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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-07 · 319 added, 528 removed, 81 unchanged (91% of the section changed)

3 unchanged sentences

in this Quarterly Report is intended to update the information contained in our Annual Report on Form 10-K for the year ended December

31, 2024 filed with the Securities And Exchange Commission (the “SEC”) on March 21, 2025, as amended on March 28, 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 (collectively, the “Form 10-K”) and presumes that readers have access to,

and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and

other information contained in the Form 10-K.

The following discussion and analysis also should be read together with our financial statements

and the notes to the financial statements included elsewhere in this Quarterly Report.

31, 2025 filed with the Securities And Exchange Commission (the “SEC”) on March 3, 2026 (the “Form 10-K”) and

presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” and other information contained in the Form 10-K.

The following discussion and analysis also should

be read together with our financial statements and the notes to the financial statements included elsewhere in this Quarterly Report.

The following discussion

contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation

Reform Act of 1995.

Such statements appear in a number of places in this Quarterly Report, including, without limitation, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance

and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control.

Forward-looking statements

speak only as of the date of this Quarterly Report.

contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities

Litigation Reform Act of 1995.

Such statements appear in a number of places in this Quarterly Report, including, without limitation,

“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees

of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control.

Forward-looking

statements speak only as of the date of this Quarterly Report.

You should not put undue reliance on any forward-looking statements.

We strongly encourage

investors to carefully read the risk factors described in the Form 10-K in the section entitled “Risk Factors” for a description

of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.

We assume no responsibility

to update the forward-looking statements contained in this Quarterly Report.

The following should also be read in conjunction with the

unaudited financial statements and notes thereto that appear elsewhere in this Quarterly Report.

Except as otherwise indicated

herein or as the context otherwise requires, references in this Quarterly Report to “we,” “us,” “our,”

“Company,” and “RYTHM” refer to RYTHM Inc., a Nevada corporation and its consolidated subsidiaries.

delivers well-being to customers 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 and Good

Green, in addition to our Señorita brand which offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages

that mirror well-known cocktails like a margarita – in four flavors – classic Lime Jalapeño Margarita, Mango Margarita,

Paloma and Ranch Water.

Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita offers

a low-sugar, low-calorie alternative to alcoholic beverages and is available at top retailers including Total Wine, ABC Fine Wine &

Spirits, and Binny’s in eleven U.S.

states and Canada, with plans for expansion and future availability in premier on-premises

destinations.

Other hemp-derived products including incredibles and Beboe edible products are primarily sold online and through

direct-to-retail partnerships.

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

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

In addition to hemp-derived products (non-licensing) and Licensing

Revenue, RYTHM has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry

(the “Extraction Business”).

Prior to our exit of the Extraction Business on March 30, 2025, our comprehensive extraction

product line, which includes hydrocarbon, alcohol, solventless, post-processing, and lab equipment, empowered producers to maximize the

quantity and quality of extract required for premium concentrates.

Additionally, prior to its sale on December 31, 2024, our proprietary

micro-environment-controlled Agrify Vertical Farming Units (“VFUs”) enabled cultivators to produce high quality products for

the cannabis industry (the “Cultivation Business”).

Reverse Stock Split

On October 8, 2024, we effected

a 1-for-15 reverse stock split of our Common Stock.

All share and per share information has been retroactively adjusted to give effect

to the reverse stock splits for all periods presented unless otherwise indicated.

Lines of Business

Non-licensing Revenue and Licensing Revenue

We acquired the Señorita

brand of hemp-derived THC beverages in November 2024.

Señorita was designed and formulated by world-class winemakers Charles Bieler

and Joel Gott.

Recognizing a growing generational demand for adult beverage alternatives, Bieler and Gott gave the classic margarita a

modern twist—replacing alcohol with hemp-derived to create a delightful adult beverage alternative.

Through the use of all-natural,

premium ingredients like organic Mexican agave, fresh lime juice and sweet, tangy mango, Señorita quickly gained acclaim, taking

home the top spot in The High Times Cannabis Cup just one year after inception.

Gott and Bieler continue to collaborate on the brand with

Kovler and the RYTHM team.

Señorita currently

offers four award-winning flavors – classic Lime Jalapeño Margarita, Paloma, Mango Margarita, and Ranch Water.

hemp-derived beverages are currently available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s in

states and Canada.

Products are also available for direct-to-consumer purchase where permissible under state law at senoritadrinks.com.

On May 20, 2025, we entered

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

(“Green Thumb”), a related party, pursuant to which we acquired all of the equity interests in MC Brands LLC and its

wholly-owned subsidiary Core Growth LLC (both formerly wholly-owned subsidiaries of Green Thumb and together referred to as “MC

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

The aggregate

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

In connection with the purchase of MC Brands,

we also licensed the right to use the RYTHM and Beboe brands from Green Thumb for hemp-derived THC beverages and similar products.

contrast, the incredibles licensing agreement grants GTI Core the rights to use certain intellectual property related to the incredibles

brand in connection with GTI Core’s existing businesses.

