BLMH 10-K & 10-Q changes, risk factors and insider trading

For the year ended December 31, 2024, we incurred a net income of $33.1 million and, as of that date, we had an accumulated deficit of $421.08 million. We have incurred significant losses in prior periods. For the year ended December 31, 2023, we incurred a net loss of $14.13 million and, as of that date, we had an accumulated deficit of $454.18 million. For the year ended December 31, 2022, we incurred a net loss of $188.93 million and, as of that date, we had an accumulated deficit of $440.05 million. Any losses in the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flow.

Our board of directors is(the currently“Board” comprisedor “Board of aDirectors”) majority of independent directors. However, through much of our history our board wasis not currently comprised of a majority of independent directors. We may in the future desire to list our commonCommon stockStock on The New York Stock Exchange (“NYSE”) or The NASDAQ Stock Market (“NASDAQ”), both of which require that a majority of our board be comprised of independent directors. We may have difficulty attracting and retaining independent directors because, among other things, we operate in the marijuana industry, and as a result we may be delayed or prevented from listing our commonCommon stockStock on the NYSE or NASDAQ.

We will be exposed to liabilities that are unique to the products we provide. While we intend to maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from risks and uncertainties of our business. It is also not possible to obtain insurance to protect against all operational risks and liabilities. In particular, we have had difficulty obtaining insurance because we operate in the marijuana industry. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations. We do not have anyOur business interruption insurance.insurance may not cover all risk exposures. Any business disruption or natural disaster could result in substantial costs and diversion of resources.

The StatesState of California imposeimposes excise tax on products sold at licensed cannabis dispensaries. Local jurisdictions typically impose additional taxes on cannabis products. In addition, we incur significant costs complying with state and local laws and regulations. As a result, products sold at our dispensaries will likely cost more than similar products sold by unlicensed vendors and we may lose market share to those vendors.

EmployeesWhile innone of our employees are currently unionized, employees at the recently divested Blüm Oakland and Blüm San Leandro facilitieswere arepreviously unionized. We could face an increased risk of work stoppages and higher labor costs wherever labor is organized. If additional employees at our dispensaries,other production or cultivation facilitiesdispensaries were to unionize,become unionized, our relationship with our employees could be adversely affected. Accordingly, unionizationUnionization of our employees could have a material adverse impact on our operating costs and financial condition and could force us to raise prices on our products or curtail operations.

Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock, which could depress the price of our Common Stock.

Our Chief Executive Officer controls a significant amount of the voting power of our capital stock due to (i) his beneficial ownership of approximately 15%44% of the outstanding Common Stock, (ii) his ownership of approximately 25% of the Company’s outstanding Series V Preferred Stock, which vote in a number equal to two times the number of shares of the Common Stock into which such shares of Series V Preferred Stock are then convertible, and (iii) the fact that he has voting power over an additional approximately 75% of the Series V Preferred Stock owned by others due to such other owners executing Voting Agreements which provide Mr. Carrillo with their voting rights with respect to the Series V Preferred Stock owned by them. As a result, Mr. Carrillo potentially has the ability to control the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any arrangement or sale of all or substantially all of our assets. Certain other of our executive officers and directors own, in the aggregate, approximately 1%4% of the outstanding shares of Common Stock and approximately 8% of the outstanding shares of Series V Preferred Stock.

Our amendedAmended and restatedRestated certificateCertificate of incorporationIncorporation ("Certificate of Incorporation") and amended and restated bylaws ("Bylaws") provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the DGCL,Delaware General Corporate Law (“DGCL”), our amended and restated bylawsBylaws and our indemnification agreements that we have entered into with our directors and officers provide that:

Our Certificate of Incorporation authorizeauthorizes the issuance of up to 990,000,000 shares of Common Stock and 50,000,000 shares of preferred stock, with a par value of $0.001 per share. As of AprilMarch 10, 2024,2025, we had 8,499,10513,553,473 shares of Common Stock outstanding, 14,071,431 shares of Series V Preferred Stock outstanding, and no shares of Series N Preferred Stock outstanding. We may issue additional shares of Common Stock or preferred stock in the future in connection with a financing or an acquisition. Such issuances may not require the approval of our stockholders. In addition, certain of our outstanding rights to purchase additional shares of Common Stock or securities convertible into our Common Stock are subject to full-ratchet anti-dilution protection, which could result in the right to purchase significantly more shares of Common Stock being issued or a reduction in the purchase price for any such shares or both. Any issuance of additional shares of our Common Stock, or equity securities convertible into our Common Stock, including but not limited to, preferred stock, warrants, and options, will dilute the percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impact the market price of our Common Stock.

Our amended and restated certificateCertificate of incorporationIncorporation and our amended and restated bylawsBylaws contain provisions that could delay or prevent a change in control of our Company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our boardBoard of directors,Directors, which is responsible for appointing the members of our management. In addition, the provisions of Section 203 of the Delaware General Corporate Law (“DGCL”) govern us. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent of our board of directors.Board.

These and other provisions in our amended and restated certificateCertificate of incorporationIncorporation and our amended and restated bylawsBylaws and under Delaware law, together with the voting control possessed by our founders,Chief Executive Officer, could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of our commonCommon stockStock and result in the market price of our commonCommon stockStock being lower than it would be without these provisions.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Declaring and paying future dividends, if any, will be determined by our boardBoard of directors,Directors, based upon earnings, financial condition, capital resources, capital requirements, restrictions in our Certificate of Incorporation, contractual restrictions, and such other factors as our board of directorsBoard deems relevant. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.

As of December 31, 2024, we had goodwill of $17.12 million and other intangible assets of $2.95 million, which represented 81% of our total assets. As of December 31, 2023, we had goodwill of $3.59$0.0 million and other intangible assets of $1.36$0.53 million, which represented 15% of our total assets. As of December 31, 2022, we have goodwill of $3.59 million and other intangible assets of $2.86 million, which represented 16%2% of our total assets. We evaluate goodwill for impairment on an annual basis or more frequently if impairment indicators are present based upon the fair value of each reporting unit. We assess the impairment of other intangible assets on an annual basis, or more frequently if impairment indicators are present, based upon the expected future cash flows of the respective assets. These valuations include management’s estimates of sales, profitability, cash flow generation, capital structure, cost of debt, interest rates, capital expenditures, and other assumptions. Significant negative industry or economic trends, disruptions to our business, inability to achieve sales projections or cost savings, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations. If the estimated fair value of our reporting units changes in future periods, we may be required to record an impairment charge related to goodwill or other intangible assets, which would reduce earnings in such period.

The CompanyBlüm is a cannabispublicly traded holding company with retail, manufacturing, distribution, and cultivation operations throughout California,California withcommitted an emphasis onto providing the highest quality of medical and adult use cannabis products.products and related services. The Company is home to Korova, a brand of high potency products across multiple product categories.categories, currently available in California. The Company operatesformerly operated Blüm OC,Santa Ana, a premier cannabis dispensary in Orange County, California, regularlywhich servicingwas upwardssold ofin 800June customers each day.2024. The Company alsopreviously ownsowned dispensaries in California which operateoperated as The Spot in Santa Ana, Blüm in Oakland,Oakland and Blüm in San Leandro.Leandro, which were sold in November 2024. In May 2024, the Company began operating the retail store, Cookies Sacramento, and providing consulting services for two additional dispensaries located in Northern California. As of December 31, 2023,2024, the Company had 14976 employees.

• Cannabis Distribution – Includes cannabis distribution operations Either independently or in conjunction with third parties, we operate medical marijuana retail and adult use dispensaries, cultivation and manufacturing facilitiesdispensaries in California.

