MEHA 10-K & 10-Q changes, risk factors and insider trading
Functional Brands Inc. · OTC · Medicinal Chemicals & Botanical Products · CIK 1837254 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Comparison not available: Not available: fewer than two 10-K filings on EDGAR to compare (only one so far)..
What changed in the latest 10-Q
Risk Factors
New heading “Our common stock is no longer listed on a national securities exchange and is quoted on the OTC Markets, which may adversely affect the liquidity and market price of our common stock and our ability to raise capital.”
Largest changes
“Our common stock is no longer listed on a national securities exchange and is quoted on the OTC Markets, which may adversely affect the liquidity and market price of our common stock and our ability to raise capital.”see in full comparison
“Our common stock was removed from listing on The Nasdaq Stock Market and is currently traded on OTC Markets Group Inc. Securities quoted on the OTC Markets generally experience lower trading volumes, wider bid-ask spreads, greater price volatility and less consistent price discovery than securities listed on a national securities exchange. Quotation is dependent on the continued willingness of one or more market makers to publish quotations, and there is no assurance that an active trading market for our common stock will be maintained. …”see in full comparison
see in full comparisonAsOther than as set forth below, as of the date of this QuarterlyReport,Report there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Full comparison: every changed paragraph (3)
AsOther than as set forth below, as of the date of this Quarterly Report,Report there
have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K filed with the SEC. Any of these
factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk
factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Our common stock is no longer listed on a national securities exchange and is quoted on the OTC Markets, which may adversely affect the liquidity and market price of our common stock and our ability to raise capital.
Our common stock was removed from listing on The Nasdaq Stock Market and is currently traded on OTC Markets Group Inc. Securities quoted on the OTC Markets generally experience lower trading volumes, wider bid-ask spreads, greater price volatility and less consistent price discovery than securities listed on a national securities exchange. Quotation is dependent on the continued willingness of one or more market makers to publish quotations, and there is no assurance that an active trading market for our common stock will be maintained. Certain institutional investors, mutual funds and other market participants are subject to internal or contractual policies that prohibit or limit investment in securities that are not exchange-listed, and our common stock is no longer eligible for inclusion in indices that require exchange listing. In addition, our common stock may not be eligible for margin lending under Regulation T. Any of the foregoing may reduce demand for our common stock, depress its market price, and make it more difficult and more expensive for us to raise capital or to use our common stock as consideration in acquisitions or in settlement of obligations. These effects may be more pronounced given the substantial doubt about our ability to continue as a going concern described in Note 2 to our condensed consolidated financial statements.
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the Six months Ended June 30, 2026, to the Six Months Ended June 30, 2025”
New heading “Cost of goods sold”
New heading “Sales and marketing expenses”
New heading “General and administrative expenses”
New heading “Other income / (expenses)”
New heading “Events of Default under the Series C Convertible Preferred Shares and Senior Secured Convertible Notes”
Largest changes
“At June 30, 2026, the Company had cash of $352,142 and a working capital deficit, and used $943,457 of cash in operating activities during the six months then ended. …”see in full comparison
“On June 16, 2026, the Company’s common stock ceased trading on the Nasdaq Capital Market and began trading in the over-the-counter market, following a Nasdaq staff delisting determination issued June 8, 2026. The failure to maintain a listing on a national securities exchange constitutes a separate and independent event of default under the Notes.”see in full comparison
“Events of Default under the Series C Convertible Preferred Shares and Senior Secured Convertible Notes”see in full comparison
“As a result of the events of default, and effective from the applicable event-of-default date: the dividend rate on the Series C increased from 0% to 24% per annum, recognized as interest expense; the outstanding obligations under the Notes increased to 125% of the amounts otherwise outstanding under the default-premium provisions; interest on the Notes accrues at the 24% default rate; the Company became obligated for a monthly monitoring fee of $5,000; …”see in full comparison
“For the three months ended June 30, 2026, the Company recognized a loss of $967,942 on the change in fair value of its embedded conversion derivative liabilities (a loss of $942,568 for the six months ended June 30, 2026, reflecting a fair-value gain in the first quarter), included in other income (expense), net. In connection with the events of default, the Company also recognized default-rate interest expense on the Series C and the Notes, a default premium reflecting the increase in the Note obligations to 125%, and monitoring fees. …”see in full comparison
“On May 11, 2026 — prior to the events of default — the Company entered into a Conversion Price Reduction and Waiver Agreement with certain holders of the Series C and the Notes. The agreement reduced the conversion price applicable to the Series C during the fixed conversion period to $0.1636 per share, superseding the previously applicable tiered fixed conversion prices in their entirety, and provided that any unpaid cash consideration under the exchange documents would be capitalized as additional principal under the applicable holders’ Notes. …”see in full comparison
Full comparison: every changed paragraph (54)
We have based these forward-looking statements
largely on our current expectations and projections about our business, the industry in which we operate, and financial trends that we
believe may affect our business, financial condition, results of operations, and prospects, but these forward-looking statements are not
guarantees of future performance or development. These statements are based upon information available to us as of the date of this report,
and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and
our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available
relevant information. These statements are inherently uncertainuncertain, and you are cautioned not to unduly rely upon these statements. Except
as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this report, whether
as a result of any new information, future events, or otherwise.