On August 27, 2025, we entered

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

pursuant to which we 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 aggregate consideration exchanged

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

In connection with the purchase of VCP, we also entered a license agreement

with GTI Core, an indirect wholly-owned subsidiary of Green Thumb, related to the Acquired Brands in connection with GTI Core’s

existing businesses.

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

on August 27, 2025.

The consideration payable by GTI Core for the license rights of the incredibles brand and the Acquired Brand,

consists of a monthly license fee, payable in cash, for using the licensed intellectual property.

Co-Manufacturing Arrangements

Our finished goods are manufactured

by various third-party co-manufacturers situated throughout the United States and Canada, under separate arrangements with each party.

Our co-manufacturing arrangements vary in terms and, from time to time, we may enter into manufacturing contracts with agreed upon minimum

quantities to ensure continuity of supply of certain products in certain territories.

We continue to actively seek alternative and/or

additional co-manufacturing facilities with adequate capacity and capability for the production of our various products to minimize transportation

costs as well as mitigate the risk of disruption in production.

Our ability to estimate demand

for our products is imprecise, particularly with new products, and may be less precise during periods of rapid growth, including in new

If we materially underestimate demand for our products and/or are unable to secure sufficient ingredients or raw materials and/or

procure adequate co-manufacturing arrangements and/or obtain adequate or timely shipment of our products, we might not be able to satisfy

demand on a short-term basis.

Distribution Agreements

During the first nine months

of 2025, we continued to expand distribution of our hemp-derived beverage products in our domestic markets.

We have entered into

agreements with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain

terms and conditions, which may vary depending on the form of the agreement.

Such agreements remain in effect for their then-current term

as long as our products are being distributed, but are subject to specified termination rights held by each party.

Additionally, we are

entitled to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may be material

depending on the agreement.

Discontinued Operations

Cultivation Solutions

Prior to its sale on December

31, 2024, we sold proprietary cultivation solutions to independent licensed cultivators as part of our Cultivation Business.

The two primary

products we sold were the VFUs and Agrify Insights™ software.

The proprietary VFU technology

offered a modular, compartmentalized micro-climate growing system for indoor vertical farming.

The VFU system was designed for craft farmers,

single-state operators, and multi-state operators who were looking to consistently produce higher-quality crops at scale.

The VFUs were

designed to line up horizontally in rows, and could be stacked vertically up to three units tall.

The VFUs were designed to

work in conjunction with the Agrify Insights™ software.

Each VFU sold included a license for Agrify Insights™ and a monthly

Software-as-a-Service (“SaaS”) subscription fee was charged per VFU.

The VFU could not operate successfully without Agrify

Agrify Insights™ license agreements were generally for a multi-year term, with an annual auto-renewal.

Extraction Solutions

Prior to its discontinuation

on March 30, 2025, our extraction equipment and business solutions that were a part of our Extraction Business could be used within indoor

processing facilities by fully licensed cannabis and hemp cultivators and processors or in some cases, by individual processors for individual

use in compliance with applicable law.

We sold our proprietary extraction solutions to independent, licensed cultivators and processing

We had strategically acquired

four brands in the extraction space in late 2021 and early 2022:

Precision Extraction, PurePressure, Lab Society, and Cascade Sciences.

These brands encompassed hydrocarbon, alcohol, and solventless extraction and distillation and post-processing solutions.

Our extraction

brands provided equipment and solutions for extraction, post-processing, and testing for the cannabis and hemp industries.

Use of Estimates

The preparation of financial

statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date

of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ

from those estimates.

Significant estimates include assumptions about the valuation and recognition of stock-based compensation expense,

valuation allowance for deferred tax assets, goodwill, impairment of long-lived assets, provision for litigation, inventory reserve, fair

value measurements and useful life of fixed assets and intangible assets.

Financial Overview

Critical Accounting Policies and Significant

Judgments and Estimates

Our management’s discussion

and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States of America, or U.S.

The preparation of financial statements in

conformity with U.S.

GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and

accompanying notes.

On an ongoing basis, we evaluate estimates, which include estimates related to accruals, business combinations, asset

acquisitions, and stock-based compensation expense.

We base our estimates on historical experience and other market-specific or other

relevant assumptions that we believe to be reasonable under the circumstances.

Actual results may differ materially from those estimates

or assumptions.

We account for warrants as

either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable

authoritative guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity

(“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”).

Management’s assessment considers

whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant

to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants

are indexed to our own Common Stock among other conditions for equity classification.

For issued or modified warrants

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

issuance or when incurred.

For issued or modified warrants that are precluded from equity classification, they are recorded as a liability

at their initial fair value on the date of issuance and marked-to-market each reporting period with the changes in fair value of warrant

liabilities recorded in other income (expense), net in the accompanying unaudited condensed consolidated statements of operations until

the warrants are exercised.

The fair value of the warrant liabilities are estimated using a Black-Scholes option-pricing model.

The estimated fair value

of the warrant liabilities 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 our best estimate.

The volatility rate is determined utilizing our own share price

and the share price of competitors over time.

Revenue Recognition

We generate revenue from continuing operations through the sale of

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

We license intellectual property to a related party under arrangements

that provide for sales-based license fees.

