# EDGAR Filing Document

**Accession Number:** 0001837254
**File Stem:** 0001213900-25-075072
**Filing Date:** 2025-8
**Character Count:** 1177127
**Document Hash:** d24b9db4319ffbf4c3800780690ae3ee
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-25-075072.hdr.sgml**: 20250812

**ACCESSION NUMBER**: 0001213900-25-075072

**CONFORMED SUBMISSION TYPE**: S-1/A

**PUBLIC DOCUMENT COUNT**: 34

**FILED AS OF DATE**: 20250812

**DATE AS OF CHANGE**: 20250812

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Functional Brands Inc.
- **CENTRAL INDEX KEY:** 0001837254
- **STANDARD INDUSTRIAL CLASSIFICATION:** MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 854094332
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** S-1/A
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-284180
- **FILM NUMBER:** 251207786

**BUSINESS ADDRESS:**
- **STREET 1:** 8605 SANTA MONICA BLVD
- **CITY:** WEST HOLLYWOOD
- **STATE:** CA
- **ZIP:** 90069
- **BUSINESS PHONE:** 7789383367

**MAIL ADDRESS:**
- **STREET 1:** 8605 SANTA MONICA BLVD
- **CITY:** WEST HOLLYWOOD
- **STATE:** CA
- **ZIP:** 90069

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** HT Naturals Corp.
- **DATE OF NAME CHANGE:** 20201218

As filed with the Securities and Exchange Commission on August 12, 2025.

**Registration No. 333-284180**

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 **Amendment No. 9**

**to**

**FORM S-1**

**REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933**

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| |
|:---|
| &nbsp;&nbsp;**FUNCTIONAL BRANDS INC.**<br> (formerly HT Naturals Inc.) |
| &nbsp;&nbsp;**(Exact name of registrant as specified in its charter)** |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Delaware** | &nbsp;&nbsp;**325411** | &nbsp;&nbsp;**85-4094332** |
| &nbsp;&nbsp;(State or other jurisdiction of<br> incorporation or organization) | &nbsp;&nbsp;(Primary Standard Industrial<br> Classification Code Number) | &nbsp;&nbsp;(I.R.S. Employer<br> Identification Number) |

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**6400 SW Rosewood Street**

**Lake Oswego, Oregon 97035**

**(800) 245-8282**

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

**Eric Gripentrog** 

**Chief Executive Officer**

**6400 SW Rosewood Street**

**Lake Oswego, Oregon 97035**

**(800) 245-8282**

(Names, address, including zip code, and telephone number, including area code, of agent for service)

***Copies to:***

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| | |
|:---|:---|
| <br> **Ross D. Carmel, Esq.**<br> **Barry P. Biggar, Esq.** <br> **Sichenzia Ross Ference Carmel LLP** <br> **1185 Avenue of the Americas, 31<sup>st</sup> Floor**<br> **New York, NY 10036**<br> **(212) 930-9700** | **Eric Gripentrog**<br> **Tariq Rahim**<br> **Functional Brands Inc.**<br> **6400 SW Rosewood Street**<br> **Lake Oswego, Oregon 97035**<br> **(800) 245-8282** |

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Approximate date of commencement of proposed sale to the public: **As soon as practicable after this Registration Statement becomes effective.**

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐

**The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.**

**The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.**

**SUBJECT TO COMPLETION, DATED AUGUST 12, 2025**

**PRELIMINARY PROSPECTUS**

**FUNCTIONAL BRANDS INC.** 

 **17,883,693 Shares of Common Stock**

This prospectus relates to the registration of the resale of up to 17,883,693 shares of our common stock by our stockholders identified in this prospectus, or the Registered Stockholders, in connection with our direct listing, or the Direct Listing, on the Nasdaq Capital Market, or Nasdaq. Unlike an initial public offering, the resale by the Registered Stockholders is not being underwritten on a firm commitment basis by any investment bank. The Registered Stockholders may, or may not, elect to sell their shares of common stock covered by this prospectus, as and to the extent they may determine. The Registered Stockholders may offer, sell or distribute all or a portion of the shares of common stock hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not be involved in the price setting process. If the Registered Stockholders choose to sell their shares of common stock, we will not receive any proceeds from the sale of such shares.

We have engaged Joseph Gunnar & Co., LLC, as our financial advisor or Advisor, to advise and assist us with respect to certain matters relating to the Direct Listing. We previously engaged Joseph Gunnar& Co., LLC, to act as placement agent in a private placement transaction for the sale of our Series A Convertible Preferred Stock with a stated value of $10,000,000 for a funding amount of $8,000,000, together with a bonus Series B Convertible Preferred Stock with a stated value of $8,000,000. The aggregate price per share attributable to Series A and Series B Convertible Preferred Stock is $8.00. The private placement documents were executed and delivered by all the parties thereto on July 22, 2025. Funding of the purchase of such preferred stock is conditioned upon completion of the Direct Listing. All shares of our common stock underlying such convertible preferred stock are being registered by means of this registration statement. Unless otherwise indicated, all information regarding the number of shares of our common stock outstanding as of the date of this prospectus, the Registered Stockholders and the number of shares of our common stock that may be sold pursuant to this prospectus gives effect to such issuance. The price of our securities sold in the private placement transaction may bear little or no relation to the trading price of our common stock at or subsequent to the opening of trading on Nasdaq. For more information on the private placement and the preferred stock to be issued thereunder, see "*Plan of Distribution"* beginning on page 127 of this prospectus.

No public market for our common stock currently exists, and our shares of common stock have a limited history of trading in private transactions. From inception through December 31, 2024, we raised an aggregate of approximately $3,237,683 in gross proceeds from the sales of our stock at an average price of $1.28 per share.

Recent purchase prices of our common stock in private transactions may have little or no relation to the opening public price of our shares of common stock on Nasdaq or the subsequent trading price of our shares of common stock on Nasdaq. Further, the listing of our common stock on Nasdaq, without a firm-commitment underwritten offering, is a novel method for commencing public trading in shares of our common stock and, consequently, the trading volume and price of shares of our common stock may be more volatile than if shares of our common stock were initially listed in connection with an initial public offering underwritten on a firm-commitment basis.