Our Company operates in the nutraceutical supplement
industry. We are a manufacturer and distributor of supplements in categories such as pain, energy, prenatal, general health, bone and
joint, gastro, immunity, cardiac, detox, mental clarity and focus, sleep, prenatal and urinary. Our end markets focus on end-consumers
through different channels that include pharmacies, U.S. wholesalers, international distributors and direct-to-consumers sales. Our products
are sold over-the-counter,over the-counter, and consumers do not need a prescription to purchase our products.
Comparison of the Three Months Ended March
31,June 30, 2026, to the Three Months Ended MarchJune 31,30, 2025
Net Revenue
Net revenue for the three months ended MarchJune 31,
30, 2026 was $1,645,524$1,870,548 compared to $1,590,256$1,832,532 for the three months ended MarchJune 31,30, 2025 representing an increase of approximately 3%.2%. This
increase of $55,268$38,016 in net revenue was primarily due to the increase in the demand from our direct-to-consumer sales channel.channel and sales for contract manufacturing.
Cost of goods sold for the three months ended
March 31,June 30, 2026 was $684,391$750,207 compared to $723,492$864,437 for the three months ended MarchJune 31,30, 2025 representing a decrease of approximately 5%.
13%. This decrease of $39,101$114,230 in cost of goods was primarily due to receivingthe betterreduction termsin onpayroll rawand materials.employee benefits of approximately $113,358, a decrease of $26,012 due to products primarily sold for contract manufacturing in 2025, a decrease in product testing of $8,415, and an increase in inventory shrinkage and obsolescence of $32,561.
Gross profit for the three months ended June 30, 2026 was $1,120,341 compared to $968,095 for the three months ended June 30, 2025 representing an increase of 16%. This increase of $152,246 was primarily due to an increase in the demand from our direct-to-consumer sales channel and sales for contract manufacturing of $38,016, and a decrease in cost of goods sold due to the reduction in payroll and employee benefits of approximately $113,358, a decrease of $26,012 due to products primarily sold for contract manufacturing in 2025, a decrease in product testing of $8,415, and an increase in inventory shrinkage and obsolescence of $32,561.
Gross profit for the three months ended March
31, 2026 was $961,133 compared to 866,764 representing an increase of 11%. This increase of $94,369 was primarily due to the increase
in demand from direct to consumer sales channel and better terms on our raw materials.
Sales and marketing expenses for the three months
ended MarchJune 31,30, 2026, waswere $263,707$340,384 compared to $178,630$165,039 for the three months ended MarchJune 31,30, 2025, representing an increase of approximately
48%. 106%. This increase of $85,077$175,345 was primarily due to thean increase in amazonAmazon referral fees of $97,245, an increase in MPG fees of $78,540, an increase in advertising and commissions.promotional expenses of $48,393, and a decrease in payroll of $50,100.
General and administrative expenses for the three
months ended MarchJune 31,30, 2026 waswere $1,380,231,$2,100,355, compared to $720,234$958,493 for the three months ended MarchJune 31,30, 2025, representing an increase of
approximately 92%.119%. This increase of $659,997$1,141,862 was primarily attributable to an increase in payroll of approximately $200,000,$198,458, an increase
in professional fees of $300,000,$668,023, an increase in amazonAmazon seller fees of approximately $69,000,$79,980, an increase in stock-based compensation of $57,233, an increase in insurance premiums of $50,000,
and$47,877, an increase in of $30,000 in public company fees.related expenses of $140,876, and a decrease in settlement expense of $50,629.