We recognize licensing income derived from licensing agreements in accordance with ASC 606,

specifically, for sales-based license fees.

In accordance with ASC Topic

606, Revenue Recognition (“ASC 606”), revenue is recognized through a five-step model, as outlined below:

Identify the customer contract :

A customer contract is identified when there is mutual approval and commitment between us and our customer, the rights and obligations are clear, payment terms are set, the contract has commercial substance, and collectability is probable.

Written or electronic signatures on contracts and purchase orders are obtained if such orders are issued in the normal course of business by the customer.

Identify performance obligations that are distinct :

We identify distinct performance obligations in each contract.

A performance obligation is considered distinct if the customer can benefit from the good or service on its own or with readily available resources, and if it is separately identifiable from other promises in the contract.

Our revenue-generating activities typically have a single performance obligation.

Determine the transaction price :

The transaction price is the amount of consideration we expect to receive in exchange for the sale of the product.

This amount is determined excluding sales taxes collected on behalf of government agencies and net of any sales discounts, incentives, and returns.

Allocate the transaction price to distinct performance obligations :

The transaction price is allocated to each distinct performance obligation based on the relative SSP of the goods or services provided.

If a contract involves multiple performance obligations, each is accounted for separately if distinct, and the SSP reflects the price we would charge if the good or service were sold separately in similar circumstances and to similar customers.

Recognize revenue as the performance obligations are satisfied :

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.

We do 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, 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.

We account for income taxes

pursuant to the provisions of ASC Topic 740, Income Taxes , (“ASC 740”) which requires, among other things, an asset

and liability approach to calculating deferred income taxes.

The asset and liability approach requires the recognition of deferred tax

assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases

of assets and liabilities.

A valuation allowance is provided to offset any net deferred tax assets for which management believes it is

more likely than not that the net deferred asset will not be realized.

We follow the provisions

of ASC 740-10-25-5, “Basic Recognition Threshold.” When tax returns are filed, it is highly certain that some positions taken

would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position

taken or the amount of the position that would be ultimately sustained.

In accordance with the guidance of ASC 740-10-25-6, the benefit

of a tax position is recognized in the unaudited condensed consolidated financial statements in the period during which, based on all

available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the

resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions.

Tax positions

that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent

likely of being realized upon settlement with the applicable taxing authority.

The portion of the benefits associated with tax positions

taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying

balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

an uncertain tax position offsetting our research and development tax credits given we have not engaged any third parties to perform a study

to support credits claimed under Internal Revenue Code §41 for tax years ended December 31, 2016 through December 31, 2024.

If recognized, none of the unrecognized tax benefits would impact our effective tax rate.

We recognize the benefit

of a tax position when it is effectively settled.

ASC 740-10-25-10, “Basic Recognition Threshold” provides guidance on how

an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

ASC 740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority.

For tax positions considered effectively settled, we recognize the full amount of the tax benefit.

Accounting for Stock-Based Compensation

We follow the provisions

of ASC Topic 718, Compensation — Stock Compensation, (“ASC 718”) establishes standards surrounding the accounting

for transactions in which an entity exchanges its equity instruments for goods or services.

ASC 718 focuses primarily on accounting for

transactions in which an entity obtains employee services in share-based payment transactions, such as options issued under our equity

incentive plan.

The fair value of each option

is estimated on the date of grant using the Black-Scholes option-pricing model.

This model incorporates certain assumptions for inputs

including a risk-free market interest rate, expected dividend yield of the underlying Common Stock, expected option life, and expected

volatility in the market value of the underlying Common Stock.

The Black-Scholes option-pricing

model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.

In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.

Because our stock options and warrants have characteristics different from those of our traded stock, and because changes in the subjective

input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily

provide a reliable single measure of the fair value of such stock options.

The risk-free interest rate is based upon quoted market yields

for United States Treasury debt securities with a term similar to the expected term.

The expected dividend yield is based upon our history

of having never issued a dividend and management’s current expectation of future action surrounding dividends.

We calculate the

expected volatility of the stock price based on the corresponding volatility of our peer group stock price for a period consistent with

the underlying instrument’s expected term.

The expected lives for such grants were based on the simplified method for employees

and directors.

As permitted under ASC 718,

we have made an accounting policy choice to account for forfeitures when they occur.

It is important that the

discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed above.

strongly encourage investors to carefully read the risk factors described in the Form 10-K in the section entitled “Risk Factors”

for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.

We assume no responsibility to update the forward-looking statements contained in this Quarterly Report.

The following should also be

read in conjunction with the unaudited financial statements and notes thereto that appear elsewhere in this Quarterly Report.

Unless otherwise stated

or the context otherwise requires, references in this report to “RYTHM”, the “Company,” “we,” “us,”

“our,” or similar references mean RYTHM, Inc.

and its subsidiaries on a consolidated basis.

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.

Our Señorita brand offers consumers

hemp-derived tetrahydrocannabinol (“THC”) beverages and are sold at top retailers, online and through direct-to-retail partnerships.