On the day that our shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy and sell orders and will begin to continuously generate the indicative Current Reference Price (as defined below) on the basis of such accepted orders. The Current Reference Price is calculated each second and, during a 10-minute "Display Only" period, is disseminated, along with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following the "Display Only" period, a "Pre-Launch" period begins, during which our Advisor, in its capacity as our financial advisor, must notify Nasdaq that our shares are "ready to trade." Once the Advisor has notified Nasdaq that our shares of common stock are ready to trade, Nasdaq will confirm the Current Reference Price for our shares of common stock, in accordance with Nasdaq rules. If the Advisor then approves proceeding at the Current Reference Price, the applicable orders that have been entered will be executed at such price and regular trading of our shares of common stock on Nasdaq will commence, subject to Nasdaq conducting validation checks in accordance with Nasdaq rules. Under Nasdaq rules, the "Current Reference Price" means: (i) the single price at which the maximum number of orders to buy or sell can be matched; (ii) if there is more than one price at which the maximum number of orders to buy or sell can be matched, then it is the price that minimizes the imbalance between orders to buy or sell (i.e. minimizes the number of shares that would remain unmatched at such price); (iii) if more than one price exists under (ii), then it is the entered price (i.e. the specified price entered in an order by a customer to buy or sell) at which our shares of common stock will remain unmatched (i.e. will not be bought or sold); and (iv) if more than one price exists under (iii), a price determined by Nasdaq in consultation with the Advisor in its capacity as our financial advisor. In the event that more than one price exists under (iii), the Advisor will exercise any consultation rights only to the extent that it can do so consistent with the anti-manipulation provisions of the federal securities laws, including Regulation M, or applicable relief granted thereunder; in connection therewith. The Registered Stockholders will not be involved in Nasdaq's price-setting mechanism, including any decision to delay or proceed with trading, nor will they control or influence the Advisor in carrying out its role as a financial adviser. The Advisor will determine when our shares of common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations of volume, timing and price. In particular, the Advisor will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. For more information, see "*Plan of Distribution*" beginning on page 127 of this prospectus.

We have applied to list our common stock on the Nasdaq Capital Market under the symbol "MEHA*.*" We expect our common stock to begin trading on Nasdaq on or about August__, 2025.

If our Nasdaq application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on Nasdaq, we will not complete this Direct Listing. This listing is a condition to the offering. No assurance can be given that our Nasdaq application will be approved and that our common stock will ever be listed on Nasdaq. If our listing application is not approved by Nasdaq, we will not be able to consummate the offering and we will terminate this Direct Listing.

**We are an "emerging growth company" and a "smaller reporting company" as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and may elect to do so in future filings. See "*Prospectus Summary—Implications of Being an Emerging Growth Company and a Smaller Reporting Company*."**

**Investing in our common stock involves a high degree of risk. See the section of this prospectus entitled "Risk Factors" beginning on page 14 for a discussion of information that should be considered in connection with an investment in our common stock.**

**Neither the United States Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.**

 **Prospectus dated ___, 2025.**

**Table of Contents**

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| | |
|:---|:---|
|  | **Page** |
| [About this Prospectus](#a_001) | ii |
| [Prospectus Summary](#A_002) | 1 |
| [Risk Factors](#A_003) | 14 |
| [Cautionary Statement Regarding Forward-Looking Statements](#A_004) | 38 |
| [Use of Proceeds](#A_005) | 39 |
| [Dividend Policy](#A_006) | 40 |
| [Capitalization](#A_007) | 41 |
| [Management's Discussion and Analysis of Financial Condition and Results of Operations](#A_008) | 42 |
| [Business](#A_009) | 54 |
| [Management](#A_010) | 84 |
| [Executive and Director Compensation](#A_011) | 89 |
| [Certain Relationships and Related Party Transactions](#A_012) | 91 |
| [Principal and Registered Stockholders](#A_013) | 92 |
| [Description of Securities](#A_014) | 120 |
| [Shares Eligible for Future Sale](#A_015) | 123 |
| [Material U.S. Federal Tax Considerations for Non-U.S. Holders of Our Common Stock](#A_016) | 124 |
| [Plan of Distribution](#a_017) | 127 |
| [Legal Matters](#A_018) | 130 |
| [Interests of Named Experts and Counsel](#A_018a) | 130 |
| [Experts](#A_019) | 130 |
| [Where You Can Find More Information](#A_020) | 130 |

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**You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. Neither we nor any of the Registered Stockholders have authorized anyone to provide any information different from, or in addition to, the information contained in this prospectus and in any free writing prospectuses we have prepared or that have been prepared on our behalf or to which we have referred you. Neither we nor any of the Registered Stockholders take responsibility for, and can provide no assurance as to, the reliability of any other information that others may give you. The Registered Stockholders are offering to sell, and seeking offers to buy, shares of their common stock only under the circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since such date.**

**For investors outside the United States: Neither we nor any of the Registered Stockholders have done anything that would permit the use of or possession or distribution of this prospectus or any related free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock by the Registered Stockholders and the distribution of this prospectus outside the United States.**

**TRADEMARKS, TRADE NAMES AND SERVICE MARKS**

We use various trademarks, trade names and service marks in our business, including "*Biofilm Defense," "Flura," "Isogest;" "HempTown," "Nu-Thera," "HT Naturals," "HempTown Naturals," "Ultra Tested," "Functional Brands," and "Kirkman*," among others. For convenience, we may not include the SM, <sup>®</sup> or <sup>™</sup> symbols, but such omission is not meant to indicate that we would not protect our intellectual property rights to the fullest extent allowed by law. Any other trademarks, trade names or service marks referred to in this prospectus are the property of their respective owners.

