Press release·12/16/2025 00:32:29

Overview

Our Company operates in the nutraceutical supplement industry. We are a manufacturer and distributor of supplements in categories such as pain, energy, prenatal, general health, bone and joint, gastro, immunity, cardiac, detox, mental clarity and focus, sleep, prenatal and urinary. Our end markets focus on end-consumers through different channels that include pharmacies, U.S. wholesalers, international distributors and direct-to-consumers sales. Our products are sold over-the-counter, and consumers do not need a prescription to purchase our products.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2025, to the Three and Nine Months Ended September 30, 2024

Statements of Operations	Three Months Ended September 30			Change			Nine Months Ended September 30			Change
	2025	2024	Amount	Percentage	2025	2024	Amount	Percentage
Net revenue	$1,694,174	$1,395,913	$298,261	21%	$5,116,963	$4,886,359	$230,604	5%
Cost of goods sold	$715,824	$632,194	$83,630	13%	$2,303,752	$2,268,986	$34,766	2%
Gross profit	$978,350	$763,719	$214,631	28%	$2,813,211	$2,617,373	$195,838	7%
Sales and marketing expenses	$118,876	$156,497	$(37,621)	(24%)	$462,545	$454,714	$7,831	2%
General and administrative expenses	$937,762	$825,993	$111,769	14%	$2,616,489	$2,256,004	$360,485	16%
Operating income / (loss)	$(78,288)	$(218,771)	$140,483	(64%)	$(265,823)	$(93,345)	$(172,478)	185%
Interest expense	$(155,310)	$(69,638)	$(85,672)	123%	$(321,417)	$(189,552)	$(131,865)	70%
Other income	$492,599	$328	$492,271	150083%	$493,403	$1,291	$492,112	38119%
Net income / (loss)	$259,001	$(288,081)	$547,082	(190%)	$(93,837)	$(281,606)	$187,769	-67%

Net revenue Net revenue for the three months ended September 30, 2025, was $1,694,174 compared to $1,395,913 for the three months ended September 30, 2024, representing an increase of approximately 21%. This increase of $298,261 in net revenue was primarily due to the increase in the demand from our direct to consumer sales channel.

Net revenue for the nine months ended September 30, 2025, was $5,116,963 compared to $4,886,359 for the nine months ended September 30, 2024, representing an increase of approximately 5%. This increase of $230,604 in net revenue was primarily due to the increase in the demand from our direct to consumer sales channel.

Cost of goods sold Cost of goods sold for the three months ended September 30, 2025 was $715,824, compared to $632,194 for the three months ended September 30, 2024, representing an increase of approximately 13%. This increase of $83,630 in cost of goods sold was primarily due to the increase in revenue.

Cost of goods sold for the nine months ended September 30, 2025 was $2,303,752, compared to $2,268,986 for the nine months ended September 30, 2024, representing an increase of approximately 2%. This increase of $34,766 is primarily due to an increase in revenue, as well as tightening of cost controls while negotiating better terms with vendors.

Gross profit Gross profit as a percentage of net revenue for the three months ended September 30, 2025 was 57.7%, compared to 54.7% for the three months ended September 30, 2024, representing an increase of 3.0%. The increase was primarily due to increase in revenue.

Gross profit as a percentage of net revenue for the nine months ended September 30, 2025 was 55.0%, compared to $53.6% for the nine months ended September 30, 2024, representing an increase of approximately 1.4%. The increase was primarily due to an increase in revenue as well as tightening cost controls and negotiating better terms with vendors.

Sales and marketing expenses Sales and marketing expenses for the three months ended September 30, 2025, was $118,876 compared to $156,497 for the three months ended September 30, 2024, representing a decrease of approximately 24%. This decrease of $37,621 was primarily due to a reduction in costs associated with marketing.

Sales and marketing expenses for the nine months ended September 30, 2025, was $462,545 compared to $454,714 for the nine months ended September 30, 2024, representing an increase of approximately 2%. This increase of $7,831 was primarily due to the Company’s increase of its product advertising campaign.

