CVSI 10-K & 10-Q changes, risk factors and insider trading
CV Sciences, Inc. · OTC · Pharmaceutical Preparations · CIK 1510964 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Not required for “smaller reporting companies” as defined in Item 10(f)(1) of Regulation S-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Streeterville Note”
Removed heading “Elevated Softgels Acquisition”
Removed heading “July 2024 Streeterville Note”
Removed heading “2025 Secured Promissory Note”
Removed heading “Accrued Payroll Taxes”
Largest changes
“No interest was to accrue on the Streeterville Note until an occurrence of an event of default, as defined in the Streeterville Note, if ever. …”see in full comparison
“The unpaid amount of the Note, any interest, fees, charges and late fees accrued was due and payable in twelve months from July 3, 2024 (the “Maturity Date”). We were required to make weekly repayments to Streeterville of $22,856. We were permitted able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we would have repaid the Note in full on or before December 31, 2024, we would have received a $75,000 discount from the outstanding balance. …”see in full comparison
“Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., among other restrictions. In February 2025, the U.S. administration announced increased tariffs on imports from China, where certain components of our finished products are sourced. We are closely monitoring this evolving situation and evaluating our responses, which may include price adjustments or other cost-mitigation measures. …”see in full comparison
Representssee in full comparisonintangiblegainassetonimpairmentextinguishmentchargeofduringdebt2023.related to our Streeterville note payable. For more information, please see Note6,8,Goodwill and Intangible Assets,Debt, to our consolidated financial statements included in Part IV in this Annual Report.
“In consideration for the Softgels Acquisition, at closing, the Company (i) made a cash payment of $100,000 to the Softgels Member, less certain transaction expenses and certain other adjustments provided for in the Softgels Purchase Agreement (the “Softgels Closing Payment”), (ii) issued an aggregate of 15,854,185 restricted shares of Company common stock to the Softgels Member valued at $637,000, and (iii) issued an aggregate of 1,567,996 restricted shares of Company common stock to the selling broker of Elevated Softgels valued at $63,000. …”see in full comparison
“In-process research & development ("IPR&D") has an indefinite life and is not amortized until completion and development of the project, at which time the IPR&D becomes an amortizable asset. Until such time as the projects are either completed or abandoned, we test those assets for impairment at least annually at year end, or more frequently at interim periods, by evaluating qualitative factors which could be indicative of impairment. …”see in full comparison
Full comparison: every changed paragraph (87)
We had product sales of $13.8 million and gross profit of $6.8 million, representing a gross margin of 49.0%, in 2025 compared to product sales of $15.7 million and gross profit of $7.2 million, representing a gross margin of 45.6%, in 2024 compared to product sales of $16.0 million and gross profit of $7.1 million, representing a gross margin of 44.3%, in 2023.2024. Our net product sales decreased by $0.3$1.9 million, or 1.9%,12.2%, in 20242025 when compared to 2023.2024. The decline is primarily due to lower B2B sales volume in 2025 compared to 2024. The total number of units sold during the year ended December 31, 20242025 decreased by 9.2%12.6% compared to the year ended December 31, 2023,2024, partially offset by slightly higher average sales pricesprice per unit of 5.7%. In addition, 28% of our net revenue for the year ended December 31, 2024 was from new products launched since January 1, 2023. During this time period, we launched 24 new products. B2C sales increased in 2024 compared to 2023, despite lower digital marketing advertisement. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.0.3%.
In addition, 39% of our net revenue for the year ended December 31, 2025 was from new products launched since January 1, 2023. During this time period, we launched 39 new products. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.
Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in 20242025 compared to 20232024 by $0.4$1.5 million or 4.3%.17.6%. The reduction is partially due to the lower number of units sold in 2024.2025. In addition, cost of goods sold in 20242025 decreased as a percentage of revenue compared to 2023,2024, mostly due to lower shipping and fulfillment cost, lower payroll, lower inventory lossescosts and other production cost savings.savings, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods. Our gross profit improveddeclined by $0.1$0.4 million, or 1.2%,5.8%, to $7.2$6.8 million in 20242025 and gross margins improved from 44.3% in 2023 to 45.6% in 2024.2024 to 49.0% in 2025. The improvement in our gross margin is primarily due to reduced discounts, product and channel mix, lower shipping and fulfillment cost, lower payroll, lower inventory lossescosts and other production cost savings.savings, partially offset by higher cost of goods sold for Elevated Softgels and Cultured Foods.
Research and development (“R&D”) expense decreasedincreased slightly due to $0.1 million in 2024 compared to $0.2 million in 2023. The decrease is mostly related to reduced newadditional product development activitiesactivity forassociated with the in-sourcing of the manufacturing of our consumervegan products.softgels.
Selling, general and administrative (“SG&A”) expenses decreased by $0.5$1.6 million, or 5.2%,17.5%, to $7.6 million in 2025, from $9.2 million in 2024, from $9.7 million in 2023.2024. Additionally, SG&A expense as a percentage of product sales, net decreased from 60.9% in 2023 to 58.8% in 2024.2024 to 55.3% in 2025.
Sales expense increaseddecreased by $0.1$0.4 million, or 3.3%,11.5%, due to higherlower payrollcommission, payroll, travel and employeeother benefits,expense, partially offset by loweran increase in stock-based compensation, commission and other sales related expenses. Payroll and related benefits increased as we reallocated certain of our employees from marketing to sales.compensation.
Marketing expense decreased by $0.9$0.4 million, or 29.0%,20.2%, due to reducedlower digital marketing activitiesspend, aspartially welloffset asby an increase in stock-based compensation expense. Our digital marketing expense declined due to lower payroll,advertising employeeactivity benefits,during stock-basedthe compensation,year andended outsideDecember services.31, Payroll decreased as we reallocated certain employees to sales.2025.
General and administrative (“G&A”) expense decreased by $0.8 million, or 20.9% from the prior year due to lower legal and professional fees, insurance expense, depreciation expense and other administrative cost reductions, partially offset by an increase in stock-based compensation expense. In addition, we recognized a gain in fair value of contingent consideration liabilities of $0.2 million during the year ended December 31, 2024.
