Functional Brands Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Revenue for the three months ended June 30, 2026, was $1.87 million, a 2% increase from $1.83 million in the prior year period; for the six months ended June 30, 2026, revenue was $3.52 million, a 3% increase from $3.42 million in the prior year period.
• Gross profit for the three months ended June 30, 2026, was $1.12 million, up from $0.97 million in the prior year period, with gross margin expanding approximately 710 basis points to 59.9%; for the six months ended June 30, 2026, gross profit was $2.08 million, up from $1.83 million, with gross margin increasing approximately 560 basis points to 59.2%.
• Operating loss for the three months ended June 30, 2026, widened to $1.32 million from $0.16 million in the prior year period; for the six months ended June 30, 2026, operating loss was $2.00 million compared to $0.19 million in the prior year period.
• Net loss for the three months ended June 30, 2026, was $2.63 million ($0.06 per share) compared to $0.23 million ($0.03 per share) in the prior year period; for the six months ended June 30, 2026, net loss was $9.62 million ($0.31 per share) compared to $0.35 million ($0.05 per share) in the prior year period.
• Sales and marketing expenses for the three months ended June 30, 2026, were $340,384, an increase of approximately 106% from $165,039 in the prior year period; for the six months ended June 30, 2026, these expenses were $604,091, an increase of approximately 76% from $343,669 in the prior year period.
• General and administrative expenses for the three months ended June 30, 2026, were $2.10 million, an increase of approximately 119% from $0.96 million in the prior year period; for the six months ended June 30, 2026, these expenses were $3.48 million, an increase of approximately 107% from $1.68 million in the prior year period.
• Other expense for the three months ended June 30, 2026, was $1.31 million, a 1,755% increase from $0.07 million in the prior year period, driven by a $967,942 non-cash change in the fair value of derivative liabilities, a $198,705 loss on default of a convertible note, and a $50,000 increase in other expenses; for the six months ended June 30, 2026, other expense was $7.62 million, primarily reflecting a $6.31 million non-cash loss on the issuance of preferred stock.
• Net cash used in operating activities for the six months ended June 30, 2026, was $943,457, compared to net cash provided by operating activities of $647,757 in the prior year period.
• Net cash used in financing activities for the six months ended June 30, 2026, was $1.43 million, compared to net cash used of $601,717 in the prior year period.
• As of June 30, 2026, the Company held cash of $352,142, a working capital deficit of $2.90 million, and an accumulated deficit of $16.68 million.

Business Segments and Product Lines

• Revenue growth was driven by increased demand from the direct-to-consumer sales channel and contract manufacturing sales.
• Gross margin expansion was attributed to a continued shift toward higher-margin channels and the Amazon business model transition.
• The Company's portfolio includes Kirkman® nutritional supplements, P2i™ by Kirkman® Prenatal Multivitamin & Multimineral, and Tru2u.health, a consumer-facing telehealth and wellness platform.

Market and Competitive Landscape

• The Company's common stock was delisted from The Nasdaq Stock Market and began trading on OTC Markets under the ticker symbol "MEHA."
• The Company operates an FDA-registered, cGMP-compliant manufacturing facility in Oregon.

Risks and Challenges

• The Company's recurring losses, cash used in operations, and stockholders' deficit raise substantial doubt about its ability to continue as a going concern.
• The Company is dependent on its ability to secure additional financing through debt and equity, with no assurance that such financing will be available.
• The termination of the binding letter of intent regarding the proposed acquisition of blockchain-related intellectual property and assets from BullionFX represents a strategic setback.
• The Company faces increased costs associated with operating as a public company, including professional fees and public-company related expenses.

Management Commentary and Tone

• CEO Eric Gripentrog stated that the core Kirkman business continued to make real progress with revenue growth and meaningful gross margin expansion, believing the underlying momentum is genuine.
• Management acknowledged challenges including the termination of the BullionFX letter of intent, the stock's move to OTC Markets, and increased public-company operating costs.
• Management's focus is on strengthening the balance sheet, managing the cost structure, and executing on the core nutraceutical business.

Other Key Points

• On June 29, 2026, the Company received a letter from BullionFX terminating the binding letter of intent entered into on May 11, 2026, regarding the proposed acquisition of certain blockchain-related intellectual property and assets.
• Subsequent to the quarter end, on July 14, 2026, the Circuit Court for the Eighteenth Judicial Circuit, DuPage County, Illinois, entered judgment largely in favor of the Company and the HTO Parties in litigation brought by True Health Medical Center, S.C., awarding True Health $68,271 against Kirkman Group, Inc. on a narrow claim while rejecting all other counts.
• During the six months ended June 30, 2026, the Company recorded a $6.3 million non-cash charge related to the first quarter 2026 preferred stock exchange.
• The Company paid dividends of $77,050 in operating activities and $114,262 in financing activities for the six months ended June 30, 2026.
• The Company extinguished Series A and B preferred shares and issued Series C preferred shares, resulting in significant non-cash financing activities including the recognition of derivative liabilities and convertible notes.
• The Company repurchased preferred stock for $616,027 and repaid loans totaling $240,911 during the six months ended June 30, 2026.