General and administrative expenses General and administrative expenses for the three months ended September 30, 2025, was $937,762, compared to $825,993 for the three months ended September 30, 2024, representing an increase of approximately 14%. This increase of $111,769 was primarily attributable to an increase in stock-based compensation of $88,500, professional services of $87,000 and a bonus accrual of $105,000 offset by decreases in payroll of approximately $35,500 and $33,900 in office supplies.

General and administrative expenses for the nine months ended September 30, 2025, was $2,616,489 compared to $2,256,004 for the nine months ended September 30, 2024, representing an increase of approximately 16%. This increase of $360,485 was primarily attributed due to an increase stock-based compensation of $598,856, and a bonus accrual of $105,000 offset by decreases in professional services of approximately 202,000 and payroll of $66,000.

Interest expense Interest expense for the three months ended September 30, 2025 was $155,310, compared to $69,638 for the three months ended September 30, 2024, representing an increase of approximately 123%. This increase of $85,672 in interest expense was primarily the result of increased loans.

Interest expense for the nine months ended September 30, 2025 was $321,417, compared to $189,552 for the nine months ended September 30, 2024, representing an increase of approximately 70%. This increase of $131,865 in interest expense was primarily the result of increased loans.

Other income Other income for the three months ended September 30, 2025 was $492,599 compared to other income of $328 for the three months ended September 30, 2024. This increase in other income was primarily the result of an Employee Retention Tax Credit (“ERTC”) reimbursement of $491,801 received during the three months ended September 30, 2025.

Other income for the nine months ended September 30, 2025 was $493,403 compared to other expenses of $1,291 for the nine months ended September 30, 2024 This increase in other income was primarily the result of an ERTC reimbursement of $491,801 received during the nine months ended September 30, 2025.

Liquidity and Capital Resources

Sources and Uses of Cash for the nine months ended September 30, 2025 and 2024

	Nine Months Ended September 30 2025	Nine Months Ended September 30 2024
Net cash provided by (used in) operating activities	$1,478,358	$(54,178)
Net cash used in investing activities	$(8,512)	$(1,881)
Net cash used in financing activities	$(676,164)	$(68,206)
Net increase (decrease) in cash	$793,682	$(124,265)

Material cash requirements from known contractual and other obligations: Excluding debt obligations from ongoing operations, the Company owes $2,227,366 payable for the Kirkman acquisition as of September 30, 2025 (See Note 10, Business Combination). On September 24, 2024, the Company executed a Forbearance Agreement with the former owner of Kirkman. This allows the postponement of principal payment. On the same date, the Company executed a Confession of Judgement in connection with the principal owed. This allowed the seller to enter a judgement against the Company in The Circuit Court of The State of Oregon for the County of Clackamas. On September 30, 2025, the Company executed the ninth amended forbearance agreement.

Use of cash The change in net cash used in financing activities was primarily the result of the payment for payable acquisition as well as line of credit repayment.

Source of cash Cash Flows from Operating Activities Net cash provided by operating activities for the nine months ended September 30, 2025 was $1,478,358, compared to net cash used in operating activities of $54,178 during the nine months ended September 30, 2024, representing an increase of approximately 2,829%. This increase of $1,532,536 in net cash provided by operating activities was primarily attributable to an increase in net income of $187,769 non-cash expenses from stock-based compensation of $598,855, issuance of warrants of $45,263, and issuance of shares to debenture holders of $50,630, and increase in accounts receivable of $321,370 and accounts payable and accrued liabilities of $259,763.

Cash Flows from Investing Activities Net cash used in investing activities for the nine months ended September 30, 2025 was $8,512, compared to net cash used in investing activities of $1,881 during the nine months ended September 30, 2024, representing an increase of approximately 353%. This increase of $6,631 in net cash used in investing activities is attributable to purchase of long-term assets during the period.