**INDUSTRY AND MARKET DATA**

This prospectus includes industry data and forecasts that we obtained from industry publications and surveys, as well as public filings and internal company sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of the included information. Statements as to our ranking, market position and market estimates are based on management's estimates and assumptions about our markets and our internal research. We have not independently verified such third-party information, nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of such information contained in this prospectus. Such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements."

Our board of directors approved a 1-for-18.338622 reverse stock split of all classes of our issued and outstanding capital stock (the "Reverse Stock Split"). On January 22, 2025, we filed a certificate of amendment of certificate of incorporation with the State of Delaware to immediately effect the Reverse Stock Split. All share and per share information in this prospectus are presented after giving effect to the Reverse Stock Split retrospectively for all periods presented, unless otherwise stated or the context otherwise requires.

i

**<u>ABOUT THIS PROSPECTUS</u>**

This prospectus is a part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission, or the SEC, using a "shelf" registration or continuous offering process. Under this process, the Registered Stockholders may, from time to time, sell the common stock covered by this prospectus in the manner described in the section titled "*Plan of Distribution*." Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled "*Plan of Distribution*". You may obtain this information without charge by following the instructions under the "*Where You Can Find Additional Information*" section of this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our common stock.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or will be filed as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described under "*Where You Can Find Additional Information*."

ii

**PROSPECTUS SUMMARY**

*This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our securities. You should carefully read the entire prospectus, including the risks associated with an investment in our company discussed in the "Risk Factors" section of this prospectus, before making an investment decision. Some of the statements in this prospectus are forward-looking statements. See the section titled "Cautionary Statement Regarding Forward-Looking Statements."*

Our company consists of two primary legal entities: Functional Brands Inc. (formerly HT Naturals Inc.), a Delaware corporation ("Functional Brands") and HTO Nevada Inc., a Delaware corporation dba Kirkman ("HTO Nevada"). HTO Nevada was acquired by Functional Brands through a corporate restructuring consummated on May 19, 2023. Functional Brands was previously a majority owned subsidiary of Hemptown Organics Corp., a British Columbia corporation ("HOC"). On August 5, 2025, HOC distributed to holders of its common stock 1,240,665 shares of Functional Brands common stock as a return on paid in capital. Pursuant to exchange agreements with holders of certain debentures of HOC, such holders exchanged on July 11, 2025 all of their debentures for 3,576,033 shares of common stock of Functional Brands held by HOC .All such shares so distributed or exchanged are being registered pursuant to this registration statement. As of August 11, 2025, Functional Brands ceased to be deemed a controlled company. As of the date of this prospectus, HOC holds no shares of Functional Brands. HTO Nevada operates in the nutraceutical and supplement industry through the Kirkman entities as a manufacturer and distributor of health supplements in different categories further described in this prospectus. Functional Brands Inc. operates certain hemp derived products in different categories further described in this prospectus. HOC is a holding company with various interests in nutraceutical manufacturing and federally legal industrial hemp products, HOC owns intellectual property, including brands and pending trademarks, as well as other intangible assets, such as "Hemptown", "Hemptown USA" Brand and logo pending trademark. Functional Brands has a perpetual license to use and operate the HOC brand and logo. In this prospectus, "Functional Brands," "HempTown," "HTO Nevada Inc," "Kirkman," "we," "us," "our," "our company," and similar references refer to Functional Brands Inc.

**OUR COMPANY**

**Overview**

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 & focus, sleep, prenatal and urinary. Our end markets focus on end-consumers through different channels that include pharmacies, US wholesalers, international distributors and direct-to-consumers sales. Our products are sold over the counter, and consumers do not need a prescription to purchase our products. Our products are not approved by the FDA. Our company also operates in the hemp industry as a retailer of hemp derived products in categories such as capsules, cigarettes, gummies, and tinctures with a commercial end market, and end-consumers.

**Our Products**

 

*Kirkman Brand*

Our "Kirkman" brand products are manufactured in our FDA registered, cGMP certified facility in Lake Oswego, Oregon. Established in 1949, Kirkman specializes in manufacturing nutritional supplements and is one of the oldest companies dedicated to serving the special needs community.

Our Kirkman brand offers more than 150 products, including probiotics, enzymes, vitamins, multivitamins, amino acids, antioxidants, immune support, essential fatty acids, preconception, prenatal supplements, personal care products and other specialty products. Kirkman treats patients with autism spectrum disorders and special dietary needs through an established network of over 2,000 doctors in over 40 countries. Our Kirkman brand operates in 95% of the major subsegments in the supplement industry. Kirkman has a long-standing loyal customer and consumer base due to the rigorous testing of products in compliance with FDA requirements. Kirkman has been endorsed by various businesses and celebrities, including the famous and original Shark Tank member, Kevin Harrington.

<u>Digestive enzymes</u>: Over the counter oral digestive enzyme supplements are a combination of proteases, which aid protein digestion; lipases, which aid in fat digestion; and amylases, which aid in carbohydrate digestion. These may be prescribed by a doctor in some cases, when the pancreas does not make enough digestive enzymes on its own. People are increasingly taking over the counter ("OTC") digestive enzymes in lower doses to support general gut health.

<u>Essential fatty acids</u>: Also called omega-3 fatty acids, essential fatty acids are important digestive chemicals that the body cannot make on its own.

Our products under the Kirkman Brand include, but are not limited to, the following:

● Supplements for Autism; ● Essential Fatty Acids;

● Oxytocin; ● Vitamin B12;

● Vitamin B6 and Magnesium; ● Glutathione;

● Melatonin; ● Functional Mushrooms;

● Probiotics; ● Multivitamins and Minerals; and

● Digestive Enzymes; ● Antioxidants.