General and administrative (“G&A”) expense increased by $0.2 million, or 6.6%, The increase is mostly due to additional legal and professional fees during the year ended December 31, 2024. The current year included professional fees of $0.8 million associated with the legal dispute with the Company's founder. For more information on the Company's legal proceedings, please refer to Note 13, Commitments and Contingencies, to our consolidated financial statements included in Part IV in this Annual Report. In addition, stock-based compensation and other G&A expenses increased slightly, partially offset by reduced insurance expense and intangible asset impairment charge of $0.3 million in 2023.
We previously recorded a contingent liability for payroll taxes associated with the RSU release to our founderfounder. inWe 2019believe ofthat $6.7 million. Onon April 15, 2023,2025, the statute of limitationslimitation foron federal payroll tax withholding expired. In addition,both the statuteemployer and employee Medicare portion of limitationsFICA fortaxes the state tax withholding expired during the year ended December 31, 2023.expired. As a result of the expiration of the relevant statutes of limitations, thewe Company believes that neitherbelieve the IRS nordoes the State of Californianot have the rightsright to assess and collect the $6.2$0.5 million of incomeemployer and employee Medicare portion of FICA taxes from CV Sciences and we made a change in accounting estimate and no longer expect to incur a loss with respect to this matter. As a result, we derecognized the contingent liability of $6.2$0.5 million during the year ended December 31, 2023.2025. For more information, please see Note 12, Related Parties, to our consolidated financial statements included in Part IV in this Annual Report.
OtherInterest expenses,expense, net
OtherInterest expense, net consists of interest expense,expense and interest incomeincome. Interest expense, net was $0.5 million and fair value adjustments to our financial instruments. Other expense decreased by $0.1$0.2 million compared toduring the yearyears ended December 31, 2023.2025 Otherand expenses,2024, respectively. Interest expense, net includedincreased fairby value increases for our financial instruments of $0.2$0.3 million duringdue 2023 and interest expense forto the amortization of thedebt originaldiscount and debt issuance discountcosts for the new Streeterville note payable ofto $0.2an millioninstitutional in 2024.investor.
We use Adjusted EBITDA internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent generally accepted accounting principles (“GAAP”) measures or that supplement the information provided by our GAAP measures. Adjusted EBITDA is defined by us as EBITDA (net income (loss) plus depreciationdepreciation, amortization, interest and amortizationincome expense, and interesttax expense, minus income tax benefit), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it helps to provide insights in trends in our business in addition to GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance.
We use Adjusted EBITDA in communicating certain aspects of our results and performance, including in this Annual Report, and believe that Adjusted EBITDA, when viewed in conjunction with our GAAP results and the accompanying reconciliation, can provide investors with additionalgreater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of Adjusted EBITDA is useful to investors in making period-to-period comparison of results because the adjustments to GAAP are not reflective of our core business performance.
A reconciliation from our net income (loss) to Adjusted EBITDA, a non-GAAP measure, for the years ended December 31, 20242025 and 20232024 is detailed below:
Represents legal and other professional expenses incurred during 2024 associated with the legal dispute with founder. For more information on the Company's legal proceedings, please see Note 13, Commitments and Contingencies, to our consolidated financial statements included in Part IV in this Annual Report.
Represents intangiblegain asseton impairmentextinguishment chargeof duringdebt 2023.related to our Streeterville note payable. For more information, please see Note 6,8, Goodwill and Intangible Assets,Debt, to our consolidated financial statements included in Part IV in this Annual Report.
Represents benefit for reversal of accrued payroll tax associated with the RSU release to founder in 2019. For more information, please see Note 12, Related Party,Parties, to our consolidated financial statements included in Part IV in this Annual Report.
During the year ended December 31, 2024,2025, our primary sources of capital came from (i) cash generated from our operations, (ii) existing cash, and (iii) proceeds from note payable financings, and (iv) funds received from the IRS related to employee retention credits during the year ended December 31, 2023.financings. As of December 31, 2024,2025, we had approximately $0.5$0.3 million of cash and working capital of approximately $0.1 million.133,000.
For the year ended December 31, 2025, we generated negative cash flows from operations of $0.4 million, and we had an accumulated deficit of $87.9 million as of December 31, 2025.
For the year ended December 31, 2024, we generated negative cash flows from operations of $0.9 million, and we had an accumulated deficit of $87.0 million as of December 31, 2024. Excluding the funds for employee retention tax credits, we generated negative cash flows from operations of $0.5 million for the year ended December 31, 2023. In February 2025, the Company entered into a securities purchase agreement with an institutional investor (the “Investor”), pursuant to which the Company issued and sold to the Investor a secured promissory note and received net proceeds of $1,200,000 - please see Note 17, Subsequent Events, to our consolidated financial statements included in Part IV in this Annual Report for more information. Management anticipates that we will be dependent, for the near future, on additional investment capital to fund operations, growth initiatives, and will continue to make and implement strategic cost reductions, including reductions in employee headcount, vendor spending, and delaying expenses related to its drug development activities. We intend to position ourselves so that we will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit.
Management implemented, and continues to make and implement, strategic cost reductions, including reductions in employee headcount, vendor spending, and the delaying of certain expenses related to our drug development activities. To the extent that we feel it is necessary and in the best interest of the Company and our shareholders, we may also take further actions that alter our operations in order to ensure the success of our business.
Elevated Softgels Acquisition
On May 8, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Softgels Purchase Agreement”), by and among the Company, Elevated Softgels, LLC, a Delaware limited liability company (“Elevated Softgels”), Clayton J. Montgomery (the “Softgels Member”), Chris Fagan, Andrew Kester, and Timothy McGreer, pursuant to which the Company purchased all of the outstanding equity interests in Elevated Softgels, resulting in Elevated Softgels becoming a wholly owned subsidiary of the Company (the “Softgels Acquisition”). Elevated Softgels is a leading manufacturer of softgels. The Elevated Softgels Acquisition closed on May 13, 2024.
