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Item 1. Financial Statements

2025-11-07 compared with 2025-08-08 · 714 added, 592 removed, 845 unchanged (61% of the section changed)

Financial Statements

AGRIFY CORPORATION

(Formerly known as Agrify Corporation)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

September 30,

Current assets:

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Warrant liabilities

Related party debt, net of current

Long-term debt, net of current

Other non-current liabilities

Related party debt, net of current

Non-current liabilities associated with discontinued operations

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Common Stock, $ 0.001 par value per share, 35,000,000 shares authorized;

2,002,568 and 1,952,032 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

2,002,568 and 1,952,032 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Preferred Stock, $ 0.001 par value per share, 2,895,000 shares authorized, no shares issued or outstanding

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Accumulated deficit

Total stockholders’ equity attributable to Agrify Corporation

Non-controlling interests

Total stockholders' equity

Total liabilities and stockholders' equity

(1) Include $ 454 thousand and none from related parties as of September

30, 2025 and December 31, 2024, respectively.

(2) Include $ 60 thousand and none due to a related party as of

September 30, 2025 and December 31, 2024, respectively.

(3) Include $ 4.8 million and $ 487 thousand due to related parties

as of September 30, 2025 and December 31, 2024, respectively.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

(Formerly known as Agrify Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Three months ended

Six months ended

Three months ended September 30

Nine months ended September 30

Cost of goods sold

Selling, general and administrative (2)

Research and development

Change in contingent consideration

Loss on disposal of property and equipment

Total operating expenses

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Change in fair value of warrant liabilities

Other (expense) income, net

Total other (expense) income, net

Other income, net

Total other expense, net

Loss from continuing operations before income taxes

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Loss from continuing operations, net of income taxes

(Loss) income from discontinued operations

(Loss) gain on disposal of Extraction business

Income tax effect on discontinued operations

Loss from discontinued operations

Gain on disposal of Extraction business

(Loss) income from discontinued operations, net of income taxes

Net (loss) income

Income (loss) attributable to non-controlling interest

Net (loss) income attributable to Agrify Corporation

Net (loss) income per share:

Basic (loss) income per share

Continuing operations

Discontinued operations

(loss) income per share attributable to Common Stockholders – basic (1)

Diluted (loss) income per share

Net loss per share:

Basic and diluted (loss) income per share

Continuing operations

Discontinued operations

Net (loss) income per share attributable to Common Stockholders – diluted (1)

Weighted average common shares outstanding - basic (1)

Weighted average common shares outstanding - diluted (1)

presented have been adjusted to retroactively reflect the 1-for-15 reverse stock split on October 8, 2024.

Additional information regarding

reverse stock splits may be found in Note 1 – Overview, Basis of Presentation, and Significant Accounting Policies, included in

the notes to the condensed consolidated financial statements.

Net loss per share attributable to Common Stockholders – basic and diluted (4)

Weighted average common shares outstanding - basic and diluted (4)

(1) Include $ 696 thousand and $ 961 thousand for the three and

nine months ended September 30, 2025, respectively, and none for the three and nine months ended September 30, 2024, in each case from

related parties.

(2) Include $ 3.1 million and $ 7.3 million for the three and nine

months ended September 30, 2025, respectively, and none for the three and nine months ended September 30, 2024, in each case from related

(3) Include $ 1.4 million and $ 2.2 million of interest expense

for the three and nine months ended September 30, 2025, respectively, and none for the three and nine months ended September 30, 2024,

in each case from a related party.

(4) Periods presented have been adjusted to retroactively reflect

the 1-for-15 reverse stock split on October 8, 2024.

Additional information regarding reverse stock splits may be found in Note 1 –

Overview, Basis of Presentation, and Significant Accounting Policies, included in the notes to the condensed consolidated financial statements.

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

(Formerly known as Agrify Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

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(In thousands)

Stockholders’

(Deficit) attributable

Non-Controlling

Stockholders’

Total Stockholders’

Balance at January 1, 2024

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$ ( 264,303 )

Stockholders’

Equity attributable

Non-Controlling

Stockholders’

Stock-based compensation

Exercise of pre-funded warrants issued through public offering

Conversion of related party debt into prefunded warrants

Issuance of vested RSUs, net of shares held back to offset tax

Balance at September 30, 2024

$ ( 282,954 )

Total Stockholders’

Balance at January 1, 2025

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Issuance of vested RSUs, net of shares held back to offset tax

Issuance of pre-funded warrants in lieu of cash interest payments on related party debt

Accrued pre-funded warrants in lieu of cash interest

Issuance or accrual of pre-funded warrants in lieu of cash interest payments on related party debt

Issuance or accrual of pre-funded warrants in lieu of cash interest

Balance at June 30, 2025

$ ( 316,529 )

Stock-based compensation

Issuance or accrual of pre-funded warrants in lieu of cash interest payments on related party debt

Issuance or accrual of pre-funded warrants in lieu of cash interest payments

Balance at September 30, 2025

$ ( 327,194 )

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

(Formerly known as Agrify Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the six months ended

For the nine months ended

September 30,

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and amortization

Amortization of debt discount

Non-cash interest expense

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Change in inventory reserves

Loss on inventory write-down

Gain on disposal of property and equipment

Loss on abandonment of CIP projects

(Gain) loss on disposal of property and equipment

Gain on early termination of lease

Change in contingent consideration

Gain on settlement of contingent liability

Change in contingent consideration

Gain on disposal of Extraction business

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Accounts receivable

Accounts receivable - related party

Prepaid expenses and other current assets

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Accounts payable

Accounts payable - related party

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities - related party

Operating lease liabilities

Contract liabilities

Other liabilities

Net cash and cash equivalents used in operating activities

Cash flows from investing activities:

Purchases of property and equipment

Related party acquisition of MC Brands

Related party acquisition of VCP

Proceeds from disposal of property and equipment

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Proceeds from issuance of related party notes

Proceeds from exercise of CP Warrants

Repayments of notes payable

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Payments on insurance financing loans

Net cash and cash equivalents provided by financing activities continuing operations

Net cash and cash equivalents provided by financing activities

Net increase (decrease )in cash and cash equivalents

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Supplemental disclosure of non-cash investing and financing activities

Conversion of related party debt interest into pre-funded warrants

Accrued pre-funded warrants in lieu of cash interest

Issuance or accrual of pre-funded warrants in lieu of cash interest payments on related party debt

Issuance or accrual of pre-funded warrants in lieu of cash interest

Reclassification of accounts payable and accrued interests to notes payable

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Financing of prepaid insurance

Reclassification of liability classified prefunded warrants to equity

Accrued interest consolidated into related party debt

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Conversion of convertible notes into equity

Conversion of related party debts into warrants

Consolidation of related party debt principal

Fair value of warrants in connection with reclassification and issuance

Conversion of related party debt to equity

Non-cash amounts of lease liabilities arising from obtaining right-of-use assets

The accompanying notes are an integral part of

these condensed consolidated financial statements.

AGRIFY CORPORATION

(Formerly known as Agrify Corporation)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Description of Business

Agrify Corporation (together

with its subsidiaries, the “Company”) is a developer of branded innovative solutions for the cannabis and hemp industries.

The Company’s portfolio of consumer-packaged goods brands includes Señorita brand which offers consumers hemp-derived tetrahydrocannabinol

(formerly Agrify Corporation) (together with its subsidiaries,

the “Company” or “RYTHM”) delivers well-being to consumers through its portfolio of hemp-derived THC products

and iconic licensed brands.

The Company’s portfolio of consumer-packaged goods brands includes RYTHM, incredibles , Dogwalkers,

Beboe, &Shine, Doctor Solomon’s, Good Green and Señorita.

The Señorita brand offers consumers hemp-derived tetrahydrocannabinol

(“THC”) beverages that mirror well-known cocktails like a margarita – in four flavors – classic Lime Jalapeño

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sold online and through direct-to-retail partnerships.

Agrify has also historically

In addition to the sale of hemp-derived products (“Non-licensing Revenue”),

the Company licenses its brands to be manufactured and distributed in exchange for a licensing fee (“Licensing Revenue”).

RYTHM has also historically

been a leading provider of innovative cultivation and extraction solutions for the cannabis industry.

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the State of Nevada on June 6, 2016 as Agrinamics, Inc., and subsequently changed its name to Agrify Corporation.

The Company is sometimes

referred to herein by the words “we,” “us,” “our,” and similar terminology.

The Company has eleven wholly-owned

consolidated subsidiaries, which are collectively referred to as the “Subsidiaries” and seven out of eleven subsidiaries are

On August 27, 2025,

the Company filed a Certificate of Amendment to the Articles of Incorporation of the Company with the Secretary of State of Nevada, to

effect a change in the Company’s name from Agrify Corporation to RYTHM, Inc., effective as of September 2, 2025.

In connection with

the name change, the Company’s trading symbol on the Nasdaq Capital Market changed from “AGFY” to “RYM”

effective as of the open of trading on September 2, 2025.

The Company is sometimes referred to herein by the words “we,” “us,”

“our,” and similar terminology.

The Company has twelve wholly-owned

consolidated subsidiaries, which are collectively referred to as the “Subsidiaries” and seven out of twelve subsidiaries are

related to discontinued operations.

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the Company reclassified the assets and liabilities of the Cultivation Business associated with discontinued operations in the Condensed

Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024.

In connection with the reclassification as discontinued operations,

the assets and liabilities were remeasured to fair value less cost to sell.

Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024.

For further discussion on the discontinued operations, refer

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Further, the Company reclassified the assets and liabilities

of the Extraction Business associated with discontinued operations in the Condensed Consolidated Balance Sheet as of June 30, 2025 and

December 31, 2024.

In connection with the reclassification as discontinued operations, the assets and liabilities were remeasured to fair

value less cost to sell as of June 30, 2025.

of the Extraction Business associated with discontinued operations in the Condensed Consolidated Balance Sheets as of September 30, 2025

and December 31, 2024.

The balances as of December 31, 2024 reflect historical carrying values, without remeasurement.

For further discussion on the discontinued operations, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

For further discussion

on the discontinued operations, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

On May 20, 2025, the Company

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use the RYTHM and Beboe brands from Green Thumb for hemp-derived THC beverages and similar products.

On August 27, 2025, the Company

entered into a purchase agreement with VCP23, LLC (“VCP23”), an indirectly wholly-owned subsidiary of Green Thumb, a related

party, pursuant to which the Company acquired all of the equity interests in VCP.

The assets of VCP consist primarily of intellectual

property rights to several brands including RYTHM, Dogwalkers, Beboe, &Shine, Doctor Solomon’s and Good Green (the “Acquired

Cash consideration of $ 50.0 million was exchanged for 100 % of the equity interest in VCP.