● Amino Acids;

 

*P2i (prenatal) Brand*

We launched a certified prenatal vitamin in April 2024 for expectant mothers under the P2i by Kirkman brand. These vitamins have been specially formulated by our company to provide essential nutrients for both the mother and the developing fetus. The International Federation of Gynecology and Obstetrics ("FIGO") published a position statement about toxic chemicals and environmental contaminants in prenatal vitamins. FIGO's recommendation from the October 2023 position statement highlights that patients should only consume, and clinicians should only prescribe, vitamins and supplements that have been independently assessed to make certain they do not contain contaminants. Manufacturers should be held to a standard of production that assures safety and minimizes contaminants and certification of all prenatal vitamins becomes the standard of care. The FIGO Committee report on Climate Change and Toxic Environmental Exposures brought together global scientists to review reputable reference sources for chemicals that have the potential to impact maternal and newborn health, including the USA Environmental Protection Agency, the European Union, and the California EPA.

The group of experts recommended several approaches, including:

&nbsp;&nbsp;&nbsp;&nbsp;1. creating
 a list of toxic chemicals and contaminants that should be screened for in Prenatal Vitamins
 and reduced to de minimis standards; and

&nbsp;&nbsp;&nbsp;&nbsp;2. conducting
 assays of existing vitamins to assess ongoing risk to maternal and newborn health. This work
 can extend to personal exposure risk by offering women testing for the presence of potentially
 toxic environmental chemicals. Mass Spectrometry currently offers the most comprehensive
 measurement.

This first publication of a list of toxic chemicals and contaminants represents the most comprehensive testing available at present but does not purport to identify or eliminate all potential sources of toxicity.

We are currently the only certified prenatal vitamin in the market that aligns to the FIGO position statement. We have formulated and produced a prenatal vitamin called P2i by Kirkman. There are approximately 3.6 million pregnancies alone in the United States (https://www.cdc.gov/nchs/fastats/births.htm) and the initial market focus for this product will be the United States with the expectation to expand globally since FIGO's position statement reaches all countries.

The P2i by Kirkman prenatal vitamin has been certified by The FORUM, a nonprofit 501(c)(3) organization dedicated to promoting low-toxicity standards for prenatal healthy products. The FORUM operates under a Memorandum of Understanding (MOU) with FIGO, a globally recognized organization of obstetricians and gynecologists. This MOU establishes a shared objective to reduce environmental toxicity in prenatal products.

● The certification process involves rigorous testing and evaluation to ensure compliance with The FORUM's low-toxicity standards, which align with FIGO's objectives for maternal and fetal health. These standards include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Analysis
 of 24 Heavy Metals, ensuring levels are below stringent safety thresholds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Testing
 for the presence of 120 toxic chemicals, such as pesticides and endocrine disruptors, with
 strict limits to prevent potential harm

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Utilization
 of ISO 17025-accredited laboratories for all testing to ensure reliability and reproducibility
 of results

● Purity Labs, an ISO 17025-accredited laboratory, as directed by The FORUM, conducted testing, which confirmed the product's compliance with The FORUM's criteria. Based on this testing, The FORUM issued its certification, indicating that Kirkman's prenatal vitamin meets its standards for low toxicity and safety.

*HempTown Naturals Brand*

All HempTown Naturals products are produced and sold in compliance with the US 2018 Farm Bill and the US Agricultural Act of 2014. Cannabidiol ("CBD") and cannabigerol ("CBG") are cannabinoids present in the cannabis plant. Both CBD and CBG are used in hemp derived products. These products are believed to help in treating certain neurodegenerative and inflammatory conditions.<sup>1</sup>

CBD

CBD is the second most prevalent ingredient in cannabis. While CBD is an integral component of medical marijuana, it is derived directly from the hemp plant, both of which are the same species of Cannabis sativa L. One of the hundreds of components of Cannabis sativa L., CBD does not cause a "high" by itself. According to a report from the World Health Organization, "In humans, CBD exhibits no effects indicative of any abuse or dependence potential. To date, there is no evidence of public health related products associated with the use of pure CBD."<sup>2</sup>

As reported by Forbes Health, CBD is applied topically or consumed through smoke inhalation or edible consumption. CBD interacts with neuroreceptors in your endocannabinoid system, which sends signals between your cells to help regulate your movement, mood, homeostasis, and immune system. Different studies have shown that CBD can offset everyday anxiety and depression.<sup>3</sup>

CBG

CBG is another compound found in hemp which doesn't have intoxicatingly psychoactive effects. CBG, often referred to by experts as "the mother of all cannabinoids," is the cannabinoid from which other types of cannabinoids (including CBD) are derived, says Michelle Sexton, a naturopathic doctor who works at the Pain Trauma Institute in San Diego. "CBG is the first compound in the biosynthesis (the production of chemical compounds by a living organism) of the other cannabinoids," she adds.

CBG is available in many forms, including tinctures, gummies, capsules and topical creams and lotions. CBG is often coupled with CBD in these products because the two cannabinoids can provide complimentary benefits, such as decreasing inflammation and pain, says Fraser Smith, a naturopathic doctor, as well as assistant dean and associate professor at the National University of Health Services in Lombard, Illinois. CBD and CBG occur naturally in hemp extract which is the source of our cannabinoids.<sup>4</sup>

 

*Golf Mellow Brand*

The Company has utilized existing product formulations with plans to introduce 12 different products under the Golf Mellow brand. A brand logo and packaging has been created to support the existing formulations. These supplements will be targeting the golf industry and golf professionals. These products include capsules, a powder, a cream and tinctures to help golfers of all levels improve their game and overall well-being. The capsules are packed with a blend of essential vitamins and minerals that support joint health, flexibility, and energy levels. The tinctures are made from all-natural ingredients and provide a quick and easy way to support focus and mental clarity, helping athletes stay in the zone and make the perfect shot. The creams are specially designed to provide targeted relief for sore muscles and joints, helping them stay comfortable and focused on the course. Some of these products include Sleep Caps to ensure that players are well rested the night before, Super B12 Powder which provides the energy needed for the perfect round, Calm Caps which help manage anxiety when players need it most, and Epsom Salt Cream & Recovery Caps, which aids with recovery.