In consideration for the Softgels Acquisition, at closing, the Company (i) made a cash payment of $100,000 to the Softgels Member, less certain transaction expenses and certain other adjustments provided for in the Softgels Purchase Agreement (the “Softgels Closing Payment”), (ii) issued an aggregate of 15,854,185 restricted shares of Company common stock to the Softgels Member valued at $637,000, and (iii) issued an aggregate of 1,567,996 restricted shares of Company common stock to the selling broker of Elevated Softgels valued at $63,000. The Company common stock was valued based on the thirty-day volume weighted average price of the Company’s common stock on the thirty trading days prior to the date of the Softgels Purchase Agreement (the “Softgels Closing Shares,” and together with the Softgels Closing Payment, the “Softgels Closing Consideration”). The Softgels Closing Payment is subject to adjustment, upward or downward, based on post-closing adjustments to the net working capital of Elevated Softgels within 120 days of closing, as reflected in the Final Working Capital Statement (as defined in the Softgels Purchase Agreement). Additionally, within 90 days following the final determination of the Final Working Capital Statement (the “Softgels Receivables Date”), the Company shall be entitled to recover from the Softgels Member an amount equal to the unpaid balance, as of the Softgels Receivables Date, of all accounts receivable which were included in as assets in the Final Working Capital Statement. The closing working capital has been settled and the Company received a payment of $30,000 from the Softgels Member.
In addition to the Softgels Closing Consideration, the Company has agreed to issue additional consideration for the Softgels Acquisition, in the form of an earn-out (the “Softgels Earnout Amount”), which shall be based on Elevated Softgels’ Net Revenue (as defined in the Softgels Purchase Agreement) generated during the 12-month period following the closing date and will be calculated as follows:
If the Elevated Softgels’ Net Revenue is at least $700,000, then the Softgels Earnout Amount will be $200,000.
If the Elevated Softgels’ Net Revenue is at least $650,000 but less than $700,000, then the Softgels Earnout Amount will be $125,000.
If the Elevated Softgels’ Net Revenue is at least $600,000 but less than $650,000, then the Softgels Earnout Amount will be $50,000.
If the Elevated Softgels’ Net Revenue is at least $550,000 but less than $600,000, then the Softgels Earnout Amount will be $25,000.
If the Elevated Softgels’ Net Revenue is less than $550,000, then the Softgels Earnout Amount will be $0.
The Softgels Earnout Payment shall be paid within 10 business days after the final determination of the Company’s Net Revenue for the 12-month period following the closing date, as determined in accordance with the Softgels Purchase Agreement. 50% of the Softgels Earnout Amount shall be paid in cash and 50% of the Softgels Earnout Amount shall be in the form of restricted common stock of the Company, with the number of shares determined based upon the thirty-day volume weighted average price of the Company's common stock as of the 12-month anniversary of the closing date. Net revenues of Elevated Softgels are currently expected to be insufficient to trigger any earn-out payments.
Pursuant to the Softgels Purchase Agreement, the recipients of the Company's common stock agreed that they will not, on any single trading day sell, transfer or otherwise dispose of any Company common stock, including the Softgels Closing Shares, in an aggregate amount exceeding the greater of (i) 15% of the of the Company’s common stock sold in the aggregate based on the greater of the current or proceeding trading day, and (ii) $3,000 in gross value; provided, however, that in the event that the Company enters into a leak-out agreement with any third party on terms more favorable than the foregoing, the Softgels Member shall be afforded the same more favorable terms offered to such third party.
Additionally, for a period of one year following the closing date, Mr. Montgomery and Mr. Fagan shall be prohibited from engaging in certain competitive and/or solicitation activities within the United States, as more particularly set forth in the Softgels Purchase Agreement.
July 2024 Streeterville Note
On July 3, 2024, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), pursuant to which we issued and sold to Streeterville a Secured Promissory Note in the original principal amount of $1,188,500 (the “Note”). The Note carried an original issuance discount of $283,500 and we agreed to pay $5,000 to Streeterville to cover legal fees, each of which were deducted from the proceeds of the Note received by us, which resulted in a purchase price received by us of $900,000 (the “Purchase Price”).
The unpaid amount of the Note, any interest, fees, charges and late fees accrued was due and payable in twelve months from July 3, 2024 (the “Maturity Date”). We were required to make weekly repayments to Streeterville of $22,856. We were permitted able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we would have repaid the Note in full on or before December 31, 2024, we would have received a $75,000 discount from the outstanding balance. The Note was secured by all of our assets pursuant to a Security Agreement entered into with Streeterville on July 3, 2024. No interest was to accrue on the Note unless and until an occurrence of an Event of Default.
Subsequent to December 31, 2024, the Company repaid the entire amount due under the Note and all obligations thereunder were cancelled and terminated. For more information, please see Note 8, Debt, to our consolidated financial statements included in Part IV in this Annual Report.
2025 Secured Promissory Note
In FebruaryOctober 2025, the Companywe entered into a securities purchase agreement with an institutional investor (the “Investor”), pursuant to which the Companywe issued and sold to the Investor a secured promissory note in the original principal amount of $1,600,000 (the "2025 Note"). The 2025 Note carries an original issuance discount of $400,000 and thereceived Company agreed to pay $10,000 to the Investor to cover legal fees. The original issuance discount was deducted from thenet proceeds of the$0.3 2025million. For more information refer to Note received8, byDebt, theto Companyour whichconsolidated resultedfinancial statements included in aPart purchase price received by the CompanyIV of $1,200,000.this Annual Report.
In November 2025, Congress passed, and the President signed into law, a government funding bill that includes provisions affecting hemp-derived products. The legislation provides that, effective November 13, 2026, the sale of hemp-derived products containing more than 0.4 milligrams of total tetrahydrocannabinol (“THC”) per container will be prohibited under federal law. Products containing less than this amount may continue to be sold, but such products currently represent a small portion of the overall hemp-derived product market.
We are evaluating the potential impact of this legislation on our product portfolio, supply chain, and future operating results. We have until November 13, 2026 to assess and, if necessary, modify our product formulations, labeling, and related compliance measures in response to this legislation. While management cannot reasonably estimate the financial effect of this legislation at this time, it could have a material adverse impact on our business, results of operations, and cash flows.
Management implemented, and continues to make and implement, strategic cost reductions, including reductions in employee headcount, vendor spending, and the delaying of certain expenses related to our drug development activities. To the extent that we feel it is necessary and in the best interest of the Company and our stockholders, we may also take further actions that alter our operations in order to ensure the success of our business.
Note Payable
In February 2025, we entered into a securities purchase agreement with an institutional investor (the “Investor”), pursuant to which we issued and sold to the Investor a secured promissory note in the original principal amount of $1,600,000 (the “Note”). The Note carries an original issuance discount of $400,000 and we paid $10,000 to the Investor to cover legal fees. We incurred additional legal and professional fees of $72,424. The original issuance discount was deducted from the proceeds of the Note received by us which resulted in a purchase price received by us of $1,200,000.