In connection with the purchase

of VCP, the Company also entered a license agreement with GTI Core, LLC (“GTI Core”), an indirect wholly-owned subsidiary

of Green Thumb, related to the Acquired Brands in connection with GTI Core’s existing businesses, with an effective date of November

The consideration payable by GTI Core for the license rights consists of a monthly license fee, payable in cash, for using the

licensed intellectual property.

The May 20, 2025 license agreements granting the Company rights to use the RYTHM and Beboe brands were

terminated concurrently on August 27, 2025.

Nasdaq Deficiency Notice

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As a result of the conversion of a convertible

note and a junior note held in favor of CP, the Company regained compliance with the stockholders’ equity requirement, On May 28,

note and a junior note held in favor of CP, the Company regained compliance with the stockholders’ equity requirement.

2024, the Company received formal written notice from Nasdaq confirming that the Company had regained compliance with the minimum stockholders’

equity requirement as set forth in Listing Rule 5550(b)(1).

On March 5, 2024, the Company received a deficiency letter from

the Nasdaq Listing Qualifications Department (the “Staff”) notifying the Company that, for the last 30 consecutive business

days, the bid price for the Company’s Common Stock had closed below $ 1.00 per share, which is the minimum closing price required

to maintain continued listing on the Nasdaq Stock Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).

On March 5, 2024, the Company

received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifying the Company that, for

the last 30 consecutive business days, the bid price for the Company’s Common Stock had closed below $ 1.00 per share, which is the

minimum closing price required to maintain continued listing on the Nasdaq Stock Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum

Bid Requirement”).

The Notice had no immediate effect on the listing of the Company’s Common Stock on Nasdaq.

In accordance with Nasdaq Listing Rule

5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

The compliance period for the

Company expired on September 3, 2024.

On September 4, 2024, the Staff notified the company in writing that it was eligible for an additional

180-day compliance period, or until March 3, 2025, to regain compliance with the Minimum Bid Requirement.

On October 8, 2024, the Company

completed a 1-for-15 reverse stock split of its Common Stock, in which each fifteen shares of Common Stock issued and outstanding was

combined and converted into one share of Common Stock to regain compliance with the Minimum Bid Requirement.

On October 22, 2024, the

Staff notified the Company that it had regained compliance with the Minimum Bid Requirement.

In accordance

with Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

The compliance

period for the Company expired on September 3, 2024.

On September 4, 2024, the Staff notified the company in writing that it was eligible

for an additional 180-day compliance period, or until March 3, 2025, to regain compliance with the Minimum Bid Requirement.

8, 2024, the Company completed a 1-for-15 reverse stock split of its Common Stock, in which each fifteen shares of Common Stock issued

and outstanding was combined and converted into one share of Common Stock to regain compliance with the Minimum Bid Requirement.

22, 2024, the Staff notified the Company that it had regained compliance with the Minimum Bid Requirement.

Basis of Presentation and Principles of Consolidation

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accepted in the United States (“U.S.

Certain information and

footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.

GAAP have been

condensed or omitted.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s

audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2024 filed with the SEC.

Certain information and footnote

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audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2024, filed with the SEC on March 21, 2025, as amended on March 28, 2025 (the “Form 10-K”).

The December 31,

2024 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2024, retrospectively

adjusted for discontinued operations.

December 31, 2024, filed with the SEC on March 21, 2025, as amended on March 28, 2025, with Items 7 and 9 from such Annual Report having

been recast to retrospectively reflect discontinued operations as reflected in the Current Report on Form 8-K filed with the SEC on October

8, 2025 (the “Form 10-K).

The December 31, 2024 balances reported herein are derived from the audited consolidated financial statements

for the year ended December 31, 2024, retrospectively adjusted for discontinued operations.

Accounting for Wholly-Owned Subsidiaries

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The Company regularly evaluates

its assets, including asset groups or reporting units, for impairment in accordance with U.S.

The Company is aware of the impact

that prolonged net losses can have on the fair value of underlying assets and the overall company.

The Company is committed to ensuring

that the carrying amounts of its assets are appropriately assessed and adjusted for any impairment, reflecting a true and fair view of

its financial position.

its assets, including asset groups or reporting units, for impairment in accordance with ASC 360-10, Impairment and Disposal of Long-Lived

The Company is aware of the impact that prolonged net losses can have on the fair value of underlying assets and the overall

The Company is committed to ensuring that the carrying amounts of its assets are appropriately assessed and adjusted for any

impairment, reflecting a true and fair view of its financial position.

Reclassifications

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of $ 0.001 per share.

Accordingly, the Stockholders’ equity section of the condensed consolidated balance sheets reflects

the reverse stock split by reclassifying from Common Stock to additional paid-in capital an amount equal to the par value of the decreased

shares resulting from the reverse stock split.

Accordingly, the Stockholders’ equity section of the condensed consolidated balance sheets reflects the reverse

stock split by reclassifying from Common Stock to additional paid-in capital an amount equal to the par value of the decreased shares

resulting from the reverse stock split.

Certain amounts in the condensed

consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation, specifically related to discontinued operations.

consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation,

specifically related to discontinued operations.

Discontinued Operations

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to the Cultivation Business.

On March 30, 2025, the Company discontinued the Extraction Business.

On March 30, 2025, the Company discontinued the Extraction Business (together with the Cultivation Business,

the “Discontinued Operations”).

As the sale of the Cultivation

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and financial results, they have been presented in discontinued operations in accordance with ASC 205, Presentation of Financial Statements ,

separate from continuing operations for the three months and six months ended June 30, 2025 and 2024, and as of June 30, 2025 and December

31, 2024, as applicable.

For further discussion, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

separate from continuing operations for the three months and nine months ended September 30, 2025 and 2024, and as of September 30, 2025

and December 31, 2024, as applicable.

For further discussion, refer to Note 6 included elsewhere in the notes to the unaudited condensed

consolidated financial statements.

Accounts Receivable, Net

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In accordance with the current

expect credited loss (“CECL”) impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial

expected credit loss (“CECL”) impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial

Instruments – Credit Losses (Topic 326), accounts receivable balances are presented net of an allowance for credit losses, which

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For the three months ended

June 30, 2025, the Company had one related party customer and one third-party customer that accounted for 10% or more of the total revenue

from continuing operations.

A related party customer and a third-party customer represented 13 % and 38 % each of total revenue from continuing

operations for the period, respectively.

For the three months ended June 30, 2024, the Company had no revenue from continuing operations

and therefore no customer represented a significant portion of revenue from continuing operations.

For the six months ended

June 30, 2025, the Company had three third-party customers that accounted for 10% or more of the total revenue from continuing operations.

These customers represented between 11 % and 30 % each of total revenue from continuing operations for the period.

For the six months ended

June 30, 2024, the Company had no revenue from continuing operations and therefore no customer represented a significant portion of revenue

from continuing operations.

As of June 30, 2025, one

of the Company’s related party customers accounted for 14 % of accounts receivable and three of the Company’s third-party

customers also accounted for between 16 % and 40 % each of accounts receivable.

As of December 31, 2024, one third-party customer accounted

for 100 % of accounts receivable.

September 30, 2025, the Company had one related party customer and three third-party customers that accounted for 10% or more of the total

revenue from continuing operations.

These customers each represented between 11 % and 26 % of total revenue from continuing operations for

For the three months ended September 30, 2024, the Company had no revenue from continuing operations and therefore no customer

represented a significant portion of revenue from continuing operations.

For the nine months ended

September 30, 2025, the Company had one related party customer and three third-party customers that accounted for 10% or more of the total

revenue from continuing operations.

These customers each represented between 10 % and 28 % of total revenue from continuing operations for

For the nine months ended September 30, 2024, the Company had no revenue from continuing operations and therefore no customer

represented a significant portion of revenue from continuing operations.

As of September 30, 2025,

one of the Company’s related party customers accounted for 18 % of accounts receivable and three of the Company’s third-party

customers accounted for 45 % of accounts receivable.

As of December 31, 2024, one third-party customer accounted for 100 % of accounts receivable.

The Company values all its

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are recorded through specific identification of obsolete or damaged material.

The Company takes a physical inventory count at least once

annually at all significant inventory locations.

The Company takes a physical inventory count at least annually

at all significant inventory locations.

Business Combinations

The Company accounts for

its business combinations under the provisions of Accounting Standards Codification Topic 805-10, Business Combinations (“ASC

805”), which requires that the purchase method of accounting be used for all business combinations.

Assets acquired and liabilities

assumed are recorded at the date of acquisition at their respective fair values.

For transactions that are business combinations, the

Company evaluates the existence of goodwill.

Goodwill represents the excess purchase price over the fair value of the tangible net assets

and intangible assets acquired in a business combination.

ASC 805 also specifies criteria that intangible assets acquired in a business

combination must meet to be recognized and reported apart from goodwill.

Acquisition-related expenses are recognized separately from the

business combinations and are expensed as incurred.

The estimated fair value of net assets acquired, including the allocation

of the fair value to identifiable assets and liabilities, is determined using established valuation techniques.

A fair value measurement

is determined as the price received to sell an asset or pay to transfer a liability in an orderly transaction between market participants

at the measurement date.

In the context of purchase accounting, the determination of fair value often involves significant judgments and

estimates by management, including the selection of valuation methodologies, estimates of future revenues, costs and cash flows, discount

rates, and selection of comparable companies.

The estimated fair values reflected in the purchase accounting rely on management’s

judgment and the expertise of a third-party valuation firm engaged to assist in concluding on the fair value measurements.

In determining

the fair value of all identifiable assets and liabilities acquired, the most significant estimates relate to intangible assets.

intangible assets identified, depending on the type of intangible asset and the complexity of determining its fair value, the fair value

is developed using appropriate valuation techniques, taking into account assumptions such as the expected future revenue, expected use

of the asset, market conditions, uncertainty factors, the estimated useful life, and discount rate, among other factors.

These assumptions

may vary based on future events, perceptions of different market participants and other factors outside the control of management, and

such variations may be significant to estimated values.

Asset Acquisitions

The Company follows the guidance

in ASC 805, Business Combinations , for determining the appropriate accounting treatment for asset acquisitions.

Clarifying the Definition of a Business , provides an initial fair value screen to determine if substantially all of the fair value

of the assets acquired is concentrated in a single asset or group of similar assets.

If the initial screening test is not met, the set

is considered a business based on whether there are inputs and substantive processes in place.

Based on the results of this analysis and

conclusion on an acquisition’s classification of a business combination or an asset acquisition, the accounting treatment is derived.

If the acquisition is deemed

to be a business, the purchase method of accounting is applied.

If the transaction is deemed to be an asset acquisition, the cost accumulation

and allocation model is used whereby the assets and liabilities are recorded based on the purchase price and allocated to the individual

assets and liabilities based on relative fair values.

