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

Risks Related to our Financial Condition

Our auditors have included an explanatory paragraph in their opinion regarding our ability to continue as a going concern. If we are unable to continue as a going concern, our stockholders will lose all or some of their investments.

Rose, Snyder & Jacobs LLP, our independent registered public accounting firm for the fiscal year ended December 31, 2025, has included an explanatory paragraph in their opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2025, indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. This has continued as of the date of this Report.

We have sustained recurring losses and we have had working capital and stockholders’ equity deficits. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability to continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through sales of our products, financing or from other sources or transactions, we will exhaust our resources and will be unable to continue operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next 12 months.

In order to continue and fund its operations, the Company will be required to obtain additional resources through sales and issuances of equity to successfully execute its business plans and keep the Common Stock listed on the NYSE American. No assurances can be given the Company will be successful in raising additional capital, if needed, or on acceptable terms. Sales of Common Stock or Common Stock equivalents would have the effect of diluting existing stockholders. If we are unable to raise the necessary capital on favorable terms, within the timeframes needed or at all, we could be forced to cease operations, and you could lose all or some of your investment.

Because we lack the required $6 million of minimum stockholders’ equity currently as well at December 31, 2025, our Common Stock may be delisted by the NYSE American.

On April 7, 2025, the NYSE American notified the Company that as a result of its failure to comply with the applicable continued listing rules including maintaining the required minimum stockholders’ equity, it determined to commence proceedings to delist the Company’s Common Stock from the exchange. The Company appealed the determination.

On June 25, 2025, we acquired our Water Assets by issuing the Seller shares of our Series C Convertible Preferred Stock. The Series C contains a stated value of $20 million. Under Generally Accepted Accounting Principles, we accounted for this issuance by including $20 million of non-current assets on our balance sheet. On April 14, 2026, the Company rescinded the transaction and canceled the Series C in accordance with the provisions of the Asset Purchase Agreement, effective December 31, 2025. If we can complete the acquisition of Medterra, we expect we will have stockholders’ equity substantially above the $6 million minimum requirement. We cannot assure you that we will complete the acquisition of Medterra or that the NYSE American will permit our Common Stock to remain listed both prior to the planned closing and after the closing of the Medterra acquisition.

Because we lack the capital to acquire inventory and market our products, we have generated no revenue in 2025 after the three months ended March 31, 2025, making our ability to remain in operation more difficult, and there are substantial doubts as to our ability to continue as a going concern.

As reflected in this the consolidated financial statements contained in this Report, we had only $442,732 in net revenues for the year ended December 31, 2025. In fact, we did not generate any revenue in fiscal year 2025 after the three months ended March of 2025 due to a lack of operating capital which has hindered the Company’s ability to generate sales since that time. In order to generate material revenue, we estimate requiring at least $2,000,000 of working capital in order to acquire inventory and re-commence minimal operations. This does not include our plans for the Chispo tequila business which will require substantial additional capital. Specifically, management estimates needing approximately $500,000 to achieve its full year goals. In addition, we need approximately $3 million in working capital to grow our business, pay our current management, including benefits, an accounting consultant and the public company costs we are required to pay.

We have also entered into the Letter of Intent with Medterra contemplating a potential business combination with that entity. Assuming we enter into a definitive Agreement with Medterra and close the acquisition, we expect we will need approximately $10,000,000 to pay its indebtedness and the income taxes of Medterra’s investors and are working with capital partners and investors to attempt to raise an additional $25,000,000 at or subsequent to the closing of the proposed transaction to expand Medterra’s existing operations and sales inclusive of their participation in the recently launched federal CMS pilot program, additional working capital, and reserves. See “Risk Factors - Risks Related to. Our Business.”

Our lack of cash resources has prevented us from carrying on our commercialization activities. In addition, our lack of working capital has prevented us from marketing our products. Further, even if we can access the necessary capital, the Company must determine whether and what extent to invest such capital into various aspects of our business, including recommencing sales of beverage products, and we may be unsuccessful in developing and executing a business plan in this regard. Unless we raise enough money to not only pay our ongoing general and administrative expenses but also market our products and purchase inventory, we will not be able to remain operational.

We have experienced recurring losses from operations and negative cash flows from operating activities and anticipate that we will continue to incur significant operating losses before reaching profitability.