Our corporate headquarters are located at 324211516 S.Downey HalladayAvenue, St,Downey, SuiteCalifornia, 202, Santa Ana, California 9270590241 and our telephone number is (888) 909-5564. Our website address is as follows: www.blumholdings.com. No information available on or through our websites shall be deemed to be incorporated into this Form 10-Q.10-K. Our commonCommon stock,Stock, par value $0.001 (the “Common Stock”),$0.001, is quoted on the OTC Markets Group, Inc’s OTCQB tier under the symbol “BLMH.”

On January 12, 2024, Unrivaled Brands, Inc.Inc., ("UNRV")referred to herein as Unrivaled, completed itsthe previously announced corporate reorganizationReorganization pursuant to thea Reorganization Agreement,Agreement (the “Reorganization Agreement”), by and among UnrivaledUnrivaled, Brands,the Inc., Blum Holdings, Inc.,Company, and Blum Merger Sub, IncInc., a Nevada corporation ("Merger Sub"). The Reorganization Agreement provided for the merger of UNRVMerger Sub with and Mergerinto Sub,Unrivaled, with UNRVUnrivaled surviving the merger as a wholly-owned subsidiary of Blüm. The Reorganization Agreement was approved and adopted by the stockholders of UNRVUnrivaled at its annual meeting of stockholders held on December 5, 2023. At the effective time of the Reorganization, all of the issued and outstanding shares of UNRV’s common stock, par value $0.001 per share were converted automatically on a one-for-one basis into shares of Blüm’s common stock, par value $0.001 per share, and all of the issued and outstanding shares of UNRV’s classes of preferred stock, par value $0.001 per share, were converted automatically on a one-for-one basis into shares of Blüm’s respective classes of preferred stock, par value $0.001 per share. On February 12, 2024, the Company began trading as "BLMH" on the OTCQB.

EffectiveImmediately prior to the completion of the Reorganization, on January 12, 2024, theUnrivaled Company completedimplemented a reverse stock split of its commonCommon stockStock at a 1-for-100 ratio.ratio, which is referred to in this Report as the Reverse Stock Split. Accordingly, all share and per share amounts for all periods presented in this Current Report on Form 10-K have been adjusted retroactively, where applicable, to reflect thisthe reverseReverse stockStock splitSplit and adjustment of the preferred stock conversion ratios.

SettlementAdvisory ofAgreement Mysticwith HoldingsCoastal LitigationPine Holdings, Inc.

Accordingly, the Company’s cultivation operations were classified as discontinued operations during the fiscal fourth quarter of 2023. As a result,All assets and liabilities allocable to thePeople's cultivationand operationsThe wereSpot are classified as helddiscontinued for saleoperations in the Consolidatedconsolidated Balancebalance Sheetssheets for all periods presented. Discontinued operations are presented separately from continuing operations in the Consolidatedconsolidated Statementsstatements of Operationsoperations and the Consolidatedconsolidated Statementsstatements of Cashcash Flowsflows for all periods presented. In accordance with ASC 205, all comparative prior period amounts in the consolidated financial statements as of December 31, 2023 have been recast to exclude People's and The Spot from continuing operations.

The Company will continue to focus on its performing assets,assets and seek out additional opportunities, particularly California retailbased assets. In particular, the Company intendscontinues to emphasize retailon business fundamentals including a robustrobust, curated and diverse product offering, improving inventory turn and vendor management to continue to optimize gross margins, effective marketing strategies focused on driving loyalty, creating dynamic websites that provide a seamless brand experience, reactivation of lapsed customerscustomers, and new customer acquisitions.acquisitions while continuing to deliver positive ROIs. The Company remains excited as it embarks on reinvigorating the Korova brand. The Company will continue to focus on reducing and streamlining its corporate overhead and rightsizing the Company. This outlook is based on several management assumptions that are largely outside the control of the Company, including the continued overall down trending market conditions and highly promotional competitive landscape in our key markets. With a disciplined approach to analyzing retail performance and customer relationship management, a management team with extensive retail and cannabis industry and capital markets experience, deep relationships in the industry, and a commitment to investing in its team and, specifically, its company culture, the Company is encouraged that Unrivaledit will emerge from its current restructuring efforts as an effective cannabis company. We will continue to seek further opportunities to expand profitability and maximize returns for its shareholders.