The Señorita brand mirrors well-known cocktails like a margarita – in four flavors – classic Lime Jalapeño Margarita,

Mango Margarita, Paloma and Ranch Water.

Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita

offers a low-sugar, low-calorie alternative to alcoholic beverages and is available in seventeen U.S.

states and Canada including at top

retailers such as Total Wine, ABC Fine Wine & Spirits, and Binny’s.

The RYTHM branded beverage comes in two fruit-driven flavors

with effect-based ingredients.

Both Señorita and RYTHM hemp-derived beverages are available at Chicago’s iconic United Center,

based on a partnership announced in January 2026, establishing RYTHM as the venue’s official THC sponsor.

Other hemp-derived products

including incredibles and Beboe edible products are primarily sold online and through direct-to-retail partnerships.

In addition to the

sale of hemp-derived products (“Non-licensing Revenue”), we license our 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.

Prior to the exit of the extraction business on March 30, 2025, the Company’s

comprehensive extraction product line (“the Extraction Business”), which included hydrocarbon, alcohol, solventless, post-processing,

and lab equipment, empowered cannabis producers to maximize the quantity and quality of extract required for premium concentrates.

Additionally,

prior to its sale on December 31, 2024, the Company’s proprietary micro-environment-controlled Agrify Vertical Farming Units (“VFUs”)

enabled cultivators to produce high quality products for the cannabis industry (the “Cultivation Business”).

As the discontinuation

of the Extraction Business and the sale of the Cultivation Business represented strategic shifts that had a major effect on our operations

and financial results, they have been presented in discontinued operations separate from continuing operations for the three months ended

March 31, 2026 and 2025 in our condensed consolidated statements of operations and as of March 31, 2026 and December 31, 2025 in our condensed

consolidated balance sheets and applicable footnotes in accordance with ASC 205, Presentation of Financial Statements .

to Item 1 and the notes to the unaudited condensed consolidated financial statements for details on recent developments and significant

transactions during the period.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial position

and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally

accepted in the United States of America, or GAAP.

The preparation of financial statements in conformity with GAAP requires us to make

estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

On an ongoing basis, we

evaluate estimates, which include estimates related to accruals, stock-based compensation expense, recoverability of goodwill, intangible

assets, and other assets (prepaid licensing rights), and reported amounts of revenues and expenses during the reported period.

our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under

the circumstances.

Actual results may differ materially from those estimates or assumptions.

Refer to Note 1 included elsewhere in the

notes to the unaudited condensed consolidated financial statements, for further information.

Results of Operations

Comparison of the Three and Nine Months

Ended September 30, 2025 and 2024

We have a history of recurring

net losses and have incurred losses to date, except for the three months ended March 31, 2026, during which we recognized net income primarily

as a result of a non-cash income tax benefit.

Our unaudited condensed consolidated financial statements have been prepared assuming that

we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets

and classification of liabilities that might be necessary should we be unable to continue in operation.

Refer to information provided

under the heading “Liquidity and Capital Resources” below for further details.

Results of Operations

Comparison of the Three Months Ended March

31, 2026 and 2025

The following table summarizes

our results of continuing operations for the three and nine months ended September 30, 2025 and 2024:

Three months ended

September 30,

Nine months ended

September 30,

our results of continuing operations for the three months ended March 31, 2026 and 2025:

Three months ended March 31,

Cost of goods sold

Selling, general and administrative (2)

Change in contingent consideration

Total operating expenses

Operating loss from continuing operations

Interest expense, net

Interest (expense) income, net (3)

Change in fair value of warrant liabilities

Other income, net

Total other expense, net

Total other (expenses) income, net

Loss from continuing operations before income taxes

Income tax provision

Loss from continuing operations, net of income taxes

Income tax benefit

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

Loss from discontinued operations

Gain on disposal of Extraction business

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

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

Weighted average common shares outstanding - basic and diluted

We generate revenue from sales of hemp-derived THC products (non-licensing)

and related party Licensing Revenue.

Income from discontinued operations, net of income taxes

Net income (loss)

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

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

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - diluted

$10.0 million for the three months ended March 31, 2026, and $80 thousand for the three months ended March 31, 2025, in each case from

related parties.

$4.3 million for the three months ended March 31, 2026, and $1.4 million for the three months ended March 31, 2025, in each case from

related parties.

$1.8 million of interest expense for the three months ended March 31, 2026, and $250 thousand for the three months ended March 31, 2025,

in each case from a related party.

We generate revenue from

sales of hemp-derived THC products (non-licensing) and related party Licensing Revenue.

The following table provides

a breakdown of our revenue from continuing operations for the three and nine months ended September 30, 2025 and 2024:

a breakdown of our revenue from continuing operations for the three months ended March 31, 2026 and 2025:

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

2 unchanged sentences

Total revenue

Revenue increased by $4 million

for the three months ended September 30, 2025, as compared to the same period in 2024.

The comparative increase in revenue was primarily

driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from the Cultivation

Business and Extraction Business for the three months ended September 30, 2024 being presented as part of discontinued operations.

the revenue recognized for the three months ended September 30, 2025, $696 thousand was attributable to related parties.