According to data from the National Golf Foundation 28.1 million people (aged six and over) played on a golf course in the United States in 2024 – furthermore there were another 19.1 million people who took part in off-course activities like driving ranges, indoor golf simulators or venues like Topgolf.<sup>5</sup>

<sup>1</sup> https://www.medicalnewstoday.com/articles/cgb-vs-cbd

<sup>2</sup> www.health.harvard.edu

<sup>3</sup> www.forbes.com/health/body/cbd-oil-benefits/

<sup>4</sup> www.forbes.com/health/body/cannabigerol-cbg/

<sup>5</sup> https:// https://www.ngf.org/the-clubhouse/golf-industry-research/

**Competitive Strengths**

The Kirkman brand has been in business for over 70 years with a loyal consumer base and we believe that we maintain high purity and quality standards in the industry. We source all materials from high quality suppliers. We test finished goods in certified laboratories with state-of-the-art equipment and manufacture our supplements in US-based cGMP certified and FDA registered facility located in Lake Oswego, Oregon. The FDA requires that we conduct at least one appropriate test or examination to verify and identify any component that is a dietary ingredient. We conduct ingredient testing by verifying the identity through ISO certified 3rd party laboratories. We also test for residual solvents and pesticides (where applicable), presence of up to 24 heavy metals and microbial contamination that could lead to illness or death. Microbial tests can include, but are not limited to, aerobic plate count, yeast & mold, coliforms, E. coli, pseudomonas, staphylococcus aureus, Bile Tolerant gram negative, Salmonella, Aflatoxins and listeria. Heavy metals testing includes beryllium, aluminum, vanadium, chromium, manganese, cobalt, nickel, copper, zinc, arsenic, selenium, molybdenum, palladium, silver, cadmium, tin, antimony, barium, tungsten, platinum, thallium, lead, uranium and mercury. For incoming raw ingredients, we ID using the following methods: Botanicals – HPLC (High Pressure Liquid Chromatography) or TLC (Thin Layer Chromatography), or an approved Chemical test; Vitamins – IR (Infrared) absorption, Chemical test, UV (Ultraviolet) absorption, UV fluorescence, GC (Gas Chromatography), HPLC; Minerals – ICP-MS (Inductively Coupled Plasmas – Mass Spectroscopy), IR (Infrared), Chemical tests, TLC (Thin Layer Chromatography); Enzymes – HPLC (High Pressure Liquid Chromatography), PCR (Polymerase Chain Reaction); Amino Acids – IR absorption, Optical Rotation, HPLC, TLC, GC (Gas Chromatography), Assay; Probiotics – PCR and HPLC; Metals – HPLC or ICP-MS; Micros – Cell culture and cell identification. The FDA requires that a finished batch of the dietary supplement meets product specifications for identity, purity, strength, composition, and for limits on those types of contamination that may adulterate or that may lead to adulteration of the finished batch of the dietary supplement. This can be conducted for a subset of finished dietary supplement batches through a sound statistical sampling plan (or for every finished batch). For our business, we test every batch of products to ensure heavy metals are below Pop 65 limits. In addition, every batch is tested for microbial contamination. Our 75+ year history in the industry, along with our rigorous material testing, allows Kirkman to use statistical sampling to ensure the identity, purity and strength of each product is met. Our formulations use proprietary blends. Although we are authorized to produce hemp derived products because we hold a hemp handler's license, we currently do not grow any hemp, but we source our hemp derived products from registered growers in operation. The FDA does not require any testing on dietary supplements whereas we test for approximately 90 metals and toxins in raw materials.

As stated above we launched P2i by Kirkman prenatal vitamin, in 2024, which is the only certified prenatal vitamin that aligns to FIGO's position statement.

The P2i by Kirkman prenatal vitamin has been certified by The FORUM, a nonprofit 501(c)(3) organization dedicated to promoting low-toxicity standards for prenatal healthy products. The FORUM operates under a Memorandum of Understanding (MOU) with the FIGO, a globally recognized organization of obstetricians and gynecologists. This MOU establishes a shared objective to reduce environmental toxicity in prenatal products.

● The certification process involves rigorous testing and evaluation to ensure compliance with The FORUM's low-toxicity standards, which align with FIGO's objectives for maternal and fetal health. These standards include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Analysis
 of 24 Heavy Metals, ensuring levels are below stringent safety thresholds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Testing
 for the presence of 120 toxic chemicals, such as pesticides and endocrine disruptors, with
 strict limits to prevent potential harm

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Utilization
 of ISO 17025-accredited laboratories for all testing to ensure reliability and reproducibility
 of results

● Purity Labs, an ISO 17025-accredited laboratory, as directed by The FORUM, conducted testing, which confirmed the product's compliance with The FORUM's criteria. Based on this testing, The FORUM issued its certification, indicating that Kirkman's prenatal vitamin meets its standards for low toxicity and safety.

We have an exclusive license agreement with the Trailer Park Boys ("TBP") to market and sell hemp derived products. There are two product categories that include Hemp Derived Delta 9 products. This includes Delta 9 gummies and Delta 9 Drink Enhancers. . The revenue from these two product categories represents approximately 0.6% of total company revenue. entered. To date, $575,000 has been paid to TBP under the license agreement and TBP has been issued 14,440 shares of common stock of the Company. The Company and TBP are negotiating a termination of the license agreement effective as of December 31, 2025, with up to a maximum of $150,000 in remaining accrued royalties to be paid by the Company to TBP no later than March 31, 2026.

**Growth Strategy**

We aim to be a leader in the nutraceutical space by manufacturing products held to the highest standard of quality in terms of toxins, metals, and other impurities. Our goal is to build a well-rounded portfolio of products including mushroom-based supplements targeted for everyday use, prenatal, athletes and beyond.