Year(1) EndedAmounts for the fiscal year ended December 31, 2023 Comparedhave been recast to Yearreflect Endeddiscontinued operations as of December 31, 20222024.

Overall revenue was $33.23$12.99 million for the year ended December 31, 20232024 compared to $52.02$7.76 million for the year ended December 31, 2022,2023, aan decreaseincrease of $18.79$5.23 million or 36.1%.67.5%. Revenue from continuing operations in fiscal year 20232024 was composed of retail revenue of $33.04$12.8 million and distribution revenue of $0.19 million. This compared to fiscal year 20222023 revenue composed of retail revenue of $39.94$7.44 million and distribution revenue of $12.08$0.32 million.

This management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Blum Holdings, Inc. (“Blüm” or the “Company”) is for the three and sixnine months ended JuneSeptember 30, 2025. The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the accompanying notes presented in Item 1 of this Quarterly Report on Form 10-Q (this "Form 10-Q") and those discussed in Item 8 of the Company’s Annual Report on Form 10-K (the “Form 10-K”) filed with the SEC on March 13, 2025. Except for historical information, the discussion in this section contains forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below for many reasons, including the risks described in “Cautionary Language Concerning Forward-Looking Statements,” “Item 1A—Risk Factors” and elsewhere in this Form 10-Q.

Blüm is a publicly traded holding company with operationsoperating subsidiaries throughout California committed to providing the highest quality of medical and adult use cannabis products and related services. The Company is home to Korova, a brand of high potency products across multiple product categories, currently available in California.categories. The Company formerly operated Blüm Santa Ana, a premier cannabis dispensary in Orange County, California, which was sold in June 2024. The Company previously owned dispensaries in California which operated as Blüm in Oakland and Blüm in San Leandro, which were sold in November 2024. In May 2024, the Company began operating the retail store, Cookies Sacramento, and providing consulting services for two additional dispensaries located in Northern California. In May 2025, the Company began operating a retail dispensary located in Santa Clara County, California. In July 2025, the Company began operating Cookies Redding. As of JuneSeptember 30, 2025, the Company operates a total of fourfive cannabis retail locations in the state of California. As of JuneSeptember 30, 2025, the Company had 124133 employees.

On February 12, 2025, the Company’s wholly owned subsidiaries Unrivaled Brands, Inc. (“Unrivaled”) and Halladay Holding, LLC (“Halladay Holding”) (collectively, the “Debtors”) and People's California, LLC ("People's") participated in an in-person mediation and reached a settlement. On March 27, 2025, the parties executed definitive documentation for the terms of the settlement,settlement. onOn May 2, 2025, the Bankruptcy Court signed an order approving the settlement, and on May 16, 2025, the settlement went into effect. Under the settlement terms, all pre-petition litigation and bankruptcy adversary proceedings between the parties were dismissed, People's withdrew its motion to dismiss the bankruptcy case, People's will support the Debtors’ liquidating plan, and a payment of $0.40 million from the sale of the Halladay Holding property was made to People's, with an additional $1.00 million to be subject to an interpleader complaint.complaint, which was later resolved and distributed to People’s and a third party.

On February 25, 2025, the Company issued an unsecured promissory note in the principal amount of $0.20 million which maturesmatured on September 30, 2025 and bears no interest. The Company may prepay the principal balance in full at any time without penalty. The proceeds from the unsecured promissory note dated February 25, 2025 were used for general working capital needs. On May 7, 2025, the unsecured promissory note was amended wherein the note may be converted at the Lender’s election into a convertible promissory note. The conversion shall include the option to convert into shares of capital stock issued by Blüm at a conversion price equal to 85% of a $20.90 million pre-money valuation of Blüm (equal to a per share price of $0.98 on a fully diluted basis). In addition, the Company issued to the Lender warrants to purchase up to 75,472 shares of the Company's common stock, at an exercise price of $0.53 per share. The balance of the unsecured promissory note was unpaid as of September 30, 2025. Management is renegotiating terms of the promissory note as of the date of these consolidated financial statements were issued.