Revenue increased by $12.7

million for the nine months ended September 30, 2025, as compared to the same period in 2024.

The comparative increase in revenue was

primarily driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from

the Cultivation Business and Extraction Business for the nine months ended September 30, 2024 being presented as part of discontinued

Of the revenue recognized for the nine months ended September 30, 2025, $961 thousand was attributable to related parties.

million for the three months ended March 31, 2026, as compared to the same period in 2025.

The comparative increase in revenue was primarily

driven by the commencement of Licensing Revenue in May and August 2025 as well as the $2.8 million increase in Non-Licensing Revenue.

Of the revenue recognized for the three months ended March 31, 2026, $10.0 million was attributable to related parties, as compared to

$80 thousand for the three months ended March 31, 2025.

Cost of Goods Sold

Cost of goods sold represents costs associated with the hemp-derived

products sales (non-licensing).

The following table provides

a breakdown of our cost of goods sold from continuing operations for the three and nine months ended September 30, 2025 and 2024:

THC product sales (Non-licensing Revenue).

The following table presents our cost of goods sold from continuing

operations for the three months ended March 31, 2026 and 2025, all of which relates to non-licensing revenue:

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

Non-licensing Revenue

Total cost of goods sold

Cost of goods sold

increased by $2.6 million for the three months ended September 30, 2025 compared to the same period in 2024.

The comparative increase

in cost of goods sold is associated with the acquisition of Señorita in December 2024, which aligns with the increase in revenue.

Cost of goods sold increased

by $4.5 million for the nine months ended September 30, 2025 compared to the same period in 2024.

The comparative increase in cost of

goods sold is associated with acquisition of Señorita in December 2024, which aligns with the increase in revenue.

Cost of goods sold increased by $2.4 million for the three months ended

March 31, 2026 compared to the same period in 2025.

The comparative increase in cost of goods sold is driven by the increased sales of

hemp-derived THC products.

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

Gross profit totaled $1.4

million, or 34.0% of total revenue during the three months ended September 30, 2025.

Gross profit totaled $2.1 million, or 32.4% of total

revenue during the nine months ended September 30, 2025.

Gross profit totaled $10.4 million, or 78% of total revenue during

the three months ended March 31, 2026, compared to a gross profit of $90 thousand, or 17% of total revenue during the three months ended

March 31, 2025.

The comparative $10.3 million increase in gross profit was primarily driven by the commencement of Licensing Revenue in

Selling, General and Administrative

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

1 unchanged sentence

Selling, general and administrative

(“SG&A”) expenses consist principally of salaries and related costs for personnel, including stock-based compensation

and travel expenses, associated with executive and other administrative functions.

Other SG&A expenses include, but are not limited

to, professional fees for legal, consulting, and accounting services.

(“SG&A”) expenses consist principally of marketing costs and support services performed by Vision Management Services,

LLC, a subsidiary of Green Thumb Industries Inc, a related party (“Green Thumb”), pursuant to two shared services agreements,

as well as stock-based compensation and travel expenses associated with executive and other administrative functions.

Other SG&A expenses

include, but are not limited to, professional fees for legal and accounting services and amortization costs.

SG&A expense increased

by $9.0 million, or 741%, for the three months ended September 30, 2025, compared to the same period in 2024.

The comparative change is

primarily attributable to sales and marketing expense to support the growth of the hemp-derived THC products in addition to

the SG&A expense from the Cultivation Business and Extraction Business for the three months ended September 30, 2024 being presented

as part of discontinued operations.

Of the SG&A expense incurred for the three months ended September 30, 2025, $3.1 million was attributable

to related parties.

SG&A expense increased by $17.7 million, or 467%, for the nine

months ended September 30, 2025, compared to the same period in 2024.

The comparative change is primarily attributable to sales and marketing

expense to support the growth of the hemp-derived THC products (non-licensing) in addition to the SG&A expense from the Cultivation

Business and Extraction Business for the nine months ended September 30, 2024 being presented as part of discontinued operations.

SG&A expense incurred for the nine months ended September 30, 2025, $7.3 million was attributable to related parties.

Other Income, Net

by $10.6 million, or 281%, for the three months ended March 31, 2026, compared to the same period in 2025.

The comparative change is primarily

attributable to marketing and consulting costs to support the growth of the hemp-derived THC products sales in addition to the presentation

of SG&A expense from the Cultivation Business and Extraction Business for the three months ended March 31, 2025 as part of discontinued

Other (Expenses) Income, Net

Three months ended

September 30,

Nine months ended

September 30,

(In thousands)

Interest expense, net

Interest (expense) income, net

Change in fair value of warrant liabilities

Other income, net

Total other expense, net

Interest expense, net was

$1.1 million for the three months ended September 30, 2025, compared to interest expense, net of $38 thousand for the three months ended

September 30, 2024.

The change is attributable mainly to the increase of $50.0 million principal under the Convertible Notes.

in interest expense, net for the three months ended September 30, 2025 is $1.4 million incurred with a related party.

Interest expense, net was

$1.4 million for the nine months ended September 30, 2025, compared to interest expense, net of $166 thousand for the nine months

ended September 30, 2024.