Other income /expense for the three months ended
March 31,June 30, 2026 waswere a negative $6,307,984$1,310,150 compared to a negative of $94,682$70,619 for the three monthmonths ended MarchJune 31,30, 2025, representing an increase
of approximately 6562%.1755%. This increase of $6,213,302$1,239,531 was primarily due to a change of fair value of derivative liability of $967,942, loss on default of convertible note $198,705, increase in other expenses of $50,000, and a reduction in interest expense of $69,290, change of fair value
of derivative liability of $25,374, and a loss on issuance of preferred stock of $6,310,464.$26,789.
Comparison of the Six months Ended June 30, 2026, to the Six Months Ended June 30, 2025
Net revenue
Net revenue for the six months ended June 30, 2026 was $3,516,072 compared to $3,422,788 for the six months ended June 30, 2025 representing an increase of approximately 3%. This increase of $93,284 in net revenue was primarily due to the increase in the demand from our direct-to-consumer sales channel and sales for contract manufacturing.
Cost of goods sold
Cost of goods sold for the six months ended June 30, 2026 was $1,434,598 compared to $1,587,929 for the six months ended June 30, 2025 representing a decrease of approximately 10%. This decrease of $153,331 in cost of goods sold was primarily due to the reduction in payroll and employee benefits of approximately $100,675 a decrease of $70,597 due to products primarily sold for contract manufacturing in 2025, a decrease in product testing of $18,777, and an increase in inventory shrinkage and obsolescence of $40,079.
Gross profit
Gross profit for the six months ended June 30, 2026 was $2,081,474 compared to $1,834,859 for the six months ended June 30, 2025 representing an increase of 13%. This increase of $246,615 was primarily due an increase in the demand from our direct-to-consumer sales channel and sales for contract manufacturing of $38,016, and a decrease in cost of goods sold was due to the reduction in payroll and employee benefits of approximately $100,675 a decrease of $70,597 due to products primarily sold for contract manufacturing in 2025, a decrease in product testing of $18,777, and an increase in inventory shrinkage and obsolescence of $40,079.
Sales and marketing expenses
Sales and marketing expenses for the six months ended June 30, 2026, were $604,091 compared to $343,669 for the six months ended June 30, 2025, representing an increase of approximately 76%. This increase of $260,422 was primarily due to an increase in Amazon referral fees of $170,927, an increase in MPG fees of $136,530, an increase in advertising and promotional expenses of $7,680, and a decrease in payroll fees of $51,896.
General and administrative expenses
General and administrative expenses for the six months ended June 30, 2026 were $3,480,586 compared to $1,678,727 for the six months ended June 30, 2025, representing an increase of approximately 107%. This increase of $1,801,859 was primarily attributable to an increase in payroll of approximately $387,223, an increase in professional fees of $1,097,138, an increase in Amazon seller fees of approximately $141,269, increase in insurance premiums of 96,993, and an increase in public company related expenses of $169,398, increase in travel of $24,961, decrease in settlement expenses of $50,629, and a decrease in stock-based compensation of $72,381.
Other income / (expenses)
Other expense for the six months ended June 30, 2026, were $7,618,134 compared to $165,301 for the six months ended June 30, 2025, representing an increase of approximately 4509%. This increase of $7,452,833 was primarily due to a loss on issuance of preferred stock of $6,310,464, a change of fair value of derivative liability of $942,568, a loss on default of convertible note of $198,705, an increase in other expense of $50,000 and a reduction in interest expense of $42,501.
Sources and Uses of Cash for the threeSix months
Months ended MarchJune 31,30, 2026 and 2025
Use of cash
The change in net cash used in financing activities
was primarily the result of the payment for payable acquisition as well as line of credit repayment.
During the threesix months ended MarchJune 31,30, 2026,
we used $424,559$943,457 in operating activities as a result of our net loss of $6,990,789,$9,621,337, $123,288an increase of $200,885 in amortization of right-of-use and intangible assets, an increase of $437,973 in stock-based compensation, offset bya change
in fair value of derivative liabilities of $25,374,$942,568, loss on issuance of preferred stock of $6,310,464, dividends of $77,050, and net changes
in operating assets and liabilities of $130,909.$657,314.