For the allocation of intangible assets identified, depending on the type of intangible

asset and the complexity of determining its relative fair value, an independent valuation expert or management may allocate the relative

fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows

and takes into consideration other significant assumptions such as the expected use, market uncertainty, marketing or sales support requirements

and the intangible asset useful lives.

The Company evaluates all

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for equity classification.

Issued or modified

warrants that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital at the

time of issuance or when incurred.

Issued or modified warrants that are precluded from equity classification are recorded as a liability at their

initial fair value on the date of issuance and subject to remeasurement on each balance sheet date with changes in the estimated

fair value of the warrants to be recognized as an unrealized gain or loss in the unaudited condensed consolidated statements of

Issued or modified warrants

that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital at the time of issuance

or when incurred.

Issued or modified warrants that are precluded from equity classification are recorded as a liability at their initial

fair value on the date of issuance and subject to remeasurement on each balance sheet date with changes in the estimated fair value of

the warrants to be recognized as an unrealized gain or loss in the unaudited condensed consolidated statements of operations.

Fair Value of Financial Instruments

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Revenue Recognition

The Company generates revenue

from continuing operations through the sale of hemp-derived THC products and related party licensing arrangements.

The Company licenses intellectual property to a related party under

arrangements that provide for sales-based royalties.

The Company recognizes

royalty income derived from licensing agreements in accordance with ASC Topic 606, Revenue Recognition (“ASC 606”), specifically,

the sales-based royalty exception.

In accordance with ASC 606, revenue is recognized through a five-step model, as outlined below:

The Company generates revenue from continuing operations through the

sale of hemp-derived THC products (non-licensing) and Licensing Revenue.

The Company licenses intellectual property to a related party

under arrangements that provide for sales-based license fees.

The Company recognizes licensing income derived from licensing agreements

in accordance with ASC Topic 606, Revenue Recognition (“ASC 606”), specifically, the sales-based royalty exception.

In accordance with ASC 606, revenue for hemp-derived THC products (non-licensing)

is recognized through a five-step model, as outlined below:

Identify the customer contract :

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Recognize revenue as the performance obligations are satisfied :

- Revenue from the sale of hemp-derived THC products is recognized

when control of the product transfers to the customer, typically upon delivery or shipment, as the customer assumes the risks and rewards

of ownership.

Payment terms vary by customer, but the time between revenue recognition and payment due is generally not significant.

Revenue from the sale of hemp-derived THC products (non-licensing)

is recognized when control of the product transfers to the customer, typically upon delivery or shipment, as the customer assumes the

risks and rewards of ownership.

Payment terms vary by customer, but the time between revenue recognition and payment due is generally

not significant.

For products sold under consignment arrangements, revenue is recognized only when control is transferred to the end customer.

Company does not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer

Payments for slotting, listing fees, or other marketing or promotional activities, where legally permitted, are recorded

as a reduction in revenue unless a distinct good or service is received in exchange.

- In accordance with ASC 606-10-55-65 through 55-65B, royalty

revenue is recognized only when the underlying sale by the licensee occurs, and the performance obligation has otherwise been

This approach ensures that revenue is recognized in the period in which it is earned and determinable, consistent with the

transfer of control of the intellectual property to the licensee.

The Company does not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted

in customer agreements.

Payments for slotting, listing fees, or other marketing or promotional activities, where legally permitted, are

recorded as a reduction in revenue unless a distinct good or service is received in exchange.

In accordance with ASC 606-10-55-65 through 55-65B, Licensing Revenue

is recognized only when the underlying sale by the licensee occurs, and the performance obligation has otherwise been satisfied.

approach ensures that revenue is recognized in the period in which it is earned and determinable, consistent with the transfer of control

of the intellectual property to the licensee.

Net (Loss) Income Per Share

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stock options, restricted stock units and warrants.

For the six months ended June 30, 2024, the Company adjusts the net income available

For the nine months ended September 30, 2024, the Company adjusts the net income available

to common stockholders and the weighted average common stock outstanding for the effective of dilutive securities as presented within

Note 15 – Net (Loss) Income Per Share.

As the Company has reported losses for the three months ended June 30, 2025 and 2024 and

the six months ended June 30, 2025, all potentially dilutive securities including convertible notes, stock options, restricted stock units

and warrants, are anti-dilutive, and accordingly, basic net loss per share equals diluted net loss per share for those periods.

As the Company has reported losses for the three months ended September 30, 2025 and 2024

and the nine months ended September 30, 2025, all potentially dilutive securities including convertible notes, stock options, restricted

stock units and warrants, are anti-dilutive, and accordingly, basic net loss per share equals diluted net loss per share for those periods.

Net (loss) income per share

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the impact of this ASU on its condensed consolidated financial statements and related disclosures.

In November 2024, the

FASB issued ASU 2024-04, Debt with Conversion and Other Options (“ASU 2024-04”), which clarifies the requirements for

determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual

reporting periods.

Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06.

Adoption can be

on a prospective or retrospective basis.

The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its

condensed consolidated financial statement presentation and disclosures.

In November 2024, the FASB

issued ASU 2024-04, Debt with Conversion and Other Options (“ASU 2024-04”), which clarifies the requirements for determining

whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

ASU 2024-04 is effective

for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption

is permitted for all entities that have adopted the amendments in ASU 2020-06.

Adoption can be on a prospective or retrospective basis.

The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its condensed consolidated financial statement

presentation and disclosures.

In July 2025, the FASB issued

2025-05, Financial Instruments - Credit Losses (“ASU 2025-05”), to introduce a practical expedient for

all entities, which simplifies the calculation required for estimating credit losses and assumes that current conditions as of the balance

sheet date do not change for the remaining life of the asset.

ASU 2025-05 is effective for annual reporting periods beginning after December

15, 2025, and interim reporting periods within those annual reporting periods;

however, early adoption is permitted.

ASU 2025-25 allows

for adoption using a prospective method.

The Company is currently evaluating the impact of ASU 2025-05 on its condensed consolidated financial

statements and related disclosures.

Other recent accounting pronouncements

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Note 2 — Revenue

The Company generates revenue

from continuing operations from hemp-derived THC products sales and royalty revenue.

For the three and six months

ended June 30, 2025, the Company generated revenue from continuing operations from hemp-derived product sales and sales-based royalty

Revenue from hemp-derived product sales is recognized at a point-in-time when control transfers to the customer.

Royalty revenue

is recognized over time as the underlying sales occurs in accordance with the terms of the related party license agreements.

For the three and six months ended June 30, 2024, the Company had no revenue from continuing operations.

The Company generates revenue from continuing operations from Non-licensing

Revenue and Licensing Revenue.

For the three and nine months ended September 30, 2025, the Company

generated revenue from continuing operations from non-hemp-derived product sales and sales-based Licensing Revenue.

Non-licensing Revenue

from hemp-derived product sales is recognized at a point-in-time when control transfers to the customer.

Licensing Revenue is recognized

over time as the underlying sales occur in accordance with the terms of the related party license agreements.

For the three and nine months

ended September 30, 2024, the Company had no revenue from continuing operations.

The following table provides

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Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

Hemp-derived products

Royalty revenue

Non-licensing Revenue

Licensing Revenue

Total revenue

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Accounts receivable, net, consisted of the following

as of June 30, 2025 and December 31, 2024:

as of September 30, 2025 and December 31, 2024:

September 30,

(In thousands)

2 unchanged sentences

Accounts receivable, net

There is nil allowance for credit losses as of

June 30, 2025 and December 31, 2024.

The movement in the Company’s credit losses

accounts were as follows:

September 30,

(In thousands)

Allowance for credit losses - beginning of period

(Recovery of) allowance for credit losses

Write-offs of uncollectible accounts

Allowance for credit losses - end of period

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted

of the following as of June 30, 2025 and December 31, 2024:

of the following as of September 30, 2025 and December 31, 2024:

September 30,

(In thousands)

Prepaid materials

Prepaid marketing

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Accrued expenses and other current liabilities

consisted of the following as of June 30, 2025 and December 31, 2024:

consisted of the following as of September 30, 2025 and December 31, 2024:

September 30,

(In thousands)

Accrued consulting fees

Accrued interest expense

Litigation reserve

Sales tax payable

Compensation related fees

1 unchanged sentence

Accrued marketing fees

Litigation reserve

Accrued professional fees

Sales tax payable

Accrued interest expense

Other current liabilities

Total accrued expenses and other current liabilities

During the six months ended

June 30, 2025, the company paid $ 1.5 million into escrow related to Cultivation Sale Agreement.

During the nine months ended September

30, 2025, the Company paid $ 1.5 million into escrow related to Cultivation Sale Agreement.

See related legal matters in Note 16.

As of June 30, 2025 and December

31, 2024, the Company had related party accrued consulting fees with Green Thumb of approximately $ 1.3 million and $ 332 thousand, respectively.

As of September 30, 2025

and December 31, 2024, the Company had related party accrued consulting fees with Green Thumb of approximately $ 4.1 million and $ 332 thousand,

respectively.

Note 4 — Fair Value Measures

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utilized to the extent that observable inputs are not available or cost-effective to obtain.

At June 30, 2025 and December

31, 2024, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

June 30, 2025

At September 30, 2025 and

December 31, 2024, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

September 30, 2025

December 31, 2024

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The Company has pre-funded warrants issued to a related party.

As of result of the latest amendment executed as of December 31, 2024, the warrants met the requirements for equity classification and were marked to fair value as of December 31, 2024.

As a result of the latest amendment executed as of December 31, 2024, the warrants met the requirements for equity classification and were marked to fair value as of December 31, 2024.

The warrants will not be marked to fair value on a recurring basis.

1 unchanged sentence

The estimated fair value

of the warrant liabilities on June 30, 2025 and December 31, 2024 is determined using Level 3 inputs.

Inherent in a Black-Scholes option-pricing

model are assumptions used in calculating the estimated fair values that represent the Company’s best estimate.

The volatility rate

is determined utilizing the Company’s own share price and the share price of competitors over time.

of the warrant liabilities on September 30, 2025 and December 31, 2024 is determined using Level 3 inputs.

Inherent in a Black-Scholes

option-pricing model are assumptions used in calculating the estimated fair values that represent the Company’s best estimate.

volatility rate is determined utilizing the Company’s own share price and the share price of competitors over time.