The change is attributable mainly to the increase of $80.0 million principal under the Convertible Notes.

in interest expense, net for the nine months ended September 30, 2025 is $2.2 million incurred with a related party.

The change in fair value

of warrant liabilities increased by $14.4 million, or 96% during the three months ended September 30, 2025, compared to the same period

The increase is primarily related to the fair value remeasurement of warrants.

The change in fair value

of warrant liabilities increased by $15.1 million or 98% during the nine months ended September 30, 2025, compared to the same period

The increase is primarily related to the fair value remeasurement of warrants.

Other expense, net was $53

thousand for the three months ended September 30, 2025, compared to none for the same period in 2024.

Other income, net was $71

thousand for the nine months ended September 30, 2025, compared to none for the same period in 2024.

Income Tax (Expense) Benefit

There was no income tax expense

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

There was no income tax expense

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

Total other (expenses) income, net

Interest expense, net was $1.7 million for the three months ended March

31, 2026, compared to interest income, net of $1 thousand for the three months ended March 31, 2025.

The change is attributable mainly

to the increase of $80.0 million new borrowings under the Convertible Notes (as that term is defined under “—Indebtedness”

Included in interest expense, net for the three months ended March 31, 2026 is $1.8 million of interest expense incurred with

a related party and $0.3 million of interest income.

The fair value gain on warrant liabilities decreased by $302 thousand,

or 74%, for the three months ended March 31, 2026, compared to the same period in 2025.

The decrease reflects a smaller reduction in the

fair value of warrant liabilities during the current period compared to the prior year period.

Other income, net was nil for the three months ended March 31, 2026,

compared to $19 thousand for the same period in 2025.

Income Tax Benefit

Income tax benefit was $25.6 million for the three months ended March 31, 2026, compared to nil for the three

months ended March 31, 2025.

The increase was attributable to a $25.6 million non-cash income tax benefit resulting from the release of

the Company’s valuation allowance against its deferred tax assets.

The valuation allowance was released following the execution

of an amendment to the Company’s license agreement with GTI Core on March 31, 2026, which transitioned licensing fees to a fixed

annual structure and reduced uncertainty in projected future taxable income.

Based on this change and sustained projected profitability,

management concluded that sufficient positive evidence exists to support the realizability of its deferred tax assets.

Non-GAAP Measures

“EBITDA” and “Adjusted

EBITDA” are non-GAAP measures and do not have standardized definitions under GAAP.

The following information provides reconciliations

of the supplemental non-GAAP financial measures, presented herein to the most directly comparable financial measures calculated and presented

in accordance with GAAP.

The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance

with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with

These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including

and excluding the adjusted items and believes that the supplemental non-GAAP financial measures presented provide additional perspective

and insights when analyzing the core operating performance of the business.

These supplemental non-GAAP financial measures should not

be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial

measures presented.

EBITDA is calculated as Income (loss) from continuing operations before:

net interest (expense) income, provision

for income taxes, and depreciation and amortization.

Adjusted EBITDA is calculated as EBITDA before stock-based compensation and change

in fair value of warrant liabilities.

The following table presents

a reconciliation of Income (loss) from continuing operations (GAAP) to non-GAAP Adjusted EBITDA, for the periods presented:

Three months ended

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

Interest expense (income), net

Income tax benefit

Depreciation and amortization

Earnings before interest, taxes, depreciation and amortization (EBITDA) (non-GAAP measure)

Stock-based compensation expense

Change in fair value of warrant liabilities

Adjusted EBITDA (non-GAAP measure)

Liquidity and Capital Resources

As of September 30, 2025,

our principal sources of liquidity were cash and cash equivalents and marketable securities totaling $35.6 million.

Our current working

capital needs are to support revenue growth and manage inventory to meet demand forecasts and support operational growth.

Our long-term

financial needs primarily include working capital requirements.

There are many factors that may negatively impact our available sources

of funds in the future, including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of

our securities.

The amount of cash generated from operations is dependent upon factors such as the successful execution of our business

strategy and general economic conditions.

As part of our growth strategies,

we may opportunistically raise debt capital and raise cash from the issuance of our securities, subject to market and other conditions.

If additional financing is required from outside sources, we may not be able to raise such capital on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.

As of March 31, 2026, our

principal sources of liquidity are cash and cash equivalents totaling $33.3 million.

Our current working capital needs are to support

revenue growth and manage inventory to meet demand forecasts and support operational growth.

Our long-term financial needs primarily

include working capital requirements.

There are many factors that may negatively impact our available sources of funds in the future,

including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of our securities.

of cash generated from operations is dependent upon factors such as the successful execution of our business strategy and general economic

We may opportunistically

raise debt capital, subject to market and other conditions.

Additionally, as part of our growth strategies, we may also raise debt capital

for strategic alternatives and general corporate purposes.

If additional financing is required from outside sources, we may not be able

to raise such capital on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, our business, operating

results and financial condition may be adversely affected.

We are required to evaluate

whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going

concern within one year after the date that the financial statements are issued.

Substantial doubt exists when conditions and events,

considered in aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within

one year after the date that the condensed consolidated financial statements are issued.