During the threesix months ended MarchJune 31,30, 2025,
our operating activities provided $175,993$647,757 of cash as a result of our net loss of $126,782,$352,838, offset primarily by stock-based$185,577 compensation
of $252,905,in amortization of right-of-use and intangible assetsassets, $510,356 in stock-based compensation, issuance of $91,887.shares and warrants of $95,893, and net changes in operating assets and liabilities of $(87,876).$188,622.
During the threesix months ended MarchJune 31,30, 2026,
our financing activities used $1,224,170$1,431,097 of cash proceeds resulting primarily from $450,000 in repayment of liability conditional timing,
$149,137 $250,808 in repayment of loans, $114,262 in dividends, and $616,027 for buyback of series A preferred shares, During the threesix months ended MarchJune 31,30, 2025,
we used $174,004$601,717 in financing activities primarily as a result of deferred offering costs of $127,775,$540,061, proceeds from loans and line of credit of $173,379, repayment of loans for $50,177
$120,036 and proceedspayments fromfor linepayable for acquisition of credit for 48,947.$114,999.
On May 11, 2026, the Companywe entered into a binding
letter of intent with a third partyBullionFx regarding a proposed acquisition of certain intellectual property and related assets.
Under the terms of such letter of intent, the
proposed consideration for the acquired assets is expected to consist of convertible preferred stock of the Company with an aggregate
stated value of approximately $142.9 million, subject to independent third-party valuation and verification. The preferred stock iswas expected
to automatically convert into shares of the Company’sour common stock upon receipt of the required stockholder approval. Based on the
capitalization assumptions set forth in the letter of intent, following the closing of the proposed transaction and prior to giving effect
to any other equity financing, the current stockholders of the Company would own approximately 1.72% of the combined surviving company
and the seller would own approximately 98.28% of the combined surviving company.
On June 29, 2026 we received a letter from BullionFX terminating the Letter of Intent.
If the proposed transaction is not consummated,
the Company may not obtain the strategic assets, anticipated financing opportunities, business expansion, or other benefits expected from
the transaction. As a result, the Company would need to continue to rely on its existing operations, available cash resources, debt or
equity financing alternatives, expense reductions, or other strategic transactions to fund its obligations and execute its business plan.
There can be no assurance that such alternatives would be available on acceptable terms, or at all.
During the threesix months ended MarchJune 31,30, 2025 the
Company entered into multiple lines of credit agreements with third parties to finance invoices to satisfy multiple vendors of which were
repaid during the threesix months ended MarchJune 31,30, 2026.
The Company periodically reviews the value of
items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions, including forecasted
demand compared to quantities on hand, as well as other factors such as potential excess or aged inventories based on product shelf life,
and other factors that affect inventory obsolescence. As of March 31, 2026, the allowance for inventory obsolescence decreased by $53,855
resulting in a reserve of $10,972. As of December 31, 20252025, the inventory reserve was $64,827.$10,972.
As of June 30, 2026, the allowance for inventory obsolescence increased by $2,705 resulting in a reserve of $13,048.
Long-lived assets consist primarily of property
and equipment. Long-lived assets are tested for impairment when events and circumstances indicate the assets might be impaired by first
comparing the estimated future undiscounted cash flows of the asset or asset group to the carrying value. If the carrying value exceeds
the estimated future undiscounted cash flows, an impairment loss is recognized based on the amount that the carrying value exceeds the
fair value of the asset or asset group. The Company did not recognize impairment losses during the yearssix months ended MarchJune 31,30, 2026, and 2024.2025.
During the three and six months ended MarchJune 31,30, 2026,
the Company primarily applied fair value measurement to equity-linked financing instruments (warrants and stock issued for services),
and historically, to convertible debt and business combination accounting. The majority of the Company’s remaining financial instruments
are short-term or bear market-rate interest and therefore approximate fair value.
Events of Default under the Series C Convertible Preferred Shares and Senior Secured Convertible Notes
Overview
During the quarter ended June 30, 2026, the Company was in default under its Series C Convertible Preferred Shares (the “Series C”) and its Senior Secured Convertible Notes (the “Notes”), each issued in the March 9, 2026 exchange transaction. The events of default arose from two independent causes: the Company’s failure to commence the mandatory redemption of the Series C, effective June 8, 2026, and the loss of the Company’s Nasdaq listing on June 16, 2026. The effects of the events of default are reflected in the accompanying financial statements.