On April 18, 2025, the Company issued an unsecured promissory note in the principal amount of $0.33 million which maturesmatured on July 31, 2025 and bears no interest. The Company may prepay the principal balance in full at any time without penalty. The proceeds from the unsecured promissory note dated April 18, 2025 were used for general working capital needs. On May 8, 2025, the unsecured promissory note was amended wherein the note may be converted at the Lender’s election into a convertible promissory note. The conversion shall include the option to convert into shares of capital stock issued by Blüm at a conversion price equal to 85% of a $20.90 million pre-money valuation of Blüm (equal to a per share price of $0.98 on a fully diluted basis). In addition, the Company issued to the Lender warrants to purchase up to 122,642 shares of the Company's common stock, at an exercise price of $0.53 per share. The balance of the unsecured promissory note was unpaid as of September 30, 2025. Management is renegotiating terms of the promissory note as of the date of these consolidated financial statements were issued.

The below table outlines our consolidated statements of operations for the sixnine months ended JuneSeptember 30, 2025 and 2024:

SixNine Months Ended JuneSeptember 30, 2025 Compared to SixNine Months Ended JuneSeptember 30, 2024 (Unaudited)

Overall revenue for the sixnine months ended JuneSeptember 30, 2025 was $5.72$10.57 million compared to $5.57$9.93 million for the sixnine months ended JuneSeptember 30, 2024, an increase of $0.15$0.63 million or 2.7%.6.4%. Revenue from continuing operations for the sixnine months ended JuneSeptember 30, 2025 was composed of retail revenue of $5.55$10.33 million and distribution revenue of $0.17$0.24 million. This compared to prior year revenue from continuing operations which composed of retail revenue of $5.51$9.79 million and distribution revenue of $0.06$0.14 million.

Retail revenue for the sixnine months ended JuneSeptember 30, 2025 increased by $0.04$0.54 million or 0.7%5.5% compared to the same period in prior year. AlthoughThe thecurrent additionyear additions of atwo new retail location in Santa Clara County on May 15, 2025dispensaries contributed $1.65$5.52 million in retail revenuerevenue, duringwhich more than offset the currentloss six-month period, overall retailof revenue declinedresulting compared to prior year due tofrom the sale of Blüm Santa Ana in June 2024 and Blüm Oakland and Blüm San Leandro onin November 5, 2024. As of JuneSeptember 30, 2025, the Company's retail operations consisted of fourfive dispensaries,dispensaries (three acquired in May 2024 and two in the current period) compared to fivesix dispensaries as of JuneSeptember 30, 2024.

Distribution revenue for the sixnine months ended JuneSeptember 30, 2025 increased by $0.11$0.1 million or 183.1%69.3% compared to the same period in the prior year. The increase in distribution revenue was primarily due to the distribution of Korova products to third-party retail dispensaries during the current year.

Gross profit from continuing operations for the six nine months ended June September 30, 2025 was $2.88 $5.2 million compared to $2.39 $4.84 million for the six nine months ended June September 30, 2024, an increase of $0.49 $0.36 million or 20.5%. 7.5%. The increase in gross profit was primarily impacted by the decreaseincrease in cost of goods soldrevenue as described above. The Company's overall gross margin for the six nine months ended June September 30, 2025 increasedof to 50.4%49.2% aswas comparedgenerally to 42.9%consistent with 48.7% for the same period in the prior year primarily driven by the higher profitability of the three dispensaries added to the Company's retail portfolio on May 1, 2024.year. Gross profitmargin for on-going retail operations improveddeclined from 48.4% 50.8% for the six nine months ended June September 30, 2024 up down to 51.1% 49.5% for the six nine months ended June September 30, 2025 for2025, primarily reflecting the sameimpact reasons.of the acquisition of EWCR, which operates with lower margins under a value-oriented pricing model designed to drive higher sales volumes and customer growth.