We have a history of recurring net losses and negative cash flow in

operating activities.

However, for the three months ended March 31, 2026, the Company generated positive cash flow from operating activities

and reported net income which was mainly impacted by a non-cash income tax benefit.

We believe our $33.3 million of cash and cash equivalents,

anticipated contractual Licensing Revenue and ability to address our Convertible Notes will be sufficient to meet our cash requirements

through at least the 12-month period following the date that these condensed consolidated financial statements were issued.

Convertible Notes maturities

of $80.0 million exist through February 2027, with $72.0 million held by a subsidiary of Green Thumb, a related party.

If the holders

of these notes elect to be paid in cash upon maturity could raise substantial doubt about the our ability to continue as a going concern.

However, while these contractual maturities require management attention, management believes it is probable that the obligations will

be addressed through extension or conversion consistent with historical practice.

As such, our financial statements have been prepared

on a going concern basis.

Convertible Notes

On November 5, 2024, we issued

a secured convertible note (the “November 2024 Note”) to RSLGH, LLC (“RSLGH”), a subsidiary of Green Thumb.

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

Notes (each 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 is payable on the maturity date.

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

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 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 was the effective date of the amendment.

were made to the conversion price of the principal amount of the November 2024 Note.

On May 22, 2025, we 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.

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, we issued

2 unchanged sentences

The May 2025 Notes are secured obligations and rank senior to all of our

indebtedness except for the November 2024 Note and the August 2025 Notes, which rank on parity with the May 2025 Notes.

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 1, 2025.

The principal

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

The May 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 May 2025 Notes

into Common Stock, the conversion price per share will be $23.53, equal to the most recent closing price of the Common Stock on the Nasdaq

Capital Market at the time the May 2025 Notes were issued, subject to customary adjustments for certain corporate events.

elects to convert the May 2025 Notes into pre-funded warrants, and for interest payments payable in the form of pre-funded warrants, the

conversion price per pre-funded warrant will be equal to the $23.53 conversion price less than $0.001 exercise price of the warrant.

conversion of the May 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.

indebtedness except for the August 2025 Notes, which ranks on parity with the May 2025 Notes.

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 1, 2025.

The principal amount of the May 2025 Notes

will be payable on the maturity date.

The May 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 May 2025 Notes into Common Stock, the conversion

price per share will be $23.53, equal to the most recent closing price of the Common Stock on the Nasdaq Capital Market at the time the

May 2025 Notes were issued, subject to customary adjustments for certain corporate events.

If a holder elects to convert the May 2025

Notes into pre-funded warrants, and for interest payments payable in the form of pre-funded warrants, the conversion price per pre-funded

warrant will be equal to the $23.53 conversion price less than $0.001 exercise price of the warrant.

The conversion of the May 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.

On August 25, 2025, we issued

1 unchanged sentence

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

The August 2025 Notes are secured obligations of ours and rank senior

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

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, 2026.

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 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 August 2025 Notes are secured obligations and rank senior to all of

our indebtedness except for the May 2025 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, 2026.

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 May 2025 Notes and August 2025 Notes (together referred to as “the

Convertible Notes”) impose certain customary affirmative and negative covenants upon us, including covenants relating to ranking

and reservation of shares.

If an event of default under one or more of the Convertible Notes 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.

compliance with these covenants as of March 31, 2026.

Summary Statement of Cash Flows

The following table presents

the major components of net cash flows from and used in operating, investing, and financing activities for the nine months ended September

the major components of net cash flows from and used in operating, investing, and financing activities for the three months ended March

31, 2026 and 2025:

Nine months ended

September 30,

Three months ended

(In thousands)

Net cash (used in) provided by:

Net cash provided by (used in):

Operating activities

3 unchanged sentences

The following discussion

explains the major components contributing to the net cash flows from operating, investing, and financing activities for the nine months

ended September 30, 2025 and 2024, as summarized in the table above.

Each section below provides details on the key drivers of the cash

inflows and outflows for the respective periods.

explains the major components contributing to the net cash flows from operating, investing, and financing activities for the three months

ended March 31, 2026 and 2025, as summarized in the table above.

Each section below provides details on the key drivers of the cash inflows

and outflows for the respective periods.

Cash Flow from Operating Activities

For the nine months ended

September 30, 2025, our operating cash flows included a net loss of $19.7 million, which included $2.5 million related to depreciation

and amortization, $1.6 million of stock-based compensation expense, $372 thousand loss related to the change in fair value of warrant

liabilities, and $3.5 million gain on disposal of Extraction business.

Net cash was decreased by changes in operating assets and liabilities

of $4.5 million.

For the nine months ended September 30, 2024, we had net loss of $17.4

million, which included $1.1 million related to depreciation and amortization, $854 thousand of stock-based compensation expense, $15.5

million loss related to the change in fair value of warrant liabilities, $2.2 million gain from change in contingent consideration, and

$5.9 million gain on settlement of contingent liability.