However, inherent uncertainties

2 unchanged sentences

The following table summarizes

the Company’s assumptions used in the valuations as of June 30, 2025 and December 31, 2024:

the Company’s assumptions used in the valuations as of September 30, 2025 and December 31, 2024:

September 30,

Exercise price

5 unchanged sentences

The following table sets

forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the six months ended June 30, 2025 and for the

year ended December 31, 2024 and changes in the number of outstanding warrant liabilities for the six months ended June 30, 2025:

forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the nine months ended September 30, 2025 and for

the year ended December 31, 2024 and changes in the number of outstanding warrant liabilities for the nine months ended September 30,

(In thousands, except number of outstanding warrant liabilities)

Six months ended

For the year ended

September 30,

Warrant liabilities - beginning of period

4 unchanged sentences

Warrant liabilities end of period

As of September 30, 2025 and December 31, 2024,

the number of outstanding warrants subject to liability classification was 40,017 , of which 15,394 are held by RSLGH, a related party.

Note 5 — Inventory

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suppliers may require making payments in advance of delivery of the Company’s products.

Inventory consisted of the following as of June

30, 2025 and December 31, 2024:

Inventory consisted of the following related to hemp-derived THC products

as of September 30, 2025 and December 31, 2024:

September 30,

(In thousands)

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Inventory Reserves

The Company establishes

an inventory reserve for obsolete, slow moving, and defective inventory.

The Company calculates inventory reserves for obsolete, slow

moving, or defective items as the difference between the cost of inventory and its estimated net realizable value.

The reserves are based

upon management’s expected method of disposition.

The Company establishes an

inventory reserve for obsolete, slow moving, and defective inventory.

The Company calculates inventory reserves for obsolete, slow moving,

or defective items as the difference between the cost of inventory and its estimated net realizable value.

The reserves are based upon

management’s expected method of disposition.

Note 6 — Discontinued Operations

10 unchanged sentences

The disposition resulted

in a loss on sale of $ 11.9 million along with a loss from discontinued operations of $ 1.5 million for a total loss of $ 13.4 million, which

was recorded in net loss from discontinued operations in the consolidated statement of operations for the period ended December 31, 2024.

The operating results of the Cultivation Business were reported as a net loss from discontinued operations in the consolidated statements

of operations through December 31, 2024, the date of disposition, and were considered material.

The assets and liabilities

associated with discontinued operations with respect to the Cultivation Business consisted of the following as of June 30, 2025 and December

31, 2024, respectively:

Current assets:

Prepaid expenses and other current assets

Current assets associated with discontinued operations

Total assets associated with discontinued operations

Current liabilities:

Accounts payable

Accrued expenses and other current liabilities

Current liabilities associated with discontinued operations

Total liabilities associated with discontinued operations

The following table summarizes

the Company’s income from discontinued operations of the Cultivation Business for the three and six months ended June 30, 2025

and 2024, respectively:

For the three

Cost of goods sold

Gross income (loss)

Selling, general and administrative

Gain on settlement of contingent liabilities

Gain on early termination of lease

Total operating expense (income)

Operating (loss) income from discontinued operations

Net (loss) income from discontinued operations

Income tax effect on discontinued operations

(Loss) income from discontinued operations, net of income taxes

The condensed consolidated statements of cash

flows include continuing operations and discontinued operations.

The following table summarizes

the depreciation and amortization of long-lived assets, provisions for credit losses, and adjustments to net realizable value of inventories

related to discontinued operations of the Cultivation Business for the three and six months ended June 30:

For the three

Depreciation and amortization

Provision for (recovery of) credit losses

Recovery of provision for slow-moving inventory

in a loss on sale of $ 11.9 million, which was recorded in net loss from discontinued operations in the consolidated statement of operations

for the year ended December 31, 2024.

The operating results of the Cultivation Business were reported as a net loss from discontinued

operations in the consolidated statements of operations through December 31, 2024, the date of disposition, and were considered material.

The assets and liabilities related to the Cultivation Business have been separately classified in the accompanying condensed consolidated

balance sheets as of September 30, 2025 and 2024.

Extraction Business Discontinued Operations

2 unchanged sentences

As a result, all operations associated with the Extraction

Business have ceased as of March 31, 2025, and the Company has initiated the sale or disposal of all remaining assets related to the

Extraction Business.

In addition, all outstanding contracts associated with the Extraction Business have been or are in the process of

being terminated in accordance with their respective terms.

In connection with the discontinuation of the business, the Company reduced

its workforce by nine employees on April 1, 2025.

The discontinuation of the legacy Extraction Business represents efforts to strategically

shift the Company’s direction to support the continued expansion of its hemp-derived products business operations.

the Extraction Business has been presented as discontinued operations in the condensed consolidated financial statements for all periods

Business have ceased as of March 31, 2025, and the Company has initiated the sale or disposal of all remaining assets related to the Extraction

In addition, all outstanding contracts associated with the Extraction Business have been or are in the process of being terminated

in accordance with their respective terms.

In connection with the discontinuation of the business, the Company reduced its workforce by

nine employees on April 1, 2025.

The discontinuation of the legacy Extraction Business represents efforts to strategically shift the Company’s

direction to support the continued expansion of its hemp-derived products business operations.

As a result, the Extraction Business has

been presented as discontinued operations in the condensed consolidated financial statements for all periods presented.

As a result of the decision

to wind down the Extraction Business, a gain of approximately $ 3.5 million, net with a loss from discontinued operations of $ 2.0 million

for a total net gain of $ 1.5 million, was recorded in net income from discontinued operations in the condensed consolidated statement

of operations for the six months ended June 30, 2025.

The operating results of the Extraction Business were reported as a net loss from

discontinued operations in the condensed consolidated statements of operations through June 30, 2025, and were considered material.

net loss from discontinued operations for the three and six months ended June 30, 2024, represents the Extraction Business’ operating

results from the prior year.

The assets and liabilities related to the Extraction Business have been separately classified in the accompanying

condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024.

Balances as of June 30, 2025 have been remeasured at fair

value less cost to sell.

to wind down the Extraction Business, a gain of approximately $ 3.5 million, was recorded in income from discontinued operations in the

condensed consolidated statement of operations for the nine months ended September 30, 2025.

The operating results of the Extraction Business

were reported as a net loss from discontinued operations in the condensed consolidated statements of operations for the three and nine

months ended September 30, 2025 and 2024, and were considered material.

The assets and liabilities related to the Extraction Business

have been separately classified in the accompanying condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024.

The assets and liabilities

associated with discontinued operations with respect to the Extraction Business consisted of the following as of June 30, 2025 and December

31, 2024, respectively:

associated with Discontinued Operations consisted of the following as of September 30, 2025 and December 31, 2024, respectively:

(In thousands)

September 30,

Current assets:

2 unchanged sentences

Prepaid expenses and other current assets

Current assets associated with discontinued operations

Current assets of discontinued operations

Property and equipment, net

1 unchanged sentence

Other non-current assets

Non-current assets associated with discontinued operations

Non-current assets of discontinued operations

Total assets of discontinued operations

4 unchanged sentences

Customer deposits

Current liabilities associated with discontinued operations

Current liabilities of discontinued operations

Operating lease liabilities, net of current

Non-current liabilities associated with discontinued operations

Total liabilities associated with discontinued operations

Non-current liabilities of discontinued operations

Total liabilities

The following table summarizes

the Company’s (loss) income from discontinued operations of the Extraction Business for the three and six months ended June 30,

2025 and 2024, respectively:

For the three

the Company’s (loss) income from Discontinued Operations for the three and nine months ended September30, 2025 and 2024, respectively:

For the three months ended September 30,

For the nine months ended September 30,

(In thousands)

Cost of goods sold

1 unchanged sentence

Selling, general and administrative

Gain on settlement of contingent liabilities

Impairment of right-of-use assets

Gain on disposal of property and equipment

Loss (gain) on disposal on property and equipment

Total operating expenses

1 unchanged sentence

Other (Expense) income

(Loss) gain on disposal of Extraction business

Other income, net

Gain on disposal of Extraction business

Other (expense) income, net

Total other (expense) income

1 unchanged sentence

Income tax effect on discontinued operations

Income (loss) from discontinued operations, net of income taxes

The condensed consolidated

statements of cash flows include continuing operations and discontinued operations.

The following table summarizes

the depreciation and amortization of long-lived assets, provisions for credit losses, and adjustments to net realizable value of inventories

related to discontinued operations of Extraction Business:

For the three

(Loss) income from discontinued operations, net of income taxes

The consolidated statements of cash flows include continuing operations

and discontinued operations.

The following table summarizes the depreciation and amortization of long-lived assets, provisions for

credit losses, change in inventory reserves, and capital expenditures and disposals related to the Discontinued Operations for the three

and nine months ended September 30:

For the three months ended September 30,

For the nine months ended September 30,

Depreciation and amortization

(Recovery of) provision for credit losses

Recovery of provision for slow-moving inventory

Note 7 — Business Combinations

The Company has determined

that the below acquisitions meet the criteria for business combinations under ASC 805, Business Combinations .

They are accounted

for by applying the acquisition method, whereby the assets acquired, and the liabilities assumed are recorded at their fair values with

any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill (where applicable).

Operating results have been included in these consolidated financial statements from the date of each respective acquisition.

pro forma financial information has not been presented as the impact was not material to the Company’s consolidated financial statements.

In determining the fair

value of all identifiable assets and liabilities acquired, the most significant estimates relate to intangible assets.

For the intangible

assets identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent valuation

expert or management may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the

total expected future net cash flows and take into consideration other significant assumptions such as the expected use, market uncertainty

and the intangible asset useful lives.

Change in provision for credit losses, net

Change in inventory reserves

Proceeds from disposal of property and equipment

Note 7 — Business Combinations and Asset Acquisitions

The Company performs an assessment

of whether an acquisition is a business combination or asset acquisition based on the conditions surrounding the event using guidance

from ASC 805.

Judgement is applied in determining whether a transaction is a business combination or an asset acquisition by considering

the nature of the assets acquired and the processes applied to those assets, or if the integrated set of assets and activities is capable

of being conducted and managed for the purpose of providing a return to investors or other owners.

Business combinations and asset acquisitions

have been accounted for in accordance with ASC 805.

Business Combinations are accounted for by applying the acquisition method, whereby

the assets acquired, and the liabilities assumed are recorded at their fair values with any excess of the aggregate consideration over

the fair values of the identifiable net assets allocated to goodwill (where applicable).

If an acquisition is deemed to be a business,

the purchase method of accounting is applied.

Identifiable assets acquired and liabilities assumed at the acquisition date are recorded

at fair value.

If a transaction is deemed to be an asset acquisition, the cost accumulation and allocation model is used whereby the assets

and liabilities are recorded based on the purchase price and allocated to the individual assets and liabilities based on relative fair

Goodwill is not recognized in asset acquisitions.

Operating results have been

included in these consolidated financial statements from the date of each respective acquisition.

Supplemental pro forma financial information

has not been presented as the impact for Business Combinations was not material to the Company’s consolidated financial statements.