We plan to do this by:

● Strengthening our existing 70-year-old Kirkman brand with its established base of consumers in the autism community by curating our product mix to cater to their specific needs;

● Launching multiple brands, broad as well as niche, including P2i by Kirkman which is the only certified prenatal vitamin supporting FIGO's October 2023 position statement, to allow us to increase our market share;

● Modernizing our manufacturing capabilities by reorganizing the space and introducing new and efficient machinery and equipment to significantly enhance our output;

● Investing heavily into our sales and marketing activities as well as business development in order to increase sales and distribution; and

● Identify key companies with synergistic strengths for partnerships or acquisitions.

**Challenges, Risks and Limitations**

Our ability to utilize our competitive advantages in order to strengthen and expand our business and achieve our growth plan is subject to a number of risks and uncertainties more fully discussed under "Risk Factors" in this Prospectus. As discussed in our financial statements, we have suffered recurring losses from operations and have a significant accumulated deficit. In addition, we continue to experience negative cash flows from operations. This limited working capital capability may delay or make the accomplishment of our growth plans difficult. In assessing the likelihood of our future success, investors in this offering should note our history of losses and the likelihood of our operating profitably in the future. Further, some of our products may be subject to uncertain and evolving federal, state, and local regulations concerning hemp, CBD, CBG, and other non-tobacco consumable products. Because the type, timing, and impact of such regulations remain uncertain, we cannot give any assurance that such actions will not have a material adverse effect on this emerging business and our strategy.

**Our Corporate History and Structure**

Functional Brands was organized under the General Corporation Law in the State of Delaware on November 19, 2020, under the name HT Naturals Inc. HT Naturals Inc. changed its name to Functional Brands Inc. on March 23, 2023. Our principal business is the production, marketing, sales, and distribution of nutraceutical products through our Kirkman division, alongside our hemp derived products under the Hemptown brand in certain states within the United States that permit such sales. We ship our Kirkman products to all US states. As for hemp derived products, we only sell to states which permit this activity with certain restrictions, such as the content of THC, which differs depending on the state.

The states in which we have sold hemp derived products in the past are Alabama, Arizona, Arkansas, California (D9 ingestible and CBD/CBG ingestible only), Colorado (CBD/CBG inhalable only), Connecticut, Delaware (D9 ingestible), Florida, Georgia (D9 ingestible and CBD/CBG ingestible only), Hawaii (CBD/CBG ingestible only), Illinois(D9 ingestible and CBD/CBG inhalable), Indiana (D9 ingestible only), Iowa (D9 ingestible only), Kansas, Kentucky (D9 ingestible only), Louisiana, Maine (D9 ingestible and CBD/CBG inhalable), Maryland (CBD/CBG inhalable only), Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York (D9 and CBD/CBG ingestible only), North Carolina, North Dakota (CBD/CBG ingestible only), Ohio, Oklahoma, Oregon (CBD/CBG ingestible only), Pennsylvania, Rhode Island, South Carolina, South Dakota (D9 ingestible only), Tennessee (CBD/CBG inhalable only), Texas, Virgina (CBD/CBG ingestible and inhalable only), Washington (CBD/CBG Inhalable only), West Virginia, Wisconsin, Wyoming. We have engaged specialized hemp counsel to provide regular updates on the 50 states and the legality of our hemp products in each state. In addition, we have established and followed a standard of operating procedure (SOP) to ensure sales do not occur in the states where hemp products may not be sold consistent with the regular updates provided by our hemp counsel. We have an internal policy that prohibits us as a company and any of our executives, directors, employees, sales representatives, and distributors from distributing any of the Company's hemp derived products in places in which the sale of hemp derived products is prohibited.

We were originally a majority owned subsidiary of Hemptown Organics Corp. ("HOC"), a British Columbia, Canada private operating holding company with various interests in nutraceutical manufacturing and federally legal industrial hemp products. We were granted a licensing agreement by Hemptown Organics Corp. The licensing agreement, dated December 10, 2020, provides Functional Brands Inc. as licensee, a license to use the Hemptown USA and Hemptown Naturals brand and trademarks on a perpetual, non-exclusive, non-transferable basis, with no expiration date. This licensing agreement will transfer full ownership to Functional Brands upon the effective date of this registration statement and listing on the exchange.

On July 3, 2019, HTO Holdings Inc. ("HTO Holdings") a wholly owned subsidiary of HOC and the owner of all issued and outstanding stock of HTO Nevada (as "Purchaser"), entered into an asset purchase agreement ("APA") for the net assets of Kirkman Group Inc. a Nevada corporation, Kirkman Laboratories Inc., an Oregon corporation and Kirkman Group International, Inc. a Nevada corporation (collectively "Kirkman" or the "Seller," and together with Purchaser, the "Parties") for a consideration equal to $5 million with payout in a business combination of cash and deferred consideration. The "Seller" is David Humphrey. Under the APA, Purchaser and HTO Holdings were to make certain additional payments toward the purchase price. The APA was amended on November 30, 2021 by the Parties with the purpose of modifying the payment schedule of the deferred consideration; and in exchange for amending the payment schedule of the deferred consideration, the Purchaser and HTO Holdings agreed to enter into a security agreement, and amend the APA and other agreements attached to the APA (including, but not limited to, the non-competition agreement, the trademark assignment agreement, the domain names transfer agreement, the assignment of intangible assets, and the intellectual property security agreement (collectively, the "IP Collateral Agreements") to, among other things, provide additional collateral as security to Seller. Upon payment in full in cash of the deferred consideration or set-off of the deferred consideration, as amended: (i) each of the Parties agreed that the security agreement and amended intellectual property security agreement would be automatically terminated and be of no further force and effect; and (ii) Seller would, at its sole cost and expense, release all liens in the IP Collateral, as defined in the respective security agreement and intellectual property security agreement, and all rights therein would forthwith revert to Purchaser. On May 16, 2022, the APA was amended again by the Parties, to reflect further modifications to the schedules and exhibits to the APA and IP Collateral Agreements. On May 31, 2022, Purchaser paid Seller certain amounts ("Immediate Payments"), and on July 23, 2022, Purchaser and Seller executed a forbearance agreement ("Forbearance Agreement") to extend the payments due under the APA to August 31, 2022. After Purchaser's default, and partial payment to Seller in September 2022, the Parties executed an amendment to the Forbearance Agreement on December 27, 2022, to extend certain payments due under the APA, at which time the remaining balance due was $3,032,000.