We have experienced recurring losses from operations and negative cash flows from operating activities. We expect to continue to incur significant expenses related to our ongoing operations and generate operating losses for the foreseeable future. The size of our losses will depend, in part, on the rate of future expenditures, our ability to execute our business plan and our ability to generate revenues. We incurred a net loss from continuing operations of approximately $25.2 million including $14.2 million of non-cash items for the year ended December 31, 2025.

We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our financial condition. Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. If our products do not achieve sufficient market acceptance and we do not generate significant revenues, we may never become profitable. Even if we achieve profitability in the future, for which we can provide no assurance, we may not be able to sustain profitability in subsequent periods. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the value of our Company could cause you to lose all or part of your investment.

We may become subject to litigation in connection with our cancellation of the Series C that we had previously issued under the Asset Purchase Agreement related to certain water assets.

Following the cancellation of the Series C that we had previously issued to the Seller under the Asset Purchase Agreement related to certain water assets located in Costa Rica, the Seller may determine to sue us challenging our position with respect to such cancellation. Specifically, Section 1.04 of the Asset Purchase Agreement required the Seller to deliver the water assets by December 31, 2025 or pay the Company $20 million in cash, and further stated that failure to deliver either the water assets or the $20 million by December 31, 2025 rendered the Series C to be “null, void, and of no further force or effect.” As a result, the Company cancelled the Series C effective December 31, 2025. While the Company believes that it has adequate evidence demonstrating that the Seller failed to comply with either requirement, the Seller may nonetheless seek to sue the Company claiming that the Company was not entitled to cancel the Series C. Any resulting litigation which may arise from the foregoing could require us to incur significant costs and expenses, subject us to uncertainty with respect to our outstanding capital stock and any potential future transactions (including the potential business combination with Medterra), and divert our limited personnel and resources away from operational matters and strategic initiatives.

If we are unable to enter into a definitive agreement and close an acquisition of Medterra following our entry into a non-binding Letter of Intent on March 4, 2026 as described elsewhere in this Report, the Company and its stockholders will not receive the anticipated and intended benefits of such acquisition, and the Company would be forced to pursue alternative acquisitions or strategic transactions.

As disclosed elsewhere in this Report, we recently entered into a Letter of Intent with Medterra, a leading manufacturer and multi-brand operator of cannabinoid wellness products. Pursuant to the Letter, the parties agreed in principal on the terms of a potential business combination between Medterra and the Company, subject to due diligence and execution of a definitive written agreement and other applicable agreements, receipt of the 2025, audited financial statements of Medterra and customary closing conditions. In addition, the Company needs approximately $10.4 million of cash to close the transaction. The proposed terms for the transaction represent an enterprise value of Medterra of $37.6 million or the issuance of approximately 54,400,000 shares of Common Stock, which assumes repayment of its outstanding debt. This would represent substantial dilution to the Company’s existing stockholders.

While the closing of the acquisition would result in us becoming the parent holding company of a leading manufacturer and seller of cannabinoid products, the closing may not occur, including due to regulatory challenges arising from cannabis laws and the NYSE American requirements, our ability to raise the necessary cash and negotiate the definitive agreement, due diligence, the appearance of a competitive bid from another prospective purchaser, or the seller’s inability to maintain its operations for a sufficient time to allow the transaction to close, and other events and requirements that may not occur on favorable terms or at all and subject any potential transaction to substantial uncertainty. The Letter is non-exclusive and does not provide us with any recourse if Medterra were to decline to move forward with a transaction with us. The Letter also envisions us being required to raise a substantial amount of additional capital shortly following the closing of the business combination, which would further dilute our existing stockholders and could subject us to onerous terms that harm our ability to operate or pursue strategic transactions and alternatives. Even if we do acquire Medterra and raise the necessary capital to fund post-transaction operations in the future, there can be no assurance that such a development will yield the intended or expected benefits, result in sustained increases in prices and or volume of trading in our Common Stock, or otherwise create a meaningful return on investment or value to our stockholders.

Further, if we fail to enter into a definitive written agreement or a business combination does not close, all of the time and capital resources expended by the Company in such pursuit of such a transaction may be lost and unrecoverable by the Company or its stockholders. Unanticipated issues which may be beyond our control or that of the seller may arise that force us to suspend our pursuit of the target, including those referred to elsewhere herein. Such risks are inherent in any search for a new business and investors should be aware of them before investing in an enterprise such as ours.