Selling, general and administrative expenses for the sixnine months ended JuneSeptember 30, 2025 were $4.99$8.81 million compared to $10.55$14.84 million for the sixnine months ended JuneSeptember 30, 2024, a decrease of $5.56$6.03 million or 52.7%.40.6%. The decrease in selling, general and administrative expenses was primarily due to a decrease of $0.31 million in salaries and benefits, a decrease of $0.62$0.63 million in rental and facility expenses, a decrease of $0.29$0.53 million in security expense, and a decrease of $0.30$0.37 million in stock-based compensation. The decreases in rent and security expense were primarily driven by the sale of three dispensaries with higher operating costs during fiscal year 2024. In addition, professional fees decreased by $3.94$4.42 million due to the significant bankruptcy and restructuring efforts undertaken in the prior year as well as the Amended and Restated Engagement Letter with Adnant, LLC dated January 1, 2025 wherein the monthly service fee was decreased from $0.25 million to $0.08 million. The reduction in selling, general and administrative expenses reflects the Company's operational restructuring for a leaner corporate structure.

The Company realized an operating loss from continuing operations of $2.11$3.61 million for the sixnine months ended JuneSeptember 30, 2025 compared to $10.0$12.2 million for the sixnine months ended JuneSeptember 30, 2024, a decrease of $7.89$8.6 million or 78.9%.70.4%. The decrease in operating loss was primarily due to the decrease in selling, general and administrative expenses as described above, coupled with an impairment loss on long-lived assets of $1.71 million recognized in prior year versus none in the sixnine months ended JuneSeptember 30, 2025.

The Company recognized other incomeexpenses of $0.24$0.36 million for the sixnine months ended JuneSeptember 30, 2025 compared to $14.08other income of $13.09 million for the sixnine months ended JuneSeptember 30, 2024, a decrease of $13.84$13.45 million or 98.3%.102.8%. This was primarily due to a gain on extinguishment of debt of $15.18 million recognized in the prior year, resulting from the disposition of People's First Choice, LLC. In contrast, a loss on extinguishment of debt of $0.17 million was recognized in the current year, resulting from amendments to unsecured promissory notes with various lenders during the sixnine months ended JuneSeptember 30, 2025. For the same reasons, interest expense decreased by $0.57$0.75 million compared to the same period in the prior year. During the sixnine months ended JuneSeptember 30, 2025, the Company received a management service termination fee of $0.70 million. In addition, the Company recognized a gain of $0.27$0.19 million for changes in fair value of derivative liability in the current year, versus a loss of $0.13$0.68 million in the prior year, primarily due to changes in the Company's underlying stock price as of the reporting date.

Provision for income tax expense for continuing operations was $0.58$1.04 million for the sixnine months ended JuneSeptember 30, 2025 compared to $0.31$0.75 million for the sixnine months ended JuneSeptember 30, 2024, an increase of $0.26$0.3 million or 84.1%.39.7%. For the sixnine months ended JuneSeptember 30, 2025, the Company calculated its provision for income taxes during the interim reporting period by treating the year-to-date period as if it were the annual period and applying an estimate of the federal income tax rate on gross profit for the current period.

Net income from discontinued operations was nil for the sixnine months ended JuneSeptember 30, 2025 compared to $16.55$16.44 million for the comparative prior period. Discontinued operations for all periods presented consist of the Company's cultivation operations, Blüm Santa Ana, and The Spot. These operations were fully divested as of December 31, 2024, and as a result, the Company had no income or loss from discontinued operations during the sixnine months ended JuneSeptember 30, 2025.