On September 24, 2024, the Company executed a Fourth Amended Forbearance Agreement which allowed the postponement of principal payments. As of May 28, 2025, the remaining balance due is $2,227,366 (the "Existing Default"). On May 28, 2025, the Company executed a Sixth Amended Forbearance Agreement (the "Sixth Amendment") to provide Purchaser with a period of time to cure the Existing Default and Purchaser and the Company also executed a Confession of Judgement for Money Awarded and Decree of Foreclosure which upon a default by Purchaser under the Sixth Amendment (a "Forbearance Default") may be filed with the Circuit Court of the State of Oregon allowing assets of the Purchaser and the Company to be foreclosed upon to satisfy payment of the Existing Default. Subject to compliance by Purchaser with the terms and conditions of the Sixth Amendment, Sellers agreed to forbear from exercising their rights and remedies against Purchaser under the transaction documents with respect to the Existing Default during the period commencing on the date of execution of the Sixth Amendment by all parties and ending on the earlier to occur of (i) July 20, 2025 and (ii) the date that any Forbearance Default occurs, upon which, Sellers' forbearance, as provided herein, shall immediately and automatically cease without any requirement of notice or further action by any party (the "Termination Date"). On July 9, 2025 the company entered into a Seventh Amended Forbearance Agreement which extended clause (i) of the Termination Date to August 30, 2025. On and from the Termination Date, Sellers may, in their sole discretion, exercise any and all remedies available to them under the transaction documents that otherwise would be available only by reason of the occurrence of any Events of Default thereunder or the continuation of any Existing Default. As of July 9, 2025, the balance of $2,227,366 owed to Seller is due and payable by August 30, 2025. We intend to use a portion of the proceeds of the private placement to cure the Existing Default.

As part of our restructuring initiatives, HTO Nevada, which was previously owned by HTO Holdings, was acquired by Functional Brands on May 19, 2023. This acquisition took place through a share exchange agreement involving HOC, HTO Holdings, and Functional Brands. This exchange resulted in HTO Nevada becoming a wholly-owned subsidiary of Functional Brands. Our fiscal year ends on December 31.

We were previously deemed a "controlled company" under NASDAQ corporate governance rules because HOC. owned a majority of our outstanding shares of common stock. HOC has distributed all of the shares it holds in our Company to HOC's shareholders and debtholders. Therefore, we are no longer a controlled company and will not be relying on any exemptions from corporate governance requirements provided to controlled companies.

**Implications of Being an Emerging Growth Company and a Smaller Reporting Company**

Upon the completion of this offering, we will qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

● Have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");

● Comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

● Submit certain executive compensation matters to shareholder advisory votes, such as "say-on-pay" and "say-on-frequency;" and

● Disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.235 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act,") which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

To the extent that we continue to qualify as a "smaller reporting company," as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (ii) scaled executive compensation disclosures; and (iii) the requirement to provide only two years of audited financial statements, instead of three years.

**Corporate Information**

We are currently incorporated and in good standing in the State of Delaware. Our registered address is 6400 SW Rosewood Street, Lake Oswego, Oregon 97035 and our telephone number is (800)245-8282. We maintain the following websites: https://functionalbrandsinc.com, https://kirkmangroup.com and https://hemptownnaturals.com. Information available on our websites is not incorporated by reference in and is not deemed a part of this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.

**NASDAQ Listing**

We intend to list our common stock on NASDAQ. There is no assurance that our listing application will be approved by NASDAQ. If our application to NASDAQ is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on NASDAQ, we will not complete the offering.

**Reverse Stock Split**

Our board of directors approved the Reverse Stock Split. On January 22, 2025, we filed a certificate of amendment of certificate of incorporation with the State of Delaware to immediately effect the Reverse Stock Split. All share and per share information in this prospectus are presented after giving effect to the Reverse Stock Split retrospectively for all periods presented, unless otherwise stated or the context otherwise requires.

**SUMMARY FINANCIAL INFORMATION**

The following tables summarize certain financial data regarding our business and should be read in conjunction with our financial statements and related notes contained elsewhere in this prospectus and the information under "*Management's Discussion and Analysis of Financial Condition and Results of Operations*."

Our board of directors and our stockholders each approved the Reverse Stock Split. On January 22, 2025, we filed a certificate of amendment of certificate of incorporation with the State of Delaware to immediately effect the Reverse Stock Split. All share and per share information in this prospectus are presented after giving effect to the Reverse Stock Split retrospectively for all periods presented, unless otherwise stated or the context otherwise requires.

Our summary financial data as of December 31, 2024, and 2023, are derived from our audited financial statements included elsewhere in this prospectus. All financial statements included in this prospectus are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"). The summary financial information is only a summary and should be read in conjunction with the historical financial statements and related notes contained elsewhere herein. The financial statements contained elsewhere fully represent our financial condition and operations; however, they are not indicative of our future performance.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six months ended** | **Six months ended** | **Years Ended** | **Years Ended** |
|  | **June 30, 2025** <br> **(Unaudited)** | **June 30, 2024**<br> **(Unaudited)** | **December 31,**<br> **2024** | **December 31,**<br> **2023** |
| **Statements of Operations Data** |  |  |  |  |
| Net Revenue | $3422789 | $3490446 | $6566455 | $6820499 |
| Cost of Goods Sold | (1587928) | (1636792) | (2959609) | (3641648) |
| Operating Expenses | (2022397) | (1728228) | (3835938) | (4261354) |
| Operating Income (Loss) | (187536) | 125426 | (229092) | (1082503) |
| Other Income / (Expenses), Net | (165302) | (118951) | (330264) | (158591) |
| Net Loss | $(352838) | $6475 | $(559356) | $(1241094) |