Asset Acquisition of VCP

On August 27, 2025, the Company

entered into a purchase agreement with VCP23, an indirect wholly-owned subsidiary of Green Thumb, a related party, pursuant to which the

Company acquired all of the equity interests in VCP.

The assets of VCP consist primarily of intellectual property rights to several brands

including the Acquired Brands.

The consideration exchanged for the equity interest was cash consideration of $ 50.0 million.

The Acquisition of VCP did

not meet the definition of a business according to ASC 805 because substantially all of the fair value of the gross assets acquired was

concentrated in a single identifiable asset or a group of similar identifiable assets.

The Company recorded intangible assets relating

to trade names of the Acquired Brands in the amount of the $ 50.0 million purchase consideration.

In addition, no process or output exists

and there is not an integrated set of activities capable of providing a return.

The useful lives of the identified intangibles range from

2.4 to 4.4 years with a weighted average useful life of 3.9 years.

As the transaction was determined to be an asset acquisition, the total

purchase price was allocated to the fair value of the net identifiable assets acquired and goodwill was not recognized.

Acquisition of MC Brands LLC

On May 20, 2025, the Company

entered into a purchase agreement with VCP IP Holdings, LLC (“VCP”), an indirect wholly-owned subsidiary of Green Thumb,

a related party, pursuant to which the Company acquired all of the equity interests in MC Brands LLC and its wholly-owned subsidiary Core

Growth LLC (together referred to as “MC Brands”).

The assets of MC Brands consist primarily of intellectual property rights

to the incredibles brand.

The aggregate consideration exchanged for the equity interest was $ 5.1 million of cash.

The Company prepared a preliminary

purchase price allocation based on management’s estimates and assumptions which are subject to change within the purchase price

allocation period (generally not more than one year from the acquisition date).

Final valuations of the assets acquired and liabilities

assumed are not yet complete due to the inherent complexity associated with valuations and the short period of time between the acquisition

date and the period end.

As part of the preliminary purchase accounting, the Company recorded intangible assets of $ 4.8 million relating

to the incredibles trade name intellectual property and $ 275 thousand of customer relationships.

The preliminary estimates for

useful lives of the identified intangibles are five years for trade names and seven years for customer relationships with a weighted average

useful life of 5.11 years.

As the total purchase price equaled the fair value of the net identifiable assets acquired, no goodwill was

entered into a purchase agreement with VCP, an indirect wholly-owned subsidiary of Green Thumb, a related party, pursuant to which the

Company acquired all of the equity interests in MC Brands LLC and its wholly-owned subsidiary Core Growth LLC (together referred to as

“MC Brands”).

The assets of MC Brands consist primarily of intellectual property rights to the incredibles brand.

aggregate consideration exchanged for the equity interest was $ 5.1 million of cash.

The Company prepared a purchase price allocation based on management’s

estimates and assumptions which are subject to change within the purchase price allocation period (generally not more than one year from

the acquisition date).

As part of the purchase accounting, the Company recorded intangible assets of $ 4.8 million relating to the incredibles

trade name intellectual property and $ 275 thousand of customer relationships.

The estimates for useful lives of the identified intangibles

are five years for trade names and seven years for customer relationships with a weighted average useful life of 5.11 years.

purchase price equaled the fair value of the net identifiable assets acquired, no goodwill was recorded.

The following table summarizes

the preliminary allocation of the purchase price:

the allocation of the purchase price:

Allocation of Purchase Price (in thousands)

Accounts receivable

Inventory (non-cannabis)

Customer relationships

3 unchanged sentences

Total purchase price

Acquisition – Double or Nothing

As previously disclosed,

on December 12, 2024, the Company acquired certain assets from Double or Nothing, the owner and creator of the Señorita brand of

hemp-derived THC drinks.

As of June 30, 2025, the Company has completed its purchase price allocation for the Double or Nothing business

The final allocation remains unchanged from the preliminary amounts disclosed in the Company’s financial statements

for the fiscal year ended December 31, 2024.

Based on the information available to management, no further adjustments are expected.

the measurement period has ended and the purchase accounting is now considered final in accordance with ASC 805.

following table summarizes the final allocation of purchase price for Double or Nothing:

Allocation of Purchase Price (in thousands)

Customer Relationships

Total purchase price

Note 8 — Intangible Assets, Net

Intangible assets, net at June 30, 2025 and December

31, 2024 are summarized as follows:

June 30, 2025

Intangible assets, net at September 30, 2025 and

December 31, 2024 are summarized as follows:

September 30, 2025

Customer relationships

2 unchanged sentences

The Company recorded amortization

expense of $ 399 thousand and $ 0 , respectively, in general and administrative expense in the condensed consolidated statements of operations

for the three months ended June 30, 2025 and 2024, respectively.

expense of $ 1.8 million and $ 0 , respectively, in general and administrative expense in the condensed consolidated statements of operations

for the three months ended September 30, 2025 and 2024, respectively.

The Company recorded amortization

expense of $ 683 thousand and $ 0 , respectively, in general and administrative expense in the condensed consolidated statements of operations

for the six months ended June 30, 2025 and 2024, respectively.

expense of $ 2.5 million and $ 0 , respectively, in general and administrative expense in the condensed consolidated statements of operations

for the nine months ended September 30, 2025 and 2024, respectively.

Future amortization expense of the Company’s intangible assets

is as follows:

Remainder of 2025

Note 9 — Debt

The Company’s debt consisted of:

September 30,

(In thousands)

14 unchanged sentences

Convertible Notes

On November 5, 2024, the

Company issued a secured convertible note (the “November 2024 Note”) to RSLGH, LLC (“RSLGH”), a subsidiary of

Green Thumb, a related party.

The November 2024 Note is a secured obligation of the Company and ranks senior to all indebtedness of the

Company except for the May 2025 Notes (as defined below), which rank on parity with the November 2024 Note.

The November 2024 Note will

mature on November 5, 2025 and has a 10.0 % annualized interest rate.

The principal amount of the November 2024 Note will be payable on

the maturity date.

The November 2024 Note provides for advances of up to $ 20 million in the aggregate, of which $ 10 million was advanced

upon issuance.

On November 5, 2024, the Company issued a secured convertible note

(the “November 2024 Note”) to RSLGH, LLC (“RSLGH”), a subsidiary of Green Thumb, a related party.

2024 Note is a secured obligation of the Company and ranks senior to all indebtedness of the Company except for the May 2025 Notes and

the August 2025 Notes (both as defined below), which rank on parity with the November 2024 Note.

The November 2024 Note will mature on

November 5, 2025 and accrue interest at a 10.0 % annualized rate.

The principal amount of the November 2024 Note will be payable on the

maturity date.

The November 2024 Note provides for advances of up to $ 20 million in the aggregate, of which $ 10 million was advanced upon

The November 2024 Note was amended on May 8, 2025 to issue pre-funded warrants in lieu of cash interest, with 18,614 pre-funded

warrants issued on May 8, 2025 and an additional 11,373 pre-funded warrants to be issued on September 1, 2025, which were issued in lieu

of the cash interest that would otherwise be payable under the November 2024 Note.

warrants issued on May 8, 2025 and an additional 11,373 pre-funded warrants issued on September 1, 2025, which were issued in lieu of

the cash interest that would otherwise be payable under the November 2024 Note.

The number of pre-funded warrants is equal to the cash

interest amount otherwise payable on the November 2024 Note divided by the closing share price on May 8, 2025, which is the effective

date of the amendment.

interest amount otherwise payable on the November 2024 Note divided by the closing share price on May 8, 2025, the effective date of the

No changes were made to the conversion price of the principal amount of the November 2024 Note.

On May 22, 2025,

the Company and RSLGH entered into a second amendment to the November 2024 Note, which amended the terms to, among other things, permit

RSLGH to elect, subject to any required approvals under Nasdaq listing rules, to receive pre-funded warrants in lieu of shares of Common

Stock upon conversion of the November 2024 Note at a conversion price equal to the existing conversion price of $ 3.158 less the $ 0.001

exercise price of each pre-funded warrant.

May 22, 2025, the Company issued secured convertible notes with an aggregate original principal amount of $ 30.0 million (collectively

the “May 2025 Notes”) to RSLGH and to certain other third-party accredited investors.

The May 2025 Notes are secured obligations

of the Company and rank senior to all indebtedness of the Company except for the November 2024 Note, which ranks on parity with the May

The May 2025 Notes will mature on November 22, 2026 and accrue interest at a 10.0 % annualized rate, with interest to be paid

on the first calendar day of each September and March while the May 2025 Notes are outstanding, in pre-funded warrants, beginning September

On May 22, 2025, the Company

and RSLGH entered into a second amendment to the November 2024 Note, which amended the terms to, among other things, permit RSLGH to elect,

subject to any required approvals under Nasdaq listing rules, to receive pre-funded warrants in lieu of shares of Common Stock upon conversion

of the November 2024 Note at a conversion price equal to the existing conversion price of $ 3.158 less the $ 0.001 exercise price of each

pre-funded warrant.

Subsequent to September 30, 2025, the holder of the November 2024 Note elected to convert the outstanding principal

and interest through November 3, 2025, into pre-funded warrants.

The outstanding principal and accrued interest amounts of $ 10 million

and $ 175 thousand respectively, resulted in the issuance of 3,167,564 and 55,433 pre-funded warrants, respectively.

On May 22, 2025, the Company

issued secured convertible notes with an aggregate original principal amount of $ 30.0 million (collectively the “May 2025 Notes”)

to RSLGH and to certain other third-party accredited investors.

The May 2025 Notes are secured obligations of the Company and rank senior

to all indebtedness of the Company except for the November 2024 Note and the August 2025 Notes, which ranks on parity with the May 2025

The May 2025 Notes will mature on November 22, 2026 and accrue interest at a 10.0 % annualized rate, with interest to be paid on

the first calendar day of each September and March while the May 2025 Notes are outstanding, in pre-funded warrants, beginning September

The principal amount of the May 2025 Notes will be payable on the maturity date.

9 unchanged sentences

and, to the extent necessary, the receipt of stockholder approval under Nasdaq listing rules.

The November 2024 Note and

the May 2025 Notes (together referred to as “the Notes”) impose certain customary affirmative and negative covenants upon

the Company, including covenants relating to ranking and reservation of shares.

If an event of default under a Note occurs and is not

waived, the holder can elect to accelerate all or a portion of the then-outstanding principal amount of the applicable Note, plus accrued

and unpaid interest, including default interest, which accrues at a rate per annum equal to 14 % from the date of a default or event of

The Company is in compliance with these covenants as of June 30, 2025.