The Note was due and payable on August 12, 2026 and we were required to make monthly repayments to the Investor of $106,667 starting on June 12, 2025.
In September 2025, we entered into an agreement (the “Agreement”) with the Investor. The Agreement amended the Note among other things: (a) to provide for a new maturity date of February 12, 2027, (b) to provide that the monthly redemption amount consists of (i) $106,667 of the outstanding principal amount of the Note on each of the first 3 monthly redemption dates, (ii) $0 of the outstanding principal amount of the Note on each of the next 6 monthly redemption dates, and (iii) $106,667 of the outstanding principal amount of the Note on each of the subsequent 12 monthly redemption dates, and (c) to provide the Investor $150,000 in cash.
The 2025 Note is due and payable on August 12, 2026 and the Company is required to make monthly repayments to the Investor of $106,667 starting on June 12, 2025. The CompanyWe can pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event thewe Company repayspaid the 2025 Note in full on or before August 12, 2025, thewe Companywould willhave receivereceived a $100,000 discount from the outstanding balance. The 2025 Note is secured by all of the Company'sour assets and the assets of its subsidiaries pursuant to a security agreement and intellectual property security agreement entered into with the Investor on February 12, 2025. TheOur Company's obligationobligations under the 2025 Note are guaranteed by each of the Company'sour subsidiaries. No interest will accrue on the 2025 Note unless and until an occurrence of an event of default, as defined in the 2025 Note.
In October 2025, we entered into a new note with the Investor, pursuant to which we issued and sold to the Investor a secured promissory note in the original principal amount of $600,000 (the “New Note”). The New Note carries an original issuance discount of $150,000 and we paid $13,125 to the Investor to cover legal and other fees. The original issuance discount for the New Note and modification fees related to the original Note were deducted from the proceeds of the New Note received by the Company which resulted in a purchase price received by the Company of $300,000. The other terms of the New Note are substantially similar to the Note.
In March 2026, the Company amended the Note and the New Note (collectively, the “Notes”) to include a conversion feature pursuant to which the outstanding balance of the Notes may be converted into shares of common stock of the Company at a fixed conversion price of $0.06 per share. The outstanding principal amounts of the Notes was increased by 20% and, after such adjustment, the amended Notes have an aggregate outstanding principal amount of $2,256,000. The Company’s obligation to make monthly redemptions on the Notes was eliminated. The amendments also provide that if, after the sale of the conversion shares received upon a conversion, the holder receives net proceeds of less than 100% of the principal amount of the Notes converted, and the aggregate shortfall under both Notes exceeds $94,000, the Company will issue a new note on substantially the same terms and conditions of the amended Notes (the "Third Note") with a principal amount equal to the aggregate shortfall in excess of $94,000. If issued, the Third Note will be due April 6, 2027. There is no stated maximum number of shares of common stock that may be issuable in respect of conversions pursuant to the Third Note.
Streeterville Note
In July 2024, we entered into a note purchase agreement with Streeterville, pursuant to which we issued and sold to Streeterville a Secured Promissory Note (the "Streeterville Note") in the original principal amount of $1.2 million. The Streeterville Note carried an original issuance discount of $283,500. We incurred additional debt issuance costs of $5,000. As a result, we received aggregate net proceeds of approximately $0.9 million in connection with the sale and issuance of the Streeterville Note. The Streeterville Note was to mature on July 3, 2025 and we were required to make weekly repayments to Streeterville on the note in the amount of $22,856 until the Streeterville Note was paid in full. We were able to pay all or any portion of the outstanding balance earlier than it is due without penalty. In the event we repaid the Streeterville Note in full on or before December 31, 2024, we would have received a $75,000 discount from the outstanding balance.
No interest was to accrue on the Streeterville Note until an occurrence of an event of default, as defined in the Streeterville Note, if ever. The Streeterville Note provided for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified period of time, a cross-default to certain other indebtedness of the Company, the bankruptcy or insolvency of the Company or any significant subsidiary, monetary judgment defaults of a specified amount and other defaults resulting in liability of a specified amount. In the event of an occurrence of an event of default by us, Streeterville could have declared all amounts owed under the Streeterville Note immediately due and payable. Also, a late fee and interest penalty equal to either 22% per annum or the maximum rate allowable under law, whichever is lesser, could have been applied to any outstanding amount not paid when due or that remained outstanding while an event of default existed. The Streeterville Note was secured by all of our assets as set forth in the Security Agreement dated July 3, 2024.
We made principal payments to Streeterville of $0.6 million during the year ended December 31, 2025. We repaid the outstanding Streeterville Note prior to its maturity date and recognized a gain on extinguishment of $37,500. As a result, the Streeterville Note has been fully repaid and satisfied as of December 31, 2025, and our obligations thereunder, were cancelled and terminated.
In October 2024,2025, we entered into a new financefinancing agreement with First Insurance Funding in order to fund a portion of our insurance policies for the currentupcoming policy year. The amount financed iswas $0.2 million, which incurs interest at an annuala rate of 8.42%.7.72% per annum. We are required to make monthly payments of $20,396$18,299 from November 20242025 through July 2025. The outstanding balance as of December 31, 2024 was $0.1 million.2026.
In NovemberOctober 2023,2024, we entered into a finance agreement with First Insurance Funding in order to fund a portion of our insurance policies. The amount financed was $0.3$0.2 million, which incurred interest at an annual rate of 8.42%. We were required to make monthly payments of $29,781$20,396 from November 20232024 through July 2024.2025. There was no outstanding balance as of December 31, 2024.2025.
Accrued Payroll Taxes
The Company previously recorded accrued payroll taxes associated with the RSU release to Michael Mona Jr. (“Mona”) in 2019. On April 15, 2023, the statute of limitations for federal payroll tax withholding expired. In addition, the statute of limitations for the state tax withholding expired during the year ended December 31, 2023. As a result of the expiration of the relevant statutes of limitations, the Company believes that neither the IRS nor the State of California have the rights to assess and collect the $6.2 million of income taxes from CV Sciences and we have made a change in accounting estimate and no longer expect to incur a loss with respect to this matter. As a result, we derecognized the accrued payroll taxes of $6.2 million during the year ended December 31, 2023. For more information, please see Note 12, Related Parties, to our consolidated financial statements included in Part IV in this Annual Report.
U.S. GAAP requires management to assess a company's ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosure in certain circumstances. Our consolidated financial statements and corresponding notes have been prepared assuming the Company will continue as a going concern. For the year ended December 31, 2024,2025, we generated negative cash flows from operations of $0.9$0.4 million, and we had an accumulated deficit of $87.0$87.9 million as of December 31, 2024. Excluding the funds for employee retention tax credits, we generated negative cash flows from operations of $0.5 million for the year ended December 31, 2023.2025. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund our operations and growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit in order to continue its operations. However, there can be no assurances that additional working capital will be available to us on favorable terms, or at all, which would be likely to have a material adverse effect on the Company's ability to continue its operations.
Net cash provided by (used in) operating activities includes net income (loss) adjusted for non-cash items such as depreciation, amortization, bad debt expense, stock-based compensation, benefit of reversal of payroll tax liabilityliability, gain on debt extinguishment, and amortization of debt discount related to our promissory notes. Operating assets and liabilities primarily include balances related to funding of inventory purchases and customer accounts receivable. Operating assets and liabilities that arise from the funding of inventory purchases and customer accounts receivable can fluctuate significantly from day to day and period to period depending on the timing of inventory purchases and customer payment behavior.
What changed in the latest 10-Q
Risk Factors
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Second Quarter 2026 vs. 2025”
New heading “First six months 2026 vs. 2025”
New heading “Second Quarter 2026 vs. 2025”
New heading “First six months 2026 vs. 2025”
New heading “Second Quarter 2026 vs. 2025”
New heading “First six months 2026 vs. 2025”
New heading “Other expense, net”
Largest changes
Full comparison: every changed paragraph (60)
The following discussion of our financial condition and results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025, respectively, should be read in conjunction with our condensed consolidated financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Second Quarter 2026 vs. 2025
We had net product sales of $3.2$3.0 million and gross profit of $1.6$1.5 million, representing a gross margin of 48.9%,48.6%, in the firstsecond quarter of 2026, compared to net product sales of $3.6 million and gross profit of $1.7$1.8 million, representing a gross margin of 46.0%,50.9%, in the firstsecond quarter of 2025. Our netNet product sales decreased in the firstsecond quarter of 2026 when compared to the firstsecond quarter 2025 mostlydriven by lower sales volume due to lowerrestrictive salesregulation volume.in certain states. The total number of units sold during the firstsecond quarter 2026 decreased by 12.2%14.9% compared to the firstsecond quarter 2025,2025. partially offset by an increase of our averageAverage sales price per unit ofalso 0.9%.decreased by 1.9% compared to the same period 2025. In addition, 42.7% of our net revenuesales for the first quarter 2026 was from new products launched since January 1, 2023. During this time, we launched 45 new products. The overall market continues to be fragmented and highly competitive, which we believe is largelydeclined due to lower third-party contract manufacturing (“CMO”) revenue in the lacksecond quarter of a2026 clearcompared regulatoryto frameworkthe andsame aperiod patchworkin of state regulation.2025.
44.3% of our net revenue for the second quarter 2026 was from new products launched since January 1, 2023. During this time, we launched 52 new products. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.
Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 by $0.3$0.2 million, or 16.2%.13.6%. The reduction is mostly due to the lower number of units sold in the firstsecond quarter of 2026. In addition, cost of goods sold in the firstsecond quarter of 2026 also decreasedincreased as a percentage of revenue compared to the firstsecond quarter of 2025, mostly due higher freight, product mix, and higher cost of goods sold for Elevated Softgels and Cultured Foods in the second quarter of 2026 compared to the prior year period, partially offset by lower product cost and reduced losses.cost. Our gross profit declined to $1.6 million in the firstsecond quarter of2026 2026declined by $0.4 million, or 21.4% from $1.7 million in the firstsecond quarter of 2025. However, ourOur gross margin improveddeclined from 46.0%50.9% in the firstsecond quarter 2025 to 48.9%48.6% in the firstsecond quarter of 2026. The improvementdecline in our gross margin is primarily due to ourhigher freight, product and channel mix, and higher cost of goods sold for Elevated Softgels and Cultured Foods, partially offset by lower product cost, reduced losses and additional cost savings.cost.
First six months 2026 vs. 2025
We had net product sales of $6.2 million and gross profit of $3.0 million, representing a gross margin of 48.7%, in the six months ended June 30, 2026, compared to net product sales of $7.2 million and gross profit of $3.5 million, representing a gross margin of 48.5%, in the six months ended June 30, 2025. Our net product sales decreased in the six months ended June 30, 2026 when compared to the six months ended June 30, 2025 mostly due to lower sales volume. Our sales volume declined due to the impact of restrictive state regulations and most recently due to out-of-stock issues for some of our key products. The total number of units sold during the six months ended June 30, 2026 decreased by 13.5% compared to the six months ended June 30, 2025. Average sales price per unit for the six months ended June 30, 2026 decreased by 0.5% compared to the same period in 2025. In addition, our net sales declined due to lower third-party CMO revenue in the six months ended June 30, 2026 compared to the same period in 2025.
43.5% of our net revenue for the six month ended June 30, 2026 was from new products launched since January 1, 2023. During this time, we launched 52 new products. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework and a patchwork of state regulation.
Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. We were able to reduce our cost of goods sold in the six months ended June 30, 2026 compared to the six months ended June 30, 2025 by $0.6 million, or 14.9%. The reduction is mostly due to the lower number of units sold in the six months ended June 30, 2026. In addition, cost of goods sold in the six months ended June 30, 2026 decreased as a percentage of revenue compared to the six months ended June 30, 2025, mostly due to lower inventory losses and product savings, partially offset by higher freight and cost of goods sold for Elevated Softgels and Cultured Foods in the six months ended June 30, 2026 compared to the prior year period. Our gross profit declined to $3.0 million in the six months ended June 30, 2026 from $3.5 million in the six months ended June 30, 2025. Our gross margin improved from 48.5% in the six months ended June 30, 2025 to 48.7% in the six months ended June 30, 2026. The improvement in our gross margin is primarily due to lower inventory losses and product cost savings, partially offset by higher freight and cost of goods sold for Elevated Softgels and Cultured Foods.
Second Quarter 2026 vs. 2025
Research and development (“R&D”) expense decreased fromfor the firstsecond quarter of2026 decreased slightly compared to the same period in 2025 due to overall reduced R&D spend associated withlower new consumer productsproduct development expenses.activity.
First six months 2026 vs. 2025
R&D expense decreased due to lower new product development activity.
Second Quarter 2026 vs. 2025
Selling, general and administrative (“SG&A”) expense decreased to $1.9$1.7 million in the firstsecond quarter of 2026 compared to $2.1$1.9 million in the firstsecond quarter of 2025, which was primarily a result of the following:
Sales expense decreased due to lower payroll, commission, payroll, travel and other salesexpense, relatedpartially offset by an increase in stock-based compensation expense.
Marketing expense remained materially flat.
Marketing expense decreased due to lower digital advertising spend and reduced marketing and promotional activities. Our reduced digital marketing expense declined due to lower advertising activity during the first quarter of 2026.
General and administrative ("G&A") expense for the firstsecond quarter of 2026 decreased from the prior year period due to lower legal and professional fees, insurance expense, depreciation expense and other administrative cost reductions, partially offset by an increase in stock-based compensation expense.
First six months 2026 vs. 2025
SG&A expense decreased to $3.6 million in the six months ended June 30, 2026 compared to $4.1 million in the six months ended June 30, 2025, which was primarily a result of the following:
Sales expense decreased due to lower commission, payroll, travel and other expense, partially offset by an increase in stock-based compensation expense.
Marketing expense decreased slightly due to lower payroll, advertising and overall marketing spend, partially offset by an increase in stock-based compensation expense.
G&A expense for the six months ended June 30, 2026 decreased from the prior year period due to lower legal fees and professional fees, insurance expense, depreciation and other administrative cost reductions, partially offset by an increase in stock-based compensation expense.
We previously recorded a contingent liability for payroll taxes associated with the RSU release to our founder. On April 15, 2025, the statute of limitations for employer and employee Medicare portion of FICA taxes expired. As a result of the expiration of the relevant statutes of limitations, the IRS does not have the rights to assess and collect the $0.5 million of employer and employee Medicare portion of FICA taxes from the Company and we have made a change in accounting estimate and no longer expect to incur a loss with respect to this matter. As a result, we derecognized the contingent liability of $0.5 million during the threesix months ended MarchJune 31,30, 2025. For more information, please see Note 11, Related Parties, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Other expense, net
Other expense consists of interest expense, net, gain on debt extinguishment, loss on conversion and change in fair value of convertible notes. Interest expense, net consists of interest expense and interest income. Interest expense was mostly related to the amortization of debt discount and debt issuance costs for the note payable with an institutional investor prior to its amendment to a convertible note. Gain on debt extinguishment relates to the recognized gain notes payable modification in 2026 and the refinancing of the Streeterville note payable in 2025. During the three and six months ended June 30, 2026, we recognized a loss on conversion related to the true-up feature in our convertible notes. In addition, we made an irrevocable election to measure the convertible notes at fair value. Any changes in fair value are recorded as change in fair value of convertible notes.
Interest expense, net consists of interest expense and interest income. Interest expense increased due to the amortization of debt discount and debt issuance costs for the notes payable with an institutional investor. Interest income was immaterial.
Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements, to aid in their analysis and understanding of our performance and in making comparisons.
A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three and six months ended MarchJune 31,30, 2026 and 2025 is detailed below:
Represents the changeloss inon fairdebt valueconversions ofrelated ourto convertiblethe notes.true-up obligation. For more information, please see Note 6, Convertible Notes,Note, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Represents gain on extinguishment of debt related to our Streeterville note payablechange in 2025fair and the extinguishmentvalue of our noteconvertible payable with an Investor in 2026.notes. For more information, please see Note 5,6, Debt,Convertible Note, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Represents gain on extinguishment of debt related to our notes payable. For more information, please see Note 5, Debt, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
(5)
During the threesix months ended MarchJune 31,30, 2026 and the year ended December 31, 2025, our primary sources of capital came from (i) cash generated from our operations, (ii) existing cash, and (iii) proceeds from note payable financings. As of MarchJune 31,30, 2026, we had approximately $0.3 million of cash and a working capital deficit of approximately $0.2 million.$64,000.
For the threesix months ended MarchJune 31,30, 2026, the Company generated cash flows from operations of $0.1 million. However, the Company generated negative cash flows from operations for the last several years, and we had an accumulated deficit of $88.6$89.4 million as of MarchJune 31,30, 2026.
We believe that a combination of factors have adversely impacted our business operations for the threesix months ended MarchJune 31,30, 2026 and the year ended December 31, 2025. Due to a low barrier entry market with a lack of a clear regulatory framework, we face intense competition from both licensed and illicit market operators that may also sell herbal supplements and hemp-based CBD consumer products. Because we operate in a market that is rapidly evolving and expanding globally, our customers may choose to obtain CBD products from our competitors, and our success depends on our ability to attract and retain our customers from purchasing CBD products elsewhere. To remain competitive, we intend to continue to innovate new products, build brand awareness, and make significant investments in our business strategy by introducing new products into the markets in which we operate, adopt quality assurance protocols and procedures, build our market presence, and undertake further research and development. In addition, we intend to make additional acquisitions to further diversify our product offerings.
During the fourth quarter of 2025, the regulatory environment for hemp-derived cannabinoid products continued to evolve materially following the enactment of H.R. 537, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “2026 Act”). The 2026 Act was signed into law on November 12, 2025, and its provisions relating to hemp-derived cannabinoid products are scheduled to take effect on November 12, 2026. Among other changes, the 2026 Act narrows the federal definition of hemp, by limiting hemp-derived consumable products to 0.4 mg of total THC, inclusive of THCA, per container. It remains uncertain whether these provisions will take effect as written, or instead be delayed, amended or replaced by subsequent congressional action. Products containing less than this amount may continue to be sold, but such products currently represent a small portion of the overall hemp-derived product market.
On August 8, 2026, the United States Senate approved continuing resolution H.R. 6500 (the “2027 CR”) which includes language that would delay most of the implementation of the regulatory changes applicable to hemp-derived cannabinoid products described in the 2026 Act from November 12, 2026, to December 11, 2026. This 29-day extension would provide Congress with additional time to work toward a longer-term solution. The 2027 CR must still be approved by the United States House of Representatives and signed by the President before it becomes law.