Three Months Ended JuneSeptember 30, 2025 Compared to Three Months Ended MarchJune 31,30, 2025 (Unaudited)

The below table outlines our consolidated statements of operations for the fiscal secondthird quarter of 2025 compared to the fiscal firstsecond quarter of 2025:

Overall revenue for the three months ended September 30, 2025 was $4.85 million compared to $3.48 million for the three months ended June 30, 2025 was $3.48 million compared to $2.24 million for the three months ended March 31, 2025, an increase of $1.24$1.37 million or 55.3%.39.4%. Revenue from continuing operations for the three months ended JuneSeptember 30, 2025 was composed of retail revenue of $3.38$4.78 million and distribution revenue of $0.1$0.07 million. This compared to the prior quarter ended MarchJune 31,30, 2025 in which revenue from continuing operations consisted of retail revenue of $2.17$3.38 million and distribution revenue of $0.07$0.1 million.

Retail revenue for the three months ended JuneSeptember 30, 2025 increased by $1.21$1.4 million or 55.8%41.3% compared to the consecutive prior quarter ended MarchJune 31,30, 2025. AlthoughOn July 1, 2025, the Company began operating Cookies Redding which contributed $0.98 million in retail revenue during the three months ended September 30, 2025. The addition of a retail location in Santa Clara County on May 15, 2025 contributed $1.65 million in retail revenue duringfor part of the fiscal second quarter of 2025, overall retail revenue declinedquarter, compared towith priora quarterfull primarilythree duemonths toin morethe conservativefiscal vendorthird terms and cash flow timing, which temporarily impacted inventory replenishment.quarter.

Distribution revenue for the fiscal secondthird quarter ended JuneSeptember 30, 2025 was generally consistent with the fiscal fourthsecond quarter ended MarchJune 31,30, 2025.

Cost of goods sold for the three months ended JuneSeptember 30, 2025 was $1.79$2.53 million, an increase of $0.74 million or 70.5%,41.1%, compared to $1.05$1.79 million for the three months ended MarchJune 31,30, 2025. The increase in cost of goods sold is relative to the increase in revenue as described above, in addition to the acquisition of a fourth retail location, EWCR, which utilizes discounts to drive top-line revenue.above.

Gross profit from continuing operations for the three months ended JuneSeptember 30, 2025 was $1.69$2.32 million compared to $1.19$1.69 million for the three months ended MarchJune 31,30, 2025, an increase of $0.5$0.63 million or 41.8%.37.5%. The increase in gross profit was directly impacted by the increase in revenue as described above. The Company's overall gross margin declined slightly from the prior consecutive quarter at 48.6%47.9% compared to 53.2%48.6% for the three months ended MarchJune 31,30, 2025. ThisThe wasdecrease primarily due toreflects the full-quarter impact of the acquisition of EWCR thatacquisition, which operates with lower grossmargins margins.under a value-oriented pricing model. The prior quarter included only a partial contribution from EWCR following its acquisition on May 15, 2025. Similarly, gross margin for on-going retail operations decreased slightly to 48.4%47.6% for the three months ended JuneSeptember 30, 2025 compared to 55.2%48.4% for the preceding quarter.

The Company realized an operating loss from continuing operations of $1.5 million for the three months ended September 30, 2025 compared to $0.81 million for the three months ended June 30, 2025 compared to $1.3 million for the three months ended March 31, 2025, aan decreaseincrease of $0.49$0.69 million or 37.7%.84.7%. The decreaseincrease in operating loss from the preceding quarter was due to the increase in grossselling, profitgeneral and administrative expenses of $0.5$1.32 million as described above.above, offset by the increase in gross profit.

Other Income (Expenses)

Provision for income tax expense for continuing operations was $0.46 million for the three months ended September 30, 2025 compared to $0.33 million for the three months ended June 30, 2025 compared to $0.25 million for the three months ended March 31, 2025, an increase of $0.08$0.13 million or 34.0%.39.9%. For the three months ended JuneSeptember 30, 2025, the Company calculated its provision for income taxes during the interim reporting period by treating the year-to-date period as if it were the annual period and applying an estimate of the federal income tax rate on gross profit for the current period.