On August 25, 2025, the Company

issued secured convertible notes with an aggregate original principal amount of $ 50.0 million (collectively the “August 2025 Notes”)

to RSLGH and to certain other third-party accredited investors.

The August 2025 Notes are secured obligations of the Company and rank

senior to all indebtedness of the Company except for the May 2025 and November 2024 Notes, which rank on parity with the August 2025 Notes.

The August 2025 Notes will mature on February 25, 2027 and accrue interest at a 10.0 % annualized rate, with interest to be paid on the

first calendar day of each September and March, while the August 2025 Notes are outstanding beginning March 1,

The principal amount of the August 2025 Notes will be payable on the maturity date.

The August 2025 Notes may be converted into

Common Stock or, at the election of the holder, into pre-funded warrants, with a beneficial ownership limitation for RSLGH of 49.99 % and

a beneficial ownership limitation for other holders of 4.99 %, in each case subject to applicable Nasdaq listing rules.

If a holder elects

to convert the August 2025 Notes into Common Stock, the conversion price per share will be $ 29.475 , equal to the Minimum Price as such

term is defined under Nasdaq Listing Rule 5635 at the time the August 2025 Notes were issued, subject to customary adjustments for certain

corporate events.

If a holder elects to convert the August 2025 Notes into pre-funded warrants, and for interest payments elected to be paid in the

form of pre-funded warrants, the conversion price per pre-funded warrant will be equal to the $ 29.475 conversion price less than $ 0.001

exercise price of the warrant.

The conversion of the August 2025 Notes into Common Stock and/or pre-funded warrants is subject to certain

customary conditions and, to the extent necessary, the receipt of stockholder approval under Nasdaq listing rules.

The November 2024 Note, May

2025 Notes and August 2025 Notes (together referred to as “the Notes”) impose certain customary affirmative and negative covenants

upon the Company, including covenants relating to ranking and reservation of shares.

If an event of default under a Note occurs and is

not waived, the holder can elect to accelerate all or a portion of the then-outstanding principal amount of the applicable Note, plus

accrued and unpaid interest, including default interest, which accrues at a rate per annum equal to 14 % from the date of a default or

event of default.

The Company was in compliance with these covenants as of September 30, 2025.

The Company determined the

convertible notes do not contain features that qualify as embedded derivatives in accordance with ASC 815.

Borrowings under the Notes

as of June 30, 2025 totaled $ 40.0 million, $ 10.0 million of which are recorded on the Company’s condensed consolidated balance sheets

in related party debt, current, $ 27.0 million of which are recorded in related party debt, and the remaining are reported in long-term

Notes do not contain features that qualify as embedded derivatives in accordance with ASC 815.

Borrowings under the Notes as of September

30, 2025 totaled $ 90.0 million, $ 10.0 million of which are recorded on the Company’s condensed consolidated balance sheets in related

party debt, current, $ 72.0 million of which are recorded in related party debt, net of current, and the remaining are reported in long-term

debt, net of current.

Related party interest expense

incurred on the Notes amounted to approximately $ 548 thousand and $ 0 for the three months ended June 30, 2025 and 2024, respectively.

Related party interest expense incurred on the Notes amounted to approximately $ 798 thousand and $ 0 for the six months ended June 30,

incurred on the Notes amounted to approximately $ 1.4 million and $ 0 for the three months ended September 30, 2025 and 2024, respectively.

Related party interest expense incurred on the Notes amounted to approximately $ 2.2 million and $ 0 for the nine months ended September

30, 2025 and 2024, respectively.

Interest expense

incurred on the Notes related to unaffiliated third parties amounted to approximately $ 33 thousand and $ 0 for the three months ended

June 30, 2025 and 2024, respectively.

Interest expense incurred on the Notes related to unaffiliated third parties amounted to

approximately $ 33 thousand and $ 0 thousand for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, future

minimum principal payments on all debt positions, excluding accrued interest amounts, were as follows:

Interest expense incurred

on the Notes related to unaffiliated third parties amounted to approximately $ 123 thousand and $ 0 for the three months ended September

30, 2025 and 2024, respectively.

Interest expense incurred on the Notes related to unaffiliated third parties amounted to approximately

$ 156 thousand and $ 0 for the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025,

future minimum principal payments on all debt positions, excluding accrued interest amounts, were as follows:

Years ending December 31 (In thousands)

Remaining 2025

Total future payments

Note 10 — Leases

The determination as to

whether any arrangement contained a lease at its inception was performed based on whether or not the Company has the right to control

the asset during the contract period.

The lease term was determined assuming the exercise of options that were reasonably certain to

Leases with an original lease term of 12 months or less at inception were not reflected in the Company’s condensed consolidated

balance sheet and those lease costs are expensed on a straight-line basis over the respective term.

Leases with a term greater than 12

months were reflected as non-current right-of-use assets and current and non-current lease liabilities in the Company’s condensed

consolidated balance sheets.

The determination as to whether

any arrangement contained a lease at its inception was performed based on whether or not the Company has the right to control the asset

during the contract period.

The lease term was determined assuming the exercise of options that were reasonably certain to occur.

with an original lease term of 12 months or less at inception were not reflected in the Company’s condensed consolidated balance

sheets and those lease costs are expensed on a straight-line basis over the respective term.

Leases with a term greater than 12 months

were reflected as non-current right-of-use assets and current and non-current lease liabilities in the Company’s condensed consolidated

balance sheets.

As the implicit interest

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the present value of its lease liabilities.

The Company’s incremental borrowing rate was determined using the interest rate on

a long term debt position entered into at approximately the same time and for the same duration as the lease.

The Company’s incremental borrowing rate was determined using the interest rate on a

long term debt position entered into at approximately the same time and for the same duration as the lease.

When a contract contained

lease and non-lease elements, both were accounted for as a single lease component.

As of June 30, 2025 and

December 31, 2024, the Company had no active finance leases.

Also during the six months

ended June 30, 2025, in connection with the discontinuation of Extraction Business, the Company subleased the assets under one of its

leases, with the sublease commencement date on April 1, 2025, for $ 9 thousand per month.

The Company recognized a sublease income of

$ 27 thousand, within loss from discontinued operations in the condensed consolidated statements of operations.

As of September 30, 2025

and December 31, 2024, the Company had no active finance leases.

Also during the nine months

ended September 30, 2025, in connection with the discontinuation of Extraction Business, the Company subleased the assets under one of

its leases, with the sublease commencement date on April 1, 2025, for $ 9 thousand per month.

The Company recognized a sublease income

of $ 27 thousand, within loss from discontinued operations in the condensed consolidated statements of operations.

The Company recognized

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of operations.

During the six months ended

June 30, 2025, in connection with the discontinuation of Extraction Business, the Company terminated a lease early and recognized a loss

on lease termination of $ 161 thousand, within gain on disposal of Extraction Business in the condensed consolidated statements of operations.

As of June 30, 2025, the

Company did not have any operating leases related to continuing operations.

As such, no operating lease cost, weighted average remaining

lease term, or weighted average discount rate, and cash paid for operating leases are presented for continuing operations for the three

and six months ended June 30, 2025.

As of June 30, 2025, there is no future lease payment related to continuing operations.

During the nine months ended

September 30, 2025, in connection with the discontinuation of Extraction Business, the Company terminated a lease early and recognized

a loss on lease termination of $ 161 thousand, within gain on disposal of Extraction Business in the condensed consolidated statements

of operations.

As of September 30, 2025

and December 31, 2024, the Company did not have any operating leases related to continuing operations.

As such, no operating lease cost,

weighted average remaining lease term, or weighted average discount rate, and cash paid for operating leases are presented for continuing

operations for the three and nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025, there was no future

lease payment related to continuing operations.

Note 11 — Stockholders’ Equity

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The public offering price for each share of Common Stock was $ 5.70 , and the offering price for each pre-funded

warrant is $ 5.685 , which equals the public offering price per share of the Common Stock, less the $ 0.015 per share exercise price of

each pre-funded warrant.

warrant is $ 5.685 , which equals the public offering price per share of the Common Stock, less the $ 0.015 per share exercise price of each

pre-funded warrant.

The Company issued 4,482

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The Placement Agents Warrants were exercisable on a cash basis, unless

there was not an effective registration statement covering the issuance of the shares issuable upon exercise of the Placement Agents

Warrants or if shareholder approval for the full exercise of the Placement Agents Warrants was not received, in which case the Placement

Agents Warrants would also be exercisable on a cashless exercise basis at Alexander Capital’s election.

The Placement Agent Warrants

were exercised in full during November 2024.

The measurement of fair

value of the Placement Agents Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at

the date of issuance (i.e., share price of $ 7.80 , exercise price of $ 5.70 , term of five years, volatility of 128 %, risk-free rate of

4.32 %, and expected dividend rate of 0 %).

The grant date fair value of these Placement Agents Warrants was estimated to be $ 31 thousand

on February 27, 2024, and was originally recorded within additional paid-in capital.

As the Placement Agents Warrants were exercised

during the year ended December 31, 2024, the related amounts remain within equity as part of the total proceeds from the issuance of

Common Stock.

there was not an effective registration statement covering the issuance of the shares issuable upon exercise of the Placement Agents Warrants

or if shareholder approval for the full exercise of the Placement Agents Warrants was not received, in which case the Placement Agents

Warrants would also be exercisable on a cashless exercise basis at Alexander Capital’s election.

The Placement Agent Warrants were

exercised in full during November 2024.

The measurement of fair value

of the Placement Agents Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date

of issuance (i.e., share price of $ 7.80 , exercise price of $ 5.70 , term of five years, volatility of 128 %, risk-free rate of 4.32 %, and

expected dividend rate of 0 %).

The grant date fair value of these Placement Agents Warrants was estimated to be $ 31 thousand on February

27, 2024, and was originally recorded within additional paid-in capital.

As the Placement Agents Warrants were exercised during the year

ended December 31, 2024, the related amounts remain within equity as part of the total proceeds from the issuance of Common Stock.

Related Party Warrant Issuance

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the Pre-Funded Warrant liability to stockholders’ equity at its post-modification fair value of $ 6.8 million.

On August 12, 2024, the stockholders of the Company approved a proposal

to amend the Related Party Pre-Funded Warrants to add the Adjustment Provisions at a future date.

Pursuant to that approval, on August

28, 2024, the Company entered into amendments to the Related Party Pre-Funded Warrants to insert the Adjustment Provisions.

This resulted

in a reassessment of the Related Party Pre-Funded Warrants such that they no longer met the requirements for equity classification and

became classified as liabilities.

They were remeasured to their fair value upon modification, resulting in a reduction in value of approximately

$ 3.1 million.

The fair value, as of August 28, 2024, of $ 3,723,383 was reclassified to a warrant liability.