As disclosed above under “Business-Letter of Intent”, we are in discussions concerning a potential acquisition of Medterra contemplated by the Letter of Intent with that entity. Unidentified liabilities or other issues may arise with respect to the businesses and assets we have acquired or may in the future acquire, which could expose us to litigation, unexpected costs, regulatory actions and other negative events that could materially harm our business and financial condition. Further, we intend for = any such acquisitions to be a critical part of our business plan moving forward, subject to accessing the necessary capital, and such acquisitions may not yield the benefits expected or desired for our business.

In addition, even if we can access the necessary capital, we may face challenges in integrating and utilizing any acquired business or assets, particularly given any such undertaking will require the investment of resources to monetize and integrate into our other operations. Even if we can access the necessary capital to further these efforts we may be unable to effectively manage these efforts without incurring extensive additional costs or at all. This would put a further strain on our already limited personnel and resources. Further, the long-term commercial success of any such undertaking will depend on our ability to timely and in a cost-effective manner pursue and develop an infrastructure and network to obtain and distribute products in high quantities and in compliance with applicable regulatory and commercial requirements. If we are unsuccessful in navigating these challenges with respect to any acquired business or assets, it could fail to result in benefits to our Company, and we could be materially adversely affected by any of the foregoing events.

Significant new or increased tariffs, import and excise duties, or other taxes on or impacting beverage products, including raw and packaging materials, such as on imports from Mexico and exports to countries in which we plan to sell our products such as the United Arab Emirates from which we source many of our supplies for our products, and any additional retaliatory tariffs imposed by those governments on products imported into the U.S., could have a material adverse effect on our business, liquidity, financial condition, and results of operations. These developments continue to pose a significant risk to our business as well as the U.S. and global economies, including by shifting consumer behaviors, inhibiting sales, increasing costs, causing further economic and supply chain disruptions and inflationary pressures, and reducing economic activity. For example, if the costs of our products increase, we and our collaborators may be forced to increase the prices at which such products are sold, which could in turn reduce demand for and sales of those products, thereby negatively impacting our operating results. Alternatively, the heightened production costs would also have a negative impact on operating results even absent a decline in sales. Further, increases in the cost of oil and other resources used in the production and transportation of products could have a material adverse effect on the acquisition and use of such resources and gross margins.

The extent and duration of the tariffs and the resulting impact on our business and general economic conditions are uncertain and depend on various factors, including negotiations between the United States and affected countries, the outcome of the United States tariff litigation, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets. To the extent we need to locate new sources of raw materials and products as a result of tariffs, we may be unable to locate alternative sources on favorable terms or in the timeframes needed, and actions we may take to adapt to new tariffs or trade restrictions may force us to modify our operations or forgo business opportunities. Likewise, tariffs and import and export regulations could also limit the availability of our products, prompt consumers to seek alternative products, and provide an opportunity for competitors not subject to such tariffs to more effectively compete with us in markets where we conduct our business.

Following President Trump’s inauguration in January 2025, certain trends and events have unfolded and continue to evolve and develop which are affecting and have the potential to further affect the global and United States capital markets and economies, including the inflation caused by the conflict with Iran, the continued high central bank interest rates, the imposition and threat of tariffs as well as subsequent developments and uncertainties surrounding tariffs, trade wars among nations and ongoing wars and geopolitical conflicts, and uncertain capital markets with significant volatility and declines in leading market indexes thus far 2026. The duration and scope of these events and their impact are at best uncertain, and their continuation may result in negative consequences on the U.S. or global economies.

The impositions of tariffs by the U.S. and any retaliatory actions by foreign countries, as well as refunds on tariffs following the U.S. Supreme Court’s ruling to strike down certain tariffs, could contribute to higher inflation and reduced economic activity for a prolonged period of time, thereby delaying any rate reductions or potentially resulting in rate increases in the future, as well as reduced demand for mortgages. Similarly, the wars in the Middle East and the Ukraine could also contribute to increased and prolonged inflation including by increasing the price of oil and causing adverse impacts on supply chains. These uncertainties and developments could result in supply chain issues, higher prices for goods and services or other adverse consequences on us and our vendors. In addition, these events come with an increased probability for an economic downturn or recession by making it more difficult for businesses to borrow money and individuals to maintain employment.

These developments follow the increase in interest rates that began in 2022 as the Federal Reserve in U.S. and central banks in other jurisdictions have sought to combat inflation. While in the U.S. inflation has declined, the conflict with Iran seems likely to having another inflationary impact. Further many economists view additional increases in inflation as a likely or possible consequence of these developments. Uncertainty surrounding rising or elevated prices and concerning the state and prospects for the U.S. and global economies and capital markets in the near term remains and has amplified due to the factors described above. If inflation does not fall low enough and/or the Federal Reserve declines to reduce interest rates in the near term, or tariffs and related developments adversely impact the economy, the result could be tipping the U.S. economy into a recession. In the wake of these events, the U.S. and global capital markets have demonstrated substantial volatility in the first quarter of 2026, as many investors consider economic outlooks to be uncertain and consider the risk of a recession and a decline in the marketplace to be increasingly probable or imminent. Ultimately the economy may turn into a recession with uncertain and potentially severe impacts upon the public capital markets and us. Among the potential consequences could be a substantial decline in stock prices including ours, a reduction in demand for securities of public companies (which may be more prevalent for smaller companies such as us) and more difficulty for us to raise capital we need and accessing capital on favorable terms or at all as a result.

From 2020, we have been engaged in the beverage businesses, although we have not generated revenue since February 2025.

The Company’s efforts to commercialize its beverage products as described under “Business”. In addition, the Company is pursuing potential strategic alternatives, including a potential acquisition as described above under “Business-Letter of Intent.”

RESULTS OF OPERATIONS

Our consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operation. Our results of operations reflect our continuing operations and reflect losses from discontinued operations related to the discontinuation of our Copa Di Vino businesses. All financial information has been restated to reflect our discontinued operations for all periods presented.

The following table sets forth our revenues, expenses and net loss for the years ended December 31, 2025 and 2024.

Results of Operations for the Year Ended December 31, 2025, compared to Year Ended December 31, 2024.

Revenues for the year ended December 31, 2025 were $0.07 million compared to revenues of $0.8 million for the year ended December 31, 2024. The $0.73 million decrease in sales primarily due to a shortage of operating capital which hindered our ability to obtain inventory and generate sales. The Company did not make any sales in the 2025 calendar year after March 2025 due to its lack of capital resources. The Company is seeking to raise at least $3 million in the fiscal year ending December 31, 2026 in order to re-establish portions of its prior business through the sale of tequila products.

During 2025, the Company recognized a $5.6 million loss on extinguishment of debt in connection with the exchange of certain outstanding loans, including principal and accrued interest totaling approximately $12.6 million, for preferred stock. This non-cash expense significantly contributed to the increase in other expense. Interest expense for the year ended December 31, 2025 was $2.6 million compared to $3.7 million for the year ended December 31, 2024, representing a decrease of approximately $1.8 million. The decrease was primarily attributable to the debt exchange transaction described above, which reduced outstanding borrowings and related interest obligations.

Amortization of debt discount decreased from $3.7 million in 2024 to $1.9 million in 2025 due to the reduction in debt balances following the exchange transactions. In addition, the Company recorded a $0.5 million inventory write-off during 2025. These increases in expense were partially offset by the absence of a $0.3 million legal settlement reserve recorded in 2024 that did not recur in 2025.

Discontinued Operations

Due to the lack of working capital to fund operations, it formed a license agreement with a 3rd party to allow the continued production and flow of product to the customers so that it could later be recovered as the funding challenges were then deemed as only temporary. As the lack of funding persisted through the full year of 2025 the company subsequently determined it no longer intends to relaunch the product line. As a result, accordingly, the Company has classified the related assets and liabilities associated with its CdV as discontinued operations in its consolidated balance sheets and the results of its logistics and transportation services business has been presented as discontinued operations in its consolidated statements of operations for all periods presented as the discontinuation of its business had a major effect on its operations and financial results. Unless otherwise noted, discussion in the other notes to consolidated financial statements refers to the Company’s continuing operations.

The following table summarizes the results of operations of discontinued operations:

Due to our lack of capital, we did not generate any revenue between March 2025 and February of 2026. In order to generate material revenue, we require at least $3,000,000 of working capital in order to acquire inventory and re-commence minimal operations. This includes our plans for our Chispo business and general and administrative expenses. Our lack of cash resources has prevented us from carrying on our commercialization activities. In addition, our lack of working capital has prevented us from marketing our products.

In addition, we would need additional capital to acquire and fund the operations of any business we may acquire in a business combination in the future, including potentially Medterra if we can structure, negotiate and pursue a transaction under the Letter of Intent with that entity. See “Part I, Item 1-Business-Recent Developments-Letter of Intent” at page 2. See also Item 1A – “ Risk Factors”.