On a non-GAAP basis, the Company recorded non-GAAP Adjusted EBITDA Loss of $1.27 million for the three months ended September 30, 2025 compared to $0.62 million for the three months ended June 30, 2025 compared to $0.42 million for the three months ended March 31, 2025. For the sixnine months ended JuneSeptember 30, 2025 and 2024, the Company recorded non-GAAP Adjusted EBITDA Loss of $1.04$2.31 million and $6.98$8.84 million, respectively. The details of those expenses and non-GAAP reconciliation of these non-cash items are set forth below:

We incurred pre-tax net loss from continuing operations of $1.56$2.1 million and $1.87$3.97 million for the three and sixnine months ended JuneSeptember 30, 2025, respectively, and had an accumulated deficit of $423.53$426.09 million and $421.08 million at JuneSeptember 30, 2025 and December 31, 2024, respectively. As of JuneSeptember 30, 2025, we had a working capital deficit of $20.82$23.7 million, including $0.37$0.39 million of cash, compared to a working capital deficit of $6.79 million, including $1.04 million of cash, as of December 31, 2024. Current assets were approximately 0.080.07 times current liabilities as of JuneSeptember 30, 2025, compared to approximately 0.30 times current liabilities as of December 31, 2024.

Cash used in operating activities for the sixnine months ended JuneSeptember 30, 2025 was $0.85$1.51 million compared to $0.85$1.31 million for the sixnine months ended JuneSeptember 30, 2024, a change of $0.0$0.2 million. In May 2024, the Company expanded its retail operations through the addition of three dispensaries in Northern California, which represented all of the Company's retail operations during the fiscal first quarter of 2025. In May 2025 and July 2025, the Company added a dispensary located in Santa Clara County and Redding, California to its renewed retail portfolio. This contrasts with the sixnine months ended JuneSeptember 30, 2024, during which the Company's retail operations also included Blum Oakland and Blum San Leandro, which were subsequently sold in November 2024. In May 2025, the Company added a dispensary located in Santa Clara County to its renewed retail portfolio. Since August 2022, management implemented a restructuring and reorganization to stabilize operations and position the Company for profitability. As part of this initiative, the Company integrated fourfive new retail locations in Northern California during fiscal year 2025 and strategically disposed of underperforming legacy assets, allowing the Company to redirect resources and enable better allocation of capital. Management anticipates improvements in cash flow from operating activities as the Company continues to execute its growth strategy.

Cash used in investing activities for the sixnine months ended JuneSeptember 30, 2025 was $1.04$0.97 million compared to cash provided by investing activities of $2.25$2.34 million for the sixnine months ended JuneSeptember 30, 2024, a decrease of $3.29$3.31 million, or 146.3%.141.5%. The decrease in cash provided by investing activities was primarily due to proceeds from investments of $1.30 million in the prior year. In addition, during the fiscal second quarter of 2024, the Company acquired $0.96 million in cash from Coastal Pines Group as part of the transactions on May 1, 2024. Whereas during the fiscalnine secondmonths quarterended ofSeptember 30, 2025, the Company has paid $0.74an aggregate amount of $0.66 million in cash to acquire EWCR onand May 15, 2025.GDR.

Cash provided by financing activities for the sixnine months ended JuneSeptember 30, 2025 was $1.22$1.83 million compared to cash used in financing activities of $0.22$0.42 million for the sixnine months ended JuneSeptember 30, 2024, a decrease of $1.44$2.25 million, or 650.0%.534.5%. The decrease in cash used in financing activities as compared to the prior year was primarily due to cash proceeds totaling $1.63$2.34 million from unsecured note financing during the sixnine months ended JuneSeptember 30, 2025, versus no financing in the comparative prior period. This was offset by an increase of $0.18$0.13 million in payments of debt principal.

As of JuneSeptember 30, 2025, the Company does not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.