As a result of the

warrant amendments and the subsequent issuance of 189,645 shares of Common Stock to Ionic at an effective purchase price of

$ 2.109 per share of Common Stock, the number of shares of Common Stock underlying the Related Party Pre-Funded Warrant held by CP

Acquisitions was adjusted to 5,452,288 and the number of shares of Common Stock underlying the Related Party Pre-Funded Warrant held by

GIC Acquisition was adjusted to 1,085,122 .

On August 30, 2024, CP Acquisitions partially exercised its Pre-Funded Warrant and entities

affiliated with Raymond Chang and I-Tseng Jenny Chan received an aggregate of 383,127 shares of Common Stock upon the exercise.

On August 12, 2024, the

stockholders of the Company approved a proposal to amend the Related Party Pre-Funded Warrants to add the Adjustment Provisions at a

Pursuant to that approval, on August 28, 2024, the Company entered into amendments to the Related Party Pre-Funded Warrants

to insert the Adjustment Provisions.

This resulted in a reassessment of the Related Party Pre-Funded Warrants such that they no longer

met the requirements for equity classification and became classified as liabilities.

They were remeasured to their fair value upon modification,

resulting in a reduction in value of approximately $ 3.1 million.

The fair value, as of August 28, 2024, of $ 3,723,383 was reclassified

to a warrant liability.

As a result of the warrant amendments and the subsequent issuance of 189,645 shares of Common Stock

to Ionic at an effective purchase price of $ 2.109 per share of Common Stock, the number of shares of Common Stock underlying the

Related Party Pre-Funded Warrant held by CP Acquisitions was adjusted to 5,452,288 and the number of shares of Common Stock underlying

the Related Party Pre-Funded Warrant held by GIC Acquisition was adjusted to 1,085,122 .

On August 30, 2024, CP Acquisitions partially

exercised its Pre-Funded Warrant and entities affiliated with Raymond Chang and I-Tseng Jenny Chan received an aggregate of 383,127 shares

of Common Stock upon the exercise.

On September 27, 2024, the

Company executed an amendment to the Related Party Pre-Funded Warrants to remove the Adjustment Provisions.

Accordingly, the Related

Party Pre-Funded Warrants met the requirements for equity classification.

The amendment also included a provision preventing the holders

from any additional exercise of either of the Related Party Pre-Funded Warrants at any time between September 27, 2024 and October 9,

Accordingly, the Related Party

Pre-Funded Warrants met the requirements for equity classification.

The amendment also included a provision preventing the holders from

any additional exercise of either of the Related Party Pre-Funded Warrants at any time between September 27, 2024 and October 9, 2024.

They were remeasured to their fair value upon modification resulting in an increase to the fair value of $ 18,392,143 .

value as of September 27, 2024 of $ 20,770,707 was reclassified to equity.

The fair value as

of September 27, 2024 of $ 20,770,707 was reclassified to equity.

During the nine months ended September 30, 2025, 61,759 warrants were

issued in lieu of cash interest payments of $ 1.4 million.

Note 12 — Stock-Based Compensation and Employee Benefit Plans

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stockholders approved an amendment to the 2022 Plan to increase the number of shares issuable thereunder by 250,000 shares.

As of September

30, 2025, there were 229,815 shares of Common Stock available to be granted under the Company’s 2022 Plan.

The Company’s stock

compensation expense from continuing operations was $ 537 thousand and $ 58 thousand for the three months ended June 30, 2025 and 2024,

compensation expense from continuing operations was $ 507 thousand and $ 127 thousand for the three months ended September 30, 2025 and

2024, respectively.

The Company’s stock compensation expense from continuing operations was $ 1.1 million and $ 511 thousand for the six

months ended June 30, 2025 and 2024, respectively.

The Company’s stock compensation expense from continuing operations was $ 1.6 million and $ 638 thousand for the

nine months ended September 30, 2025 and 2024, respectively.

The Company’s stock

compensation expense from discontinued operations was a forfeiture of $ 22 thousand and an expense of $ 23 thousand for the three months

ended June 30, 2025 and 2024, respectively.

The Company’s stock compensation expense from discontinued operations was a forfeiture

of $ 20 thousand and an expense of $ 60 thousand for the six months ended June 30, 2025 and 2024, respectively.

compensation expense from discontinued operations was $ 0 and $ 156 thousand for the three months ended September 30, 2025 and 2024, respectively.

The Company’s stock compensation expense from discontinued operations was a forfeiture of $ 20 thousand and an expense of $ 216 thousand

for the nine months ended September 30, 2025 and 2024, respectively.

Stock Options

For six months ended June

For nine months ended September

30, 2025, there were no options granted or exercised under the Company’s stock option plans.

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There were 75 and 216 options outstanding with a weighted average

exercise price of $ 27 thousand and $ 19 thousand as of June 30, 2025 and December 31, 2024, respectively.

exercise price of $ 27 thousand and $ 19 thousand as of September 30, 2025 and December 31, 2024, respectively.

There were 75 options vested

and exercisable with a weighted average exercise price of $ 27 thousand as of June 30, 2025.

There were no unvested options as of June

As of June 30, 2025, there

was no unrecognized compensation expense related to unvested options.

and exercisable with a weighted average exercise price of $ 27 thousand as of September 30, 2025.

There were no unvested options as of

September 30, 2025.

As of September 30, 2025,

there was no unrecognized compensation expense related to unvested options.

The following table summarizes information about

options vested and exercisable at June 30, 2025:

options vested and exercisable at September 30, 2025:

Options Vested and Exercisable

Price ($) Number of Options Weighted-

Number of Options Weighted-

Remaining Contractual

Life (Years) Weighted-Average

4 unchanged sentences

Restricted Stock Units

Under the 2022 Plan, the

Company may grant restricted stock units to employees, directors and officers.

The restricted stock units granted generally vest equally

over periods ranging from one to three years, subject to certain exceptions for directors.

The fair value of restricted stock units is

determined based on the closing market price of the Company’s Common Stock on the date of grant.

Compensation expense related to

the restricted stock units is recognized using a straight-line attribution method over the vesting period.

Under the 2022 Plan, the Company may grant restricted stock units to

employees, directors, officers and consultants.

The restricted stock units granted generally vest equally over periods ranging from one

to three years , subject to certain exceptions for directors.

The fair value of restricted stock units is determined based on the closing

market price of the Company’s Common Stock on the date of grant.

Compensation expense related to the restricted stock units is recognized

using a straight-line attribution method over the vesting period.

The following table presents restricted stock

unit activity for the six months ended June 30, 2025:

unit activity for the nine months ended September 30, 2025:

Grant Date Fair

Unvested at December 31, 2024

Unvested at June 30, 2025

As of June 30, 2025, total

unrecognized compensation expense related to unvested restricted stock units was $ 1.2 million, which is expected to be recognized over

a weighted average period of 0.6 years.

Unvested at September 30, 2025

As of September 30, 2025,

total unrecognized compensation expense related to unvested restricted stock units was $ 760 thousand, which is expected to be recognized

over a weighted average period of 0.37 years.

Note 13 — Stock Warrants

The following tables present all warrant activity

of the Company for the six months ended June 30, 2025:

of the Company for the nine months ended September 30, 2025:

Number of Warrants

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Warrants outstanding at December 31, 2024

Warrants outstanding at June 30, 2025

Warrants outstanding at September 30, 2025

Note 14 — Income Taxes

The Company’s effective

income tax rates were 0 % for each of the three and six months ended June 30, 2025 and 2024.

There was no provision for (benefit from)

income taxes for the three and six months ended June 30, 2025 and 2024.

There is no difference between the Company’s effective tax

rates for the 2025 and 2024 periods.

There was no change in the provision for (benefit from) income taxes for the three and six months

ended June 30, 2025 compared to the three and six months ended June 30, 2024.

income tax rates were 0 % for each of the three and nine months ended September 30, 2025 and 2024.

There was no provision for (benefit

from) income taxes for the three and nine months ended September 30, 2025 and 2024.

There is no difference between the Company’s

effective tax rates for the 2025 and 2024 periods.

There was no change in the provision for (benefit from) income taxes for the three

and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024.

The utilization of the Company’s

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Another key point is the return to immediate expensing of domestic research and experimental expenditures (“R&E”)

and accelerated tax deductions of R&E that was previously capitalized for large businesses.

and accelerated tax deductions of R&E that were previously capitalized for large businesses.

The legislation also reinstates

EBITDA-based interest deduction for tax purposes.

While the Company does not expect material impact, the Company is currently assessing the potential impact of this legislation on its future

financial position, results of operations, and cash flows.

In accordance with U.S.

GAAP, the effects will be recognized in the period

of enactment.

The impacts of the OBBA are reflected in our results for the quarter ended September

30, 2025, and there was no material impact to our income tax expense or effective tax rate.

Note 15 — Net (Loss) Income Per Share

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outstanding stock options, stock related to unvested restricted stock units, and outstanding warrants to the extent dilutive.

income per share, assuming dilution, is equal to basic net (loss) income per share for the three months ended June 30, 2025 and 2024 and

six months ended June 30, 2025 because the effect of dilutive securities outstanding during the periods, including convertible notes,

options, restricted stock units and warrants computed using the treasury stock method, is anti-dilutive.

income per share, assuming dilution, is equal to basic net (loss) income per share for the three and nine months ended September 30, 2025

and 2024 because the effect of dilutive securities outstanding during the periods, including convertible notes, options, restricted stock

units and warrants computed using the treasury stock method, is anti-dilutive.

The components of basic and diluted net loss per

share were as follows:

Three months ended

Six months ended

Three months ended September 30,

Nine months ended September 30,

(In thousands, except share and per share data)

Net loss attributable to Agrify Corporation from continuing operations

Net (loss) income attributable to Agrify Corporation from discontinued operations

Numerator for basic EPS - net (loss) income available for common shareholders

Effect of dilutive securities:

Interest expense on convertible notes - from continuing operations

Numerator for diluted EPS - net (loss) income available for common shareholders after assumed conversions

Net loss from continuing operations

Net (loss) income from discontinued operations

Numerator for basic EPS - net loss available for common shareholders

Denominator for basic EPS - Weighted-average common shares outstanding

Effect of dilutive securities:

Conversion of convertible notes

Denominator for diluted EPS - adjusted weighted-average common stock outstanding after assumed conversions

Basic net (loss) income per share attributable to common stockholders

Diluted net (loss) income per share attributable to common stockholders

As of June 30, 2024, the

Company had convertible notes outstanding with a principal balance of approximately $ 3.3 million convertible into 176,309 shares of Common

During the six months ended June 30, 2024, the Company also converted a portion of the convertible notes into 178,109 shares of

Common Stock and 1,017,318 pre-funded warrants to purchase shares of Common Stock.