In November 2025, Congress passed, and the President signed into law, a government funding bill that includes provisions affecting hemp-derived products. The legislation provides that, effective November 13, 2026, the sale of hemp-derived products containing more than 0.4 milligrams of total tetrahydrocannabinol (“THC”) per container will be prohibited under federal law. Products containing less than this amount may continue to be sold, but such products currently represent a small portion of the overall hemp-derived product market.
The Company is evaluating the potential impact of this legislation on its product portfolio, supply chain, and future operating results.
The Company hasis untilevaluating Novemberthe 13,potential 2026impact of this legislation on its product portfolio, supply chain, and future operating results. The Company is in the process to assess and, if necessary, modify its product formulations, labeling, and related compliance measures in response to this legislation. While management cannot reasonably estimate the financial effect of this legislation at this time, it could have a material adverse impact on the Company's business, results of operations, and cash flows.
The Company made an irrevocable election to measure the Amended Notes at fair value as it believes the fair value option provides a greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the common stock. As of MarchJune 31,30, 2026, the fair value of the Amended Notes was $1.1$1.0 million.
The following table summarizes the change in fair value of the Company’s convertible notes recorded as Level 3 liabilities for the three months ended March 31, 2026:
During the three months ended MarchJune 31,30, 2026, the Investor converted amounts payable under such Amended Notes into an aggregate of 9,194,75719,664,108 shares of the Company common stock at a weighted average conversion price of $0.06$0.04 per share, resulting in a reduction of the Amended Notes balance of $551,685.$705,998. During the six months ended June 30, 2026, the Investor converted amounts payable under such Amended Notes into an aggregate of 28,858,865 shares of the Company common stock at a weighted average conversion price of $0.04 per share, resulting in a reduction of the Amended Notes balance of $1,257,684. The Company recorded its estimated true-up obligation associated with converted shares during the threesix months ended MarchJune 31,30, 2026 of $146,000$25,633 as accrued expenses, which is included in “ChangesChange in fair value of convertible notes payable” in the Condensed Consolidated Statement of Operations.
Subsequent to MarchJune 31,30, 2026, the Company issued the Investor twoa new Third NotesNote in the aggregate principal amount of $256,164,$71,811, representing the aggregate shortfall of shares sold by the Investor in excess of $94,000. Also, subsequent to MarchJune 31,30, 2026, the Investor converted amounts payable under such Amended Notes into an additional 10,519,10812,706,600 shares of the Company common stock at a weighted average conversion price of $0.04$0.03 per share, resulting in a further reduction of the Amended NotesNote balance of $431,648.$381,198. As a result of these conversions subsequent to June 30, 2026, one of the two Amended Notes has been fully repaid and satisfied.
In October 2025, we entered into a new financefinancing agreement with First Insurance Funding in order to fund a portion of our insurance policies for the upcoming policy year. The amount financed iswas $0.2 millionmillion, andwhich incurs interest at an annuala rate of 7.72%.7.72% per annum. We are required to make monthly payments of $18,299 from November 2025 through July 2026. The outstanding balance as of March 31, 2026 was $0.1 million.
In October 2024, we entered into a finance agreement with First Insurance Funding in order to fund a portion of our insurance policies for the most recent policy year.policies. The amount financed wasis $0.2 million, which incurred interest at an annual rate of 8.42%. We were required to make monthly payments of $20,396 from November 2024 through July 2025. There was no outstanding balance as of MarchJune 31,30, 2026.
U.S. GAAP requires management to assess a company's ability to continue as a going concern within one year from the financial statement issuance date and to provide related note disclosure in certain circumstances. Our condensed consolidated financial statements and corresponding notes have been prepared assuming the Company will continue as a going concern. We generated cash flows from operations of $0.1 million for the threesix months ended MarchJune 31,30, 2026. However, we generated negative cash flows from operations for the last several years and had an accumulated deficit of $88.6$89.4 million as of MarchJune 31,30, 2026. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund our operations and growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit in order to continue its operations. However, there can be no assurances that additional working capital will be available to us on favorable terms, or at all, which would be likely to have a material adverse effect on the Company's ability to continue its operations.
A summary of our changes in cash flows for the three and six months ended MarchJune 31,30, 2026 and 2025 is provided below:
Net cash used in operating activities includes net loss adjusted for non-cash items such as depreciation, amortization, creditbad losses,debt expense, stock-based compensation, benefit of reversal of payroll tax liability, interest expense related to our promissory notes, change in fair value of our convertible notes, loss on note conversions and gain on debt extinguishment. Operating assets and liabilities primarily include balances related to funding of inventory purchases and customer accounts receivable. Operating assets and liabilities that arise from the funding of inventory purchases and customer accounts receivable can fluctuate significantly from day to day and period to period depending on the timing of inventory purchases and customer payment behavior.
Cash generated in operating activities was $0.1 million in the threesix months ended MarchJune 31,30, 2026, compared to cash used in operating activities was $0.1$0.2 million in the threesix months ended MarchJune 31,30, 2025. Our net loss of $1.4 million for the threesix months ended MarchJune 31,30, 2026, adjusted for non-cash items, resulted in a net loss of $0.1$0.2 million, compared to a net loss, adjusted for non-cash items, of $0.2 million$44,000 in the prior year period, an improvement of $0.1 million.period. Changes in working capital generated $0.2$0.4 million during the first threesix months of 2026,2026 comparedand to $0.1 million during the same period of 2025, an improvement of $0.1 million.2025. Our changes in working capital improvedare primarilymostly duerelated to continued usage and conversion of our inventory, partially offset by increased payments to our accounts payable.inventory. Our net loss increased by $0.5$1.0 million, mostly due to the non-recurring benefit for the reversal of accrued payroll taxes in the prior year. Non-cash adjustments increased by $0.5 million, as we recognized a benefit for the reversal of accrued payroll taxyear of $0.5 million and the non-cash charges related to theour RSU'sconvertible previouslynotes issuedof to$0.7 Mona during the three months ended March 31, 2025.million. Recurring non-cash adjustments consists of depreciation, amortization, interest expense and stock-based compensation.