We have historically raised capital to fund our operations and capital needs through the issuance of debt and equity securities. In August 2025, the Company issued convertible promissory notes with individuals in the aggregate principal amount of $424,560. These loans mature in May or June 2026 and have an interest rate of 22% per annum. In September 2025 we sold secured convertible promissory notes in the principal amount of $2,200,000 for total gross proceeds of $2,000,000, which notes do not bear any interest absent an event of default, and mature on September 22, 2026.

In September 2025 we also entered into the ELOC Agreement which subject to certain conditions including obtaining and maintaining the registration of the shares on an effective registration statement allows us to access additional capital, we plan to access and deploy such capital to re-commence certain of our operations and to establish new operations as described in this Report. From January 27, 2026 through April 14, 2026, the Company has sold 4,840,254 shares under the ELOC Agreement for total gross proceeds of $1,917,709. The Company has recently been relying upon the ELOC Agreement as a source of liquidity. Its ability to generate material capital is in large part based on the future liquidity and the market price of our Common Stock.

In November 2025, the Company borrowed $500,000 from two accredited investors and issued senior promissory notes with a combined original principal amount of $588,235, reflecting a 15% original issue discount. The notes mature on February 12, 2026, accrue interest at 6% starting 30 days after issuance, and include customary default provisions. The notes also permit the holders, at their discretion, to apply outstanding principal, accrued interest, and any Company securities they hold as consideration for participation in future equity, equity-linked, or debt financings.

From June through December 2025, we raised a total of $1,300,000 from the sale of 1,300 shares of Series A-1 Convertible Preferred Stock (“Series A-1”), Class A Warrants to purchase 325,000 shares of Common Stock and Class B Warrants to purchase 325,000 shares of Common Stock.

In December 2025, the Company entered into agreements to issue a total of 113,636 shares of Common Stock and 1,136 shares of Series D Convertible Preferred Stock to holders of options to purchase a total of up to $600,000 shares of Common Stock in exchange for the termination of such options.

As such, we have concluded that such plans do not alleviate the substantial doubt about our ability to continue as a going concern for one year from the date the accompanying financial statements are issued. There is therefore substantial doubt about our ability to continue as a going concern.

Because our Common Stock is listed on the NYSE American, we cannot issue any indebtedness while listed due to our negative stockholders’ equity as described in this Report. Further we need to raise material equity in order to complete the Medterra acquisition plan to use the ELOC to support our minimal working capital needs but that requires our stock to trade actively enough; otherwise the investor will sell any Common Stock we issue which will depress the price to a point where our Common Stock will automatically be delisted.

As of April 14, 2026, the Company had total cash and cash equivalents of $732,307.

Net cash used for continuing operating activities during the year ended December 31, 2025, was $4.8 million as compared to the net cash used by continuing operating activities for the year ended December 31, 2024, of $7.3 million. In 2025, we had a loss on debt extinguishment of $5.6 million arising from debt to equity exchanges, and non-cash share based compensation of $8.6 million related to warrants issued to our directors, officers and certain employees.

Net cash provided by financing activities during the year ended December 31, 2025 was $5.1 million compared to $7.5 million provided from financing activities for the year ended December 31, 2024. The Company received $4.3 and $$9.5 million in proceeds from the issuance of debt in years ending December 31, 2025 and 2024, respectively. The Company received $1,300,000 and $0 in proceeds from the issuance of equity securities in years ending December 31, 2025 and 2024, respectively.

Warrants

Effective July 31, 2025, the Company issued 5,050,000 Warrants to its officers, directors and certain employees. As of April 14, 2026, our Board of Directors agreed to cancel the Warrants subject to each person as applicable agreeing to cancel them. As of the date of this Report, 1,350,000 Warrants held by former employees remain outstanding and all other Warrants have been canceled. The Company intends to pursue its remedies with respect to the remaining Warrants.

Unless the context otherwise requires, references in this Form 10-Q to “we,” “us,” “our,” or the “Company” refer to Splash Beverage Group and its subsidiaries.

Splash is a Nevada corporation that was historically seeking to identify, acquire, and build early stage or under-valued beverage brands that have strong growth potential within its distribution system. During the current fiscal year beginning January 1, 2026, Splash has moved away from beverages and is focusing on the cannabinoid and wellness economy businesses.

As a result of its lack of meaningful sales in the beverage business, Splash is transitioning to the regulated wellness and cannaboid markets. The second quarter of 2026 marked an important strategic inflection point for the Company as management began repositioning Splash Beverage Group from a legacy beverage company toward a cannabinoid health and wellness platform focused on long-term value creation. To that end, the Company filed a name change in Nevada to change its corporate name to Endovia Health Sciences, Inc., which is expected to take effect on the NYSE American on August 24, 2026. The name change reflects the Company’s strategic transformation from a legacy beverage business into a diversified cannabinoid health sciences platform focused on commercializing pharmaceutical assets, advancing FDA-regulated human and veterinary therapeutics, and developing innovative cannabinoid wellness and beverage products.