Given the nominal exercise price of the Company’s

issuance of pre-funded warrants, such pre-funded warrants are included in in the calculation of basic net (loss) income per share and

weighted for the period outstanding from issuance to June 30, 2024.

The exercise price per warrant is deemed non-substantive when compared

to the fair value of the underlying shares of Common Stock.

In determination of the denominator for diluted earnings per share (“EPS”)

for the six months ended June 30, 2024, the Company assumed conversion of the 178,109 shares of Common Stock and the 1,017,318 pre-funded

warrants as of the beginning of the period, January 1, 2024, eliminating the weighting of the shares from issuance to June 30, 2024.

Company also included in the denominator for diluted EPS for the six months ended June 30, 2024, the assumed conversion of 176,309 shares

of Common Stock related to the convertible notes.

For each of the periods

presented, the Company’s potential dilutive securities, which include stock options, restricted stock units, and warrants, and

convertible notes, have been excluded from the computation of basic and diluted net (loss) income per share with the exception of the

pre-funded warrants, or penny warrants, which are included in the computation, as detailed above.

The Convertible Notes outstanding during

the six months ended June 30, 2025 were also excluded from the computation of diluted net (loss) per share as they do not represent common

stock equivalents unless and until conversion conditions are met.

The weighted-average number of shares of Common Stock outstanding used

to calculate both basic and diluted net loss per share attributable to Common Stockholders is the same.

The Company excluded the following

potential Common Stock equivalents presented based on amounts outstanding at each period end, from the computation of diluted net loss

per share attributable to Common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Six months ended

Net loss per share attributable to common shareholders - basic and diluted

For each of the periods presented, the Company’s potential dilutive

securities, which include stock options, restricted stock units, and warrants, and convertible notes, have been excluded from the computation

of basic and diluted net (loss) income per share.

The Convertible Notes outstanding during the nine months ended September 30, 2025 were

also excluded from the computation of diluted net (loss) per share as they do not represent common stock equivalents unless and until

conversion conditions are met.

The weighted-average number of shares of Common Stock outstanding used to calculate both basic and diluted

net loss per share attributable to Common Stockholders is the same.

The Company excluded the following potential Common Stock equivalents

presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to Common stockholders

for the periods indicated because including them would have had an anti-dilutive effect:

Nine months ended

September 30,

Shares subject to outstanding warrants

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initial complaint in January 2023.

The Company believes this is a meritless claim and has responded to various discovery requests.

Litigation is currently in discovery stage with a trial anticipated in the first quarter of 2026.

parties are in the process of attempting to reach a settlement to resolve the dispute.

Based on the latest settlement discussions, management

currently estimates that the Company’s aggregate net loss exposure is approximately $ 887 thousand.

Given the Company has determined

this loss is probable of occurring and reasonably estimable, an accrual was recorded in the amount of $ 887 thousand within general and

administrative expense within the Condensed Consolidated Statement of Operations for the three months ended September 30, 2025.

Other Commitments and Contingencies

5 unchanged sentences

Note 17 — Related Parties

Some of the current and former officers and directors of the Company

are involved in other business activities and may, in the future, become involved in other business opportunities that become available.

Ben Kovler, Agrify’s Chairman and Interim Chief Executive Officer also serves as Green Thumb’s Chairman and Chief Executive

Agrify’s Chief Financial Officer is a Green Thumb employee and provides services under a shared services agreement.

Kovler, two of Agrify’s seven directors are affiliated with Green Thumb.

Additional details regarding the shared services arrangement,

convertible notes, and intellectual property and licensing agreements are provided in the sections below.

Some of the current and former

officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business

opportunities that become available.

Ben Kovler, RYTHM’s Chairman and Interim Chief Executive Officer also serves as Green Thumb’s

Chairman and Chief Executive Officer.

RYTHM’s Chief Financial Officer is a Green Thumb employee and provides services under a shared

services agreement.

Including Mr.

Kovler, two of RYTHM’s seven directors are affiliated with Green Thumb.

Additional details regarding

the shared services arrangement, convertible notes, and intellectual property and licensing agreements are provided in the sections below.

The following table describes the net activity

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Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(In thousands)

Green Thumb Industries

The net activity of $ 3.4

million during the three months ended June 30, 2025 consists of $ 2.9 million of support services performed by Green Thumb on behalf of

the Company, $ 182 thousand non-royalty chargeback expense, $ 548 thousand interest charges for the Convertible Notes, offset by $ 245 thousand

royalty revenue from Green Thumb.

The net activity of $ 4.9

million during the six months ended June 30, 2025 consists of $ 4.3 million of support services performed by Green Thumb on behalf of the

Company, which is comprised of $ 3.7 million in salary charges and $ 562 thousand in non-salary charges, and $ 798 thousand interest charges,

$ 182 thousand non-royalty chargeback expense, offset by $ 80 thousand of equipment sales and beverage sales and $ 245 thousand royalty revenue

from the Company to Green Thumb.

The net activity of $ 3.8 million during the three months ended September

30, 2025 consists of $ 2.8 million of support services performed by Green Thumb on behalf of the Company, $ 1.4 million interest charges

for the Convertible Notes, and $ 201 thousand non-licensing chargeback expense, offset by $ 500 thousand Licensing Revenue from Green Thumb.

The $ 500 thousand of Licensing Revenue represents a net amount and includes $ 32 thousand of licensing costs.

The $ 201 thousand of non-licensing

chargeback expense represents a net amount and includes a $ 40 thousand inventory purchase from Green Thumb.

The net activity of $ 8.8 million during the nine months ended September

30, 2025 consists of $ 7.0 million of support services performed by Green Thumb on behalf of the Company, which is comprised of $ 6.5 million

in salary charges, $ 562 thousand in non-salary charges, $ 2.2 million interest charges, and $ 383 thousand non-licensing chargeback expense,

offset by $ 80 thousand of equipment sales and beverage sales and $ 745 thousand Licensing Revenue from the Company to Green Thumb.

$ 745 thousand of Licensing Revenue represents a net amount and includes $ 32 thousand of licensing costs.

The $ 383 thousand of non-licensing

chargeback expense represents a net amount and includes a $ 283 thousand hemp-derived inventory purchase from Green Thumb.

The following table summarizes

the net related party payable as of June 30, 2025 and December 31, 2024:

the net related party payable as of September 30, 2025 and December 31, 2024:

September 30,

(In thousands)

Green Thumb Industries

The net related party payable

of $ 38.8 million as of June 30, 2025, consists of $ 1.3 million service charge payable, $ 37.0 million convertible notes payable, $ 443 thousand

accrued interest payable, $ 232 thousand non-royalty chargeback payable, offset by $ 181 thousand receivable from royalty revenue.

Related Party Royalty Revenue

On May 20, 2025, the Company

acquired intellectual property rights to the incredibles brand, as part of the related party acquisition of MC Brands.

In connection

with the acquisition, the Company also licensed incredibles brand back to Green Thumb under a license arrangement and recognized

related party royalty revenue.

For further discussion on the acquisition and royalty revenue, refer to Note 7 and Note 2 included elsewhere

in the notes to the unaudited condensed consolidated financial statements.

The net related party payable of $ 86.4 million as of September 30,

2025, consists of $ 4.1 million service charge payable, $ 82.0 million convertible notes payable, $ 521 thousand accrued interest payable,

$ 40 thousand non-licensing chargeback payable, offset by $ 182 thousand receivable from Licensing Revenue.

Related Party Licensing Revenue

On May 20, 2025, and August 27, 2025, the Company acquired intellectual

property rights to the incredibles brand and the Acquired Brands, as part of the related party acquisition of MC Brands and VCP,

respectively.

In connection with the acquisitions, the Company also licensed incredibles and the Acquired Brands brand back to

a Green Thumb affiliate under a license arrangement and recognized related party Licensing Revenue.

For further discussion on the acquisition

and Licensing Revenue, refer to Note 7 and Note 2 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

Convertible Notes

On November 5, 2024, the

Company issued the November 2024 Note to RSLGH, an indirect wholly-owned subsidiary of Green Thumb, a related party.

On May 22, 2025, the Company issued a May 2025 Note with an original principal amount

of $ 27.0 million to RSLGH.

For further discussion on these notes, refer to Note 9 included elsewhere in the notes to the unaudited condensed

consolidated financial statements.

Company issued the November 2024 Note with an original principal amount of $ 10.0 million to RSLGH, an indirect wholly-owned subsidiary

of Green Thumb, a related party.

On May 22, 2025, the Company issued a May 2025 Note with an original principal amount of $ 27.0 million

On August 25, 2025, the Company issued an August 2025 Note with an original principal amount of $ 45.0 million to RSLGH.

further discussion on these notes, refer to Note 9 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

Support Services Agreement

14 unchanged sentences

Note 18 — Segment Reporting

The Company has determined

that it operates as a single operating and reporting segment in accordance with ASC 280, Segment Reporting.

This is due to the key decisions

and allocation of resources happening in a centralized manner based on the review of the Company’s Chief Operating Decision Maker

(“CODM”), Benjamin Kovler, the Company’s Chairman and Interim Chief Executive Officer, of Operating income from continuing

operations of the Company.

This profit measure is presented in the Condensed Consolidated Statements of Operations and the disaggregation

of sales from hemp-derived THC products and royalties is presented in Note 2 – Revenue.

There are no significant expenses associated

with the royalty revenue and the CODM does not review expense allocations, amortization expense or specific assets when reviewing royalty

The Company has determined that it operates as a single operating and

reporting segment in accordance with ASC 280, Segment Reporting.

This is due to the key decisions and allocation of resources happening

in a centralized manner based on the review of the Company’s Chief Operating Decision Maker (“CODM”), Benjamin Kovler,

the Company’s Chairman and Interim Chief Executive Officer , of Operating income from continuing operations of the Company.

profit measure is presented in the Condensed Consolidated Statements of Operations and the disaggregation of sales from hemp-derived THC

products (non-licensing) and Licensing Revenue is presented in Note 2 – Revenue.

There are no significant expenses associated with

the Licensing Revenue and the CODM does not review expense allocations, amortization expense or specific assets when reviewing Licensing

Note 19 — Subsequent Events

Subsequent to September 30,

2025, the holder of the November 2024 Note elected to convert the outstanding principal and interest through November 3, 2025, into pre-funded

The outstanding principal and accrued interest amounts of $ 10 million and $ 175 thousand respectively, resulted in the issuance

of 3,167,564 and 55,433 pre-funded warrants, respectively.

The Company evaluated subsequent

events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed consolidated financial

statements were issued and concluded that there were no subsequent events that required recognition or disclosure in the financial statements.

events and transactions that occurred after the balance sheet date up to November 7, 2025, the date that the unaudited condensed consolidated

financial statements were issued.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements