derived beverage products. The Company has entered into agreements with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain terms and conditions, which* mayvary depending on the form of the agreement. Such agreements remain in effect for their then-current term as long as the Company's products are being distributed but are subject to specified termination rights held by each party. Additionally, the Company is entitled to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may*be material depending on the agreement and the sell through of the product set.

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NOTE11 – NOTE PAYABLE

Effective* February 1, 2024,the Company entered into a Securities Purchase Agreement dated January 30, 2024,withfive* institutional investors (the “Investors”) whereby the Investors advanced the Company an aggregate of $1.25 million in gross proceeds and the Company issued to the Investors 8% Senior Secured Original Issue 20% Discount Convertible Promissory Notes, in the aggregate principal amount of $1.54 million (the “Notes”).

Each Note bore interest of 8% per annum and was to mature on* July 30, 2025.*Further, the notes were convertible, at the option of the holder, into shares of common stock at a conversion price which was adjusted for certain down-round provisions, as defined in the Securities Purchase Agreement. At issuance, the Company elected the fair value option to account for the Notes. The Notes were initially recognized at a fair value of $2.7 million. Excluding the impact of the change in fair value related to instrument-specific credit risk, which was recorded in other comprehensive income, subsequent changes in fair value were recorded in non-operating income at each reporting period.

During fiscal2025, the Company issued an aggregate of 267,597 shares of common stock to satisfy all remaining outstanding obligations of the Notes.

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NOTE12 – LEASES

The Company has lease agreements for its warehouse and executive office with the lease period expiring in* September 2026.The Company recognizes leasing arrangements on the consolidated balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets. The Company determines whether an arrangement is a lease at inception and classifies it as finance or operating. The Company’s lease is classified as an operating lease. The Company’s lease doesnot* contain any residual value guarantees.

Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements isnot readily determinable, the Company determined an incremental borrowing rate for its lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. The Company’s lease terms* may*include options to extend or terminate the lease.

In addition to the monthly base amounts in the lease agreement, the Company is required to pay real estate taxes, insurance and common area maintenance expenses during the lease term and are treated as period expenses during the time incurred.

Lease costs on operating leases are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the condensed consolidated statements of operations.

Components of operating lease costs are summarized as follows:

Supplemental cash flow information related to operating leases is summarized as follows:

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As of* December 31, 2025*, our operating lease had a weighted average remaining lease term of 0.75 years and a weighted average discount rate of 4.66%.

Future minimum aggregate lease payments under operating leases as of* December 31, 2025* are summarized as follows:

NOTE13 – LOSS PER SHARE

At* December 31, 2025*,490,850 potential shares underlying options, unvested RSUs and warrants as well as 1.6 million shares issuable upon conversion of our Series B and C Preferred stock were excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share. At* December 31, 2024*,14,104 potential shares underlying options, unvested RSUs and warrants as well as 23,153 convertible preferred shares, were excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share.

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NOTE14 – INCOME TAXES

The Company has a valuation allowance against the net deferred tax assets, with the exception of the deferred tax liabilities that result from indefinite-life intangibles (“naked credits”). The Company has determined that using the general methodology for calculating income taxes during an interim period for the quarters ending* December 31, 2019,** March 31, 2020,and June 30, 2020,provided for a wide range of potential annual effective rates. At September 30, 2023,the Company recorded a net deferred tax asset ofzero as the cumulative net deferred tax asset had a full valuation on it and there wasnot* enough positive evidence that would warrant recognizing the benefit of the net deferred tax asset. In addition, the net indefinite lived deferred tax items were a deferred tax asset so there wasnot any recognition of a deferred tax liability related to indefinite lived deferred tax liabilities. At* December 31, 2025*, the Company determined the same circumstances to be true and therefore recorded a net deferred tax asset of zero.

NOTE15 – SEGMENT INFORMATION

The Company operates as asingle reportable segment. Our chief operating decision maker (CODM) is the Chief Executive Officer, who reviews financial information on a consolidated basis for purposes of assessing performance and allocating resources. Accordingly, all of the Company's operations are considered a single operating segment under the criteria of ASC280, Segment Reporting.

Because we have a single reportable segment, the segment information presented herein is consistent with the condensed consolidated financial statements. The required segment information for revenue, profit or loss, assets, and specified expenses (such as depreciation and amortization) can be found on the face of the condensed consolidated income statement and condensed consolidated balance sheet.

NOTE16 – SUBSEQUENT EVENTS

On* January 12, 2026,the Company and Gaia Botanicals, LLC, a Colorado limited liability company d/b/a Bluebird Botanicals (“Bluebird”) and Bluebird’s wholly owned subsidiaries entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). Under the Asset Purchase Agreement, the Company acquired substantially all of Bluebird’s assets, including Bluebird’s brand name, website, related trademarks, inventory, and certain other assets, and assumed certain liabilities. This strategic acquisition brings togethertwo* mission-aligned brands and broadens the Company's customer base. The purchase consideration consisted of (i)425,000 shares of the Company’s restricted common stock issued at closing and (ii) an earnout amount of up to 525,000 shares of the Company’s restricted common stock, subject to earnout share calculations and right of setoff as set forth in the Asset Purchase Agreement. The earnout shares shall be issued to Bluebird on or before the60th day following thefirst anniversary of the closing date. The shares issued at closing and the earnout shares are subject to a180-day lock-up agreement with certain limited transfer exceptions and dribble-out provisions.

On* February 10, 2026,*the Company entered into a Letter Agreement that amended the Series C Certificate of designation to adjust the initial conversion price from $2.25 to $1.13 per share upon the effectiveness of a registration statement covering the conversion shares and eliminate further adjustments upon the effectiveness of a registration statement covering shares of common stock issuable upon conversion of the Series C Preferred Stock.

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