Cash Flows from Financing Activities Cash used in financing activities for the nine months ended September 30, 2025 was $676,164, compared to cash used in financing activities of $68,206 in the nine months ended September 30, 2024, representing an increase of approximately 891% This increase of $607,958 in cash used in financing activities is primarily attributed to an increase in deferred offering costs for the Direct Listing of approximately $572,185, decrease in proceeds from loan payables of $84,723 and a decrease in repayment of loans of $49,124 and decreases in payable for acquisition of $85,001.

Sources of cash On November 4, 2025, Functional Brands Inc. completed a private placement to six institutional investors for gross proceeds of $8,000,000, and net of commissions the Company received proceeds of approximately $7,360,000. In exchange the investors were issued a total of 100,000 Series A preferred shares and 80,000 Series B preferred shares.

On April 29, 2025, the Company entered into a loan agreement with a third-party whereby the Company received $100,000. The term of the loan is for 1 year with a 22.95% finance charge.

On March 10, 2025, the Company executed a loan agreement with a related party in the amount of $225,000, with an annual interest rate of 18% and a due date of March 7, 2029.

During the year ended December 31, 2024 the Company entered into multiple lines of credit agreements with third parties to finance invoices to satisfy multiple vendors of which the following agreements are to be repaid during the year ended December 31, 2025.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of our operations is based on our unaudited consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain amounts included in or affecting the unaudited consolidated financial statements presented in this Form 10-Q and related disclosure must be estimated, requiring management to make assumptions with respect to values or conditions which cannot be known with certainty at the time the unaudited consolidated financial statements are prepared. Management believes that the accounting policies set forth below comprise the most important “critical accounting policies” for the Company.

The judgements made in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements include:

• Obsolescence of inventories;
• Recoverability of the carrying value of long-lived assets including property and equipment, and intangible assets;
• Recoverability of carrying value of goodwill;
• Discount rate used to calculate present value of future minimum lease payments for right-of-use asset and liabilities;
• Recognition and measurement of provisions and contingencies; and
• Valuation of deferred income tax assets.

Inventories, net The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions, including forecasted demand compared to quantities on hand, as well as other factors such as potential excess or aged inventories based on product shelf life, and other factors that affect inventory obsolescence. As of September 30, 2025, the allowance for inventory obsolescence increased by $12,895 resulting in a reserve of $77,722. As of December 31, 2024 the inventory reserve was $64,827.

Long-Lived Assets Long-lived assets consist primarily of property and equipment. Long-lived assets are tested for impairment when events and circumstances indicate the assets might be impaired by first comparing the estimated future undiscounted cash flows of the asset or asset group to the carrying value. If the carrying value exceeds the estimated future undiscounted cash flows, an impairment loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset group. The Company did not recognize impairment losses during the nine months ended September 30, 2025, and 2024.

Fair value of financial instruments The Company determines the fair value of financial assets and liabilities using the fair value hierarchy established in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The hierarchy describes three levels of inputs that may be used to measure fair value, as follows:

• Level 1 — Observable inputs, such as quoted prices in active markets for identical assets and liabilities.
• Level 2 — Observable inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Application within the Company’s Financial Statements The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued liabilities, related-party loans, line of credit, government loans, loans payable, convertible debentures (prior to conversion), and warrants issued in connection with financing arrangements. Management believes that, unless otherwise noted, the carrying amounts of these instruments approximate their fair values due to their short-term nature or because they bear interest at market rates.

The following items required fair value measurement or valuation analysis during the periods presented:

• Convertible Debenture
• Warrants Issued in Financing Transactions
• Equity Instruments Issued for Services and Financing
• Business Combination and Intangible Assets (Historical)
• Financial Instruments Carried at Amortized Cost

During the nine months ended September 30, 2025, the Company primarily applied fair value measurement to equity-linked financing instruments (warrants and stock issued for services), and historically, to convertible debt and business combination accounting. The majority of the Company’s remaining financial instruments are short-term or bear market-rate interest and therefore approximate fair value.

Emerging Growth Company and Smaller Reporting Company Status

We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that