During the second quarter of 2026, the Company continued evaluating strategic alternatives designed to reposition its business for long-term growth. While Splash Beverage Group has historically operated as a branded beverage company, management believes the Company's public platform, industry relationships and leadership experience present opportunities to participate in higher-growth segments of the cannabinoid health and wellness industry.

As part of this strategic evaluation, the Company explored opportunities to expand beyond its legacy beverage portfolio through acquisitions, licensing arrangements and strategic partnerships involving cannabinoid wellness products and related health technologies. Although the previously announced proposed merger with Medterra was ultimately not completed, management believes that process reinforced its conviction regarding the long-term opportunity within the cannabinoid sector and informed the Company's current strategic direction.

The Company's strategic repositioning has been led by Interim Chief Executive Officer Brady Cobb and Interim Chief Operating Officer Mike Bondurant, each of whom has significant experience building, financing, operating and commercializing businesses within the cannabinoid industry. Management believes this experience provides the Company with a differentiated perspective as it evaluates opportunities across pharmaceutical, wellness and consumer cannabinoid markets.

Following the end of the second quarter, the Company began executing this strategy through a series of transactions and strategic initiatives intended to establish a diversified cannabinoid health sciences platform. These developments are discussed elsewhere in this Quarterly Report and in the Company's other filings with the Securities and Exchange Commission, including its Current Reports on Form 8-K.

Management remains focused on pursuing capital-efficient opportunities that leverage strategic partnerships, proprietary intellectual property and experienced leadership while seeking to create sustainable long-term value for shareholders.

On July 6, 2026, the Company acquired the exclusive worldwide rights to the pharmaceutical product marketed under the brand name CannEpil®, comprising the licensor’s proprietary compounded isolated cannabinoid formulation of CBD and THC isolates, for the treatment, prevention, management, or amelioration of drug-resistant epilepsy, refractory epilepsy, seizure disorders, and all related neurological conditions in humans. The Company subsequently expanded the license to include veterinary uses, and entered into an agreement with a third party collaborator in an effort to develop and commercialize the product under the expanded use.

The Company generated revenue in the first quarter of 2026 from sales of Chispo tequila to a single customer, however that customer has since terminated its contract with us. We are no longer seeking to market Chispo and are pursuing the development and commercialization of CannEpil® and other potential strategic transactions.

Reverse Stock Split. The Company recently filed a certificate of change to its Articles of Incorporation to effect a one-for-four reverse stock split of each of its issued and outstanding and authorized shares of Common Stock. The reverse stock split took effect at 4:30 pm ET on July 24, 2026. Share and per-share amounts throughout this quarterly report give effect to the reverse stock split. As a result of the Reverse Stock Split, every four shares of Common Stock issued and outstanding were converted into one share of Common Stock. All outstanding securities entitling their holders to purchase or otherwise acquire shares of Common Stock, including stock options, warrants and restricted stock, were adjusted as a result of the Reverse Stock Split, as required by the terms of those securities.

Gain on Extinguishment of debt

During the three months ended June 30, 2025 the Company recognized a Gain on Extinguishment of debt of $5.6 million compared to nil for the three months ending June 30, 2026. During the six months ending June 30, 2025, the Company recognized a Gain on Extinguishment of debt of $5.6 million compared to nil for the three months ended June 30, 2026.

As was disclosed in a press release and 8-K filed by the Company on June 3, 2026, the Company reported a going concern disclosure. Specifically, pursuant to Section 610(b) of the NYSE American Company Guide, the Company has reported that its audited consolidated financial statements for the fiscal year ended December 31, 2025, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2026, contain an audit opinion from its independent registered public accounting firm that includes an explanatory paragraph regarding the Company’s ability to continue as a going concern. We have sustained recurring losses and we have had working capital and stockholders’ equity deficits. These prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition. In addition, continued operations and our ability to continue as a going concern may be dependent on our ability to obtain additional financing in the near future and thereafter, and there are no assurances that such financing will be available to us at all or will be available in sufficient amounts or on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to generate additional funds in the future through sales of our products, financing or from other sources or transactions, we will exhaust our resources and will be unable to continue operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next 12 months.