Conversion price reduction (May 2026)
On May 11, 2026 — prior to the events of default — the Company entered into a Conversion Price Reduction and Waiver Agreement with certain holders of the Series C and the Notes. The agreement reduced the conversion price applicable to the Series C during the fixed conversion period to $0.1636 per share, superseding the previously applicable tiered fixed conversion prices in their entirety, and provided that any unpaid cash consideration under the exchange documents would be capitalized as additional principal under the applicable holders’ Notes. During the quarter, holders converted Series C with an aggregate stated value of $3,268,000 into common stock at the reduced conversion price, reducing the outstanding stated value of the Series C to $2,764,160 at June 30, 2026 and increasing the number of common shares outstanding.
Mandatory redemption
The Series C is subject to a mandatory redemption (forced amortization) provision requiring the Company to begin redeeming the Series C in equal monthly installments of $230,347 beginning on or about June 8, 2026, payable at the Company’s election in cash monthly or in shares of common stock weekly, subject in the case of share settlement to satisfaction of the applicable equity conditions. The Company did not commence the mandatory redemption and made no redemption installment during the quarter or through the date of this report. The Company concluded that this failure constitutes an event of default, effective June 8, 2026.
Loss of Nasdaq listing
On June 16, 2026, the Company’s common stock ceased trading on the Nasdaq Capital Market and began trading in the over-the-counter market, following a Nasdaq staff delisting determination issued June 8, 2026. The failure to maintain a listing on a national securities exchange constitutes a separate and independent event of default under the Notes.
Effect on the Company’s obligations
As a result of the events of default, and effective from the applicable event-of-default date: the dividend rate on the Series C increased from 0% to 24% per annum, recognized as interest expense; the outstanding obligations under the Notes increased to 125% of the amounts otherwise outstanding under the default-premium provisions; interest on the Notes accrues at the 24% default rate; the Company became obligated for a monthly monitoring fee of $5,000; and the conversion price applicable to the Series C and the Notes became the alternate conversion price (85% of the lowest trading price over a ten-trading-day lookback), which increases the number of common shares issuable on conversion and the resulting potential dilution to existing stockholders. Because the events of default give the holders the right to accelerate repayment, the Notes, which were otherwise scheduled to begin amortizing more than twelve months after the balance sheet date, have been reclassified from long-term to current liabilities as of June 30, 2026. The outstanding stated value of the Series C is likewise classified as a current liability.
Impact on results of operations
For the three months ended June 30, 2026, the Company recognized a loss of $967,942 on the change in fair value of its embedded conversion derivative liabilities (a loss of $942,568 for the six months ended June 30, 2026, reflecting a fair-value gain in the first quarter), included in other income (expense), net. In connection with the events of default, the Company also recognized default-rate interest expense on the Series C and the Notes, a default premium reflecting the increase in the Note obligations to 125%, and monitoring fees. For the six months ended June 30, 2026, other expense also included a loss of $6,310,464 on the issuance of preferred stock in the March 2026 exchange. General and administrative expenses increased approximately 119% over the prior-year quarter, driven principally by higher payroll, professional fees, and marketplace selling fees. The Company reported a net loss of $2,630,548 for the six months ended June 30, 2026.
Liquidity and capital resources
At June 30, 2026, the Company had cash of $352,142 and a working capital deficit, and used $943,457 of cash in operating activities during the six months then ended. The events of default, the resulting acceleration rights and reclassification of the Notes to current liabilities, the mandatory redemption of the remaining $2,764,160 of Series C stated value, and the increased default-rate interest and premium each exceed the Company’s available cash and cash generated from operations, and the Company does not currently have committed financing sufficient to satisfy these obligations as they come due. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to settle redemption and amortization obligations in shares of common stock is constrained by the failure of the applicable equity conditions following the events of default and by limitations on issuances that would require stockholder approval; to the extent obligations are settled in shares at the alternate conversion price, existing stockholders would experience substantial dilution. The Company is in discussions with the holders regarding the terms of the instruments and is evaluating available alternatives, which may include waivers, forbearance, or amendments, restructuring or refinancing, and raising additional capital. As of the date of this report, no holder had accelerated the Notes or the Series C. There can be no assurance that any such alternative will be available on acceptable terms, or at all. See the notes to the financial statements for additional information regarding the events of default and the Company’s going-concern assessment.
MEHA insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. 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.
No Form 4 stock transactions in this period.
Well-known investors holding MEHA (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 42,459 | $6.8K | — | Sold out |