Net cash was increased by changes in operating assets and liabilities of $2.8

For the three months ended

March 31, 2026, our operating cash flows included a net income of $19.9 million, which included $3.4 million related to depreciation and

amortization, $25.6 million non-cash deferred income tax benefit, $750 thousand non-cash interest expenses, $570 thousand of stock-based

compensation expense, and $105 thousand gain related to the change in fair value of warrant liabilities.

Net cash was increased by changes

in operating assets and liabilities of $1.9 million.

For the three months ended March 31, 2025, our operating cash flows

included a net loss of $1.6 million, which included $336 thousand related to depreciation and amortization, $589 thousand of stock-based

compensation expense, $407 thousand gain related to the change in fair value of warrant liabilities, and $3.6 million gain on disposal

of the Extraction Business.

Net cash was decreased by changes in operating assets and liabilities of $2.3 million.

Cash Flow from Investing Activities

For the nine months ended

September 30, 2025, net cash used in investing activities was $55 million, which primarily resulted from the related party acquisition

of MC Brands and VCP.

For the nine months ended September 30, 2024, net cash provided by

investing activities was $340 thousand, which primarily resulted from $330 thousand in proceeds from the repayment of a loan receivable.

For the three months ended

March 31, 2026 and 2025, there were no cash flows from investing activities.

Cash Flow from Financing Activities

For the nine months ended

September 30, 2025, net cash provided by financing activities was $80.0 million, which resulted from proceeds from May and August 2025

For the nine months ended

September 30, 2024, net cash provided by financing activities was $5.7 million, primarily driven by proceeds from the issuance of common

stock and warrants of $2.1 million and proceeds from the issuance of related party notes of $4.0 million.

For the three months ended

March 31, 2026, there were no cash flows from financing activities.

For the three months ended March 31, 2025, net cash provided by financing

activities was due to immaterial repayments of notes payable.

Off-Balance Sheet Arrangements

6 unchanged sentences

Critical Accounting Policies and Estimates

Part I, Item, 2, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” discusses our unaudited condensed consolidated financial

statements, which have been prepared in accordance with U.S.

The preparation of these unaudited condensed consolidated financial

statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts

of revenues and expenses during the reporting period.

Part I, Item, 2, “Management’s Discussion and Analysis

of Financial Condition and Results of Operations” discusses our unaudited condensed consolidated financial statements, which have

been prepared in accordance with GAAP.

The preparation of these unaudited condensed consolidated financial statements requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and

liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses

during the reporting period.

Actual results may differ from these estimates under different assumptions or conditions.

1 unchanged sentence

on our knowledge and understanding of current conditions and actions that we may take in the future.

Changes in these estimates will occur

as a result of the passage of time and the occurrence of future events.

Subsequent changes in these estimates may have a significant impact

on our financial condition and results of operations and are recorded in the period in which they become known.

We have identified the

following estimates that, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis:

fair value of derivative assets and liabilities, net realizable value of inventory, goodwill impairment assessment, intangible assets

Changes in these estimates will

occur as a result of the passage of time and the occurrence of future events.

Subsequent changes in these estimates may have a significant

impact on our financial condition and results of operations and are recorded in the period in which they become known.

We have identified

the following estimates that, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis:

the fair value of derivative assets and liabilities, net realizable value of inventory, goodwill impairment assessment, intangible assets

and revenue recognition.

The significant accounting

policies and estimates that have been adopted and followed in the preparation of our condensed consolidated financial statements are detailed

in Note 1 - Overview, Basis of Presentation and Significant Accounting Policies included in the Form 10-K and Note 1 - Overview, Basis

of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements in Part I, Item 1 of

policies and estimates that have been adopted and followed in the preparation of our condensed consolidated financial statements are

detailed in Note 1 - Overview, Basis of Presentation and Significant Accounting Policies included in the Form 10-K and Note 1 - Overview,

Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements in Part I, Item

1 of this Quarterly Report.

Other than the addition of the accounting policies related to business combinations and asset acquisitions

described in Note 1 – Overview, Basis of Presentation and Significant Accounting Policies, there have been no changes in these

policies and estimates that had a significant impact on the financial condition and results of operations for the periods covered in

this Quarterly Report.

Other than the addition of the accounting policies related to business combinations and asset acquisitions described

in Note 1 – Overview, Basis of Presentation and Significant Accounting Policies, there have been no changes in these policies and

estimates that had a significant impact on the financial condition and results of operations for the periods covered in this Quarterly

Recently Issued Accounting Pronouncements Adopted

For more information on recently

issued accounting pronouncements are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies, included

elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly Report.

For more information on

recently issued accounting pronouncements are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies,

included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly

New Accounting Pronouncements Not Yet Adopted

For more information on new

accounting pronouncements not yet adopted are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies,

included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 in this Quarterly

For more information on

new accounting pronouncements not yet adopted are included within Note 1 - Overview, Basis of Presentation and Significant Accounting

Policies, included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 in this

Quarterly Report.

Quantitative and Qualitative Disclosures

2 unchanged sentences

company” as defined by 17 C.F.R.

§ 229.10, we are not required to provide information required by this Item.

§ 229.10, the Company is not required to provide information required by this Item.

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 2. Management’s Discussion and Analysis