Cash used in investing activities was $3,000$10,000 and $40,000$89,000 in the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, and related to improvements to our manufacturing facilityfacilities in Poland and at Elevated Softgels.
Net cash used in provided by financing activities was $0.1 million for the threesix months ended MarchJune 31,30, 2026 compared to net cash provided by financing activities of $0.5$0.3 million for the threesix months ended MarchJune 31,30, 2025. Our financing activities for the threesix months ended MarchJune 31,30, 2026 consisted of payments for our insurance financing and debt issuance costs related to the amendment of our notenotes payable. Our financing activities for the threesix months ended MarchJune 31,30, 2025 consisted of net proceeds from our note payable financing of $1.1 million, offset by repayments of Streeterville note of $0.6$0.7 million and our insurance financing.financing of $0.1 million.
During the fourth quarter of 2025, the regulatory environment for hemp-derived cannabinoid products continued to evolve materially following the enactment of H.R. 537, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “2026 Act”). The 2026 Act was signed into law on November 12, 2025, and its provisions relating to hemp-derived cannabinoid products are scheduled to take effect on November 12, 2026. Among other changes, the 2026 Act narrows the federal definition of hemp, by limiting hemp-derived consumable products to 0.4 mg of total THC, inclusive of THCA, per container. It remains uncertain whether these provisions will take effect as written, or instead be delayed, amended or replaced by subsequent congressional action.
On August 8, 2026, the United States Senate approved continuing resolution H.R. 6500 (the “2027 CR”) which includes language that would delay most of the implementation of the regulatory changes applicable to hemp-derived cannabinoid products described in the 2026 Act from November 12, 2026, to December 11, 2026. This 29-day extension would provide Congress with additional time to work toward a longer-term solution. The 2027 CR must still be approved by the United States House of Representatives and signed by the President before it becomes law.
There is currently a lack of a clear federal regulatory framework regarding the development, sale and use of CBD products in the United States. As a result, differing state regulations have emerged, which regulations are constantly evolving and differ significantly from state to state in many cases. Several states, including without limitation, California, Florida, Maryland, Minnesota, New York, Utah and Virginia, have recently adopted regulations that mayhave impactimpacted our ability to sell certain of our products in these states. InThese Septembervarious 2024,state California Governor Gavin Newsom signed an emergency order into law, effectively banning the sale of hemp products intended for human use that contain detectable amounts of THC or certain other cannabinoids in California, amongst other things. The emergency order was originally in effect through March 25, 2025, and has been extended by one year. Weregulations have certain products which fall under this category that we have historically sold in California. It is currently unknown whether the duration of the emergency order will be extended, and/or whether it will be replaced with a permanent law with similar or more stringent prohibitions. This emergency order had a negative impact on our operating results for the year ended December 31, 2025 and the three and six months ended MarchJune 31,30, 2026 and we expect that itthese regulations will continue to have a negative impact on our business going forward for so long as it, or any permanent law with similar or more stringent prohibitions, remains in effect; however, it is currently impossible to quantify the expected impact on our business. There is also substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the FDA and the extent to which manufacturers of products containing cannabinoids may engage in interstate commerce. These uncertainties have had, and may continue to have, an adverse effect on our business. Additionally, restrictive state regulations could adversely impact our revenue and earnings going forward.
Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S., among other restrictions. InWe Februaryare 2025,currently the U.S. administration announcedincurring increased tariffs on imports from China, where certain components of our finished products are sourced. We are closely monitoring this evolving situation and evaluating our responses, which may include price adjustments or other cost-mitigation measures. However, there can be no assurance that we will be able to fully mitigate the impact of such tariffs or trade restrictions. If further tariffs are imposed, we could be forced to raise prices on all or certain of our products or make changes to our operations, any of which could materially harm our revenue or operating results. Any additional future tariffs or quotas imposed may impact our sales, gross margin and profitability if we are unable to pass increased prices onto our customers. Currently, we cannot fully determine how these tariffs will affect our business operations. The overall impact on our business will be influenced by several variables, including the duration and potential expansion of current tariffs, future changes to tariff rates, scope, or enforcement, retaliatory measures by impacted trade partners, inflationary effects and broader macroeconomic responses, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these challenges.
We have been experiencing certain manufacturing constraints that resulted in temporary out-of-stock situations for some of our key products. We are working closely to resolve these issues and expect inventory levels to normalize in 2026. While we do not currently anticipate a material long-term impact, these temporary shortages may affect our near-term revenue and customer order fulfillment.
We have disclosed in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report, filed with the SEC March 26, 2026, those accounting policies and estimates that we consider to be significant in determining our results of operation and financial condition. There have been no material changes to those policies and estimates that we consider to be significant since the filing of our 2025 Annual Report, except for our election of the fair value option under ASC 825 for certain convertible notes during the three months ended March 31, 2026.Report. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to U.S. GAAP.
CVSI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 10 trade dates, 5,740,816 shares, about $114.8K) and open-market sales in 0 filings. Net open-market shares: 5,740,816 (purchases minus sales); net value about $114.8K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-07 | Cheever Charlie E Iii |
Open-market purchase | 94,854 | $0.02 | $1.9K |
| 2026-08-04 | Cheever Charlie E Iii |
Open-market purchase | 108,000 | $0.02 | $2.2K |
| 2026-07-31 | Cheever Charlie E Iii |
Open-market purchase | 1,730,000 | $0.02 | $34.6K |
| 2026-07-29 | Cheever Charlie E Iii |
Open-market purchase | 60,000 | $0.02 | $1.2K |
| 2026-07-28 | Cheever Charlie E Iii |
Open-market purchase | 1,830,000 | $0.02 | $36.6K |
| 2026-07-24 | Cheever Charlie E Iii |
Open-market purchase | 470,075 | $0.02 | $9.4K |
| 2026-07-22 | Cheever Charlie E Iii |
Open-market purchase | 272,500 | $0.02 | $5.5K |
| 2026-07-21 | Cheever Charlie E Iii |
Open-market purchase | 335,000 | $0.02 | $6.7K |
| 2026-07-17 | Cheever Charlie E Iii |
Open-market purchase | 749,000 | $0.02 | $15.0K |
| 2026-07-16 | Cheever Charlie E Iii |
Open-market purchase | 91,387 | $0.02 | $1.8K |
Well-known investors holding CVSI (13F)
None of the 59 investors we track reported a position in their latest 13F.