---

---

| | | | |
|:---|:---|:---|:---|
|  | | **Years Ended** | **Years Ended** |
|  | **Six months ended**<br> **June 30, 2025**<br> **(Unaudited)** | **December 31,**<br> **2024** | **December 31,**<br> **2023** |
| **Balance Sheet Data** |  |  |  |
| Cash | $257683 | $211642 | $374435 |
| Total Current Assets | 3556145 | 2858324 | 2543744 |
| Total Assets | 7670856 | 7169660 | 7254635 |
| Total Current Liabilities | 5375529 | 5202950 | 2251468 |
| Total Liabilities | 7413692 | 7288237 | 7228756 |
| Accumulated Deficit | (8013768) | (7660930) | (7101574) |
| Total Stockholder's Equity / (Deficit) | 257164 | (118577) | 25879 |
| Total Liabilities and Stockholders' Equity / (Deficit) | $7670856 | $7169660 | $7254635 |

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Dismissal of Previous Independent Registered Public Accounting Firm.

On February 14, 2024, BF Borgers CPA PC ("BF Borgers") notified Functional Brands Inc. (the "Company") that it was resigning as the independent registered public accounting firm for the Company. BF Borgers is not required to obtain and did not seek, the Company's consent to its decision to resign as the Company's independent registered public accounting firm. As a result, the board of directors of the Company (the "Board") did not take part in BF Borgers's decision to provide its notice of resignation.

During the Company's two most recent fiscal years ended December 31, 2023 and 2022, and the subsequent interim period through June 30, 2024, there were (i) no disagreements with BF Borgers on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to the satisfaction of BF Borgers would have caused them to make reference thereto in connection with their reports on the financial statements for such years and (ii) no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).

BF Borgers's audit reports on the Company's consolidated financial statements for the fiscal years ended December 31, 2022 and 2021 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

Appointment of New Independent Registered Public Accounting Firm.

On March 12, 2024, the Company engaged and executed an agreement with TAAD LLP, as the Company's new independent accountant for the fiscal years ended December 31, 2024, 2023 and 2022. The board of directors approved the decision to engage TAAD LLP.

During the Company's fiscal years ended December 31, 2024 and 2023, and the subsequent interim period through march 31, 2025, neither the Company nor anyone on its behalf consulted with TAAD LLP on either (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the consolidated financial statements of the Company and its subsidiaries, and no written report or oral advice was provided by TAAD LLP to the Company that TAAD LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue, or (b) any matter that was the subject of either a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

**SUMMARY OF RISK FACTORS**

An investment in our common stock involves a high degree of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the "*Risk Factors*" section immediately following this Prospectus Summary. These risks include, but are not limited to, the following:

● Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

● We may be unable to effectively manage future growth. We will need additional financing in the future, which may not be available when needed or may be costly and dilutive.

● If we are unable to continue as a going concern, our securities will have little or no value.

● We have a limited operating history, and we may not be able to successfully operate our business or execute our business plan.

● We may incur significant debt to finance our operations.

● We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.

● Our brand and image are keys to our business and any inability to maintain a positive brand image could have a material adverse effect on our results of operations.

● Competition from traditional and large, well-financed product manufacturers or distributors may adversely affect our distribution relationships and may hinder the development of our existing markets, as well as prevent us from expanding our markets.

● We compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue developing new products to satisfy our consumers' changing preferences will determine our long-term success.

● We may be unable to respond effectively to technological changes in our industry, which could reduce the demand for our products.

● We may experience a reduced demand for some of our products due to health concerns and legislative initiatives against smokables products.

● Legislative or regulatory changes that affect our products, including new taxes, could reduce demand for products or increase our costs.

● Some products we sell are subject to developing and unpredictable regulations. The Company may become subject to increasing regulation as a result of its hemp development activities, which could require it to incur additional costs associated with compliance requirements. Our ability to develop, commercialize and distribute hemp products and comply with laws and regulations governing cannabis, hemp or related products may affect our operational results.

● International expansion efforts would likely significantly increase our operational expenses.

● Our reliance on distributors, retailers and brokers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets.

● We incur significant time and expense in attracting and maintaining key distributors, and loss of distributors or retails accounts would harm our business.

● We rely on suppliers, manufacturers and contractors, and events adversely affecting them would adversely affect us.

● We have a single customer that accounts for a substantial portion of our revenues, and our business would be harmed were we to lose this customer.

● Wholesale price volatility may adversely affect operations.

● We may sustain losses that cannot be recovered through insurance or other preventative measures.

● We may be subject to product liability claims and other claims of our customers and partners.

● If we encounter product recalls or other product quality issues, our business may suffer.

● It is difficult to predict the timing and amount of our sales, and as a result our sales forecasts are uncertain.

● If we do not adequately manage our inventory levels, our operating results could be adversely affected.

● Increases in costs or shortages of raw materials could harm our business and financial results.

● Increases in costs of energy and increased regulations may have an adverse impact on our gross margin.

● Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.

● If we are unable to attract and retain key personnel, our efficiency and operations would be adversely affected; in addition, staff turnover causes uncertainties and could harm our business.

● If we lose the services of our Chief Executive Officer and/or Chief Financial Officer, our future operations could be impaired until such time as a qualified replacement can be found.

● If we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively.

● Disruptions to our information technology systems due to cyber-attacks or our failure to upgrade and adjust our information technology systems, may materially impair our operations, hinder our growth and materially and adversely affect our business and results of operations.

● Our business is subject to many regulations and noncompliance is costly.

● Significant additional labeling or warning requirements may inhibit sales of affected products.

● Our industry may become subject to expanded regulation and increased enforcement by the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC).

● Our business and operations would be adversely impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.

● Our results of operations may fluctuate from quarter to quarter for many reasons, including seasonality.

● Global economic, political, social and other conditions, including the COVID-19 pandemic, may continue to adversely impact our business and results of operations.

● We may not be able to satisfy listing requirements of NASDAQ or obtain or maintain a listing of our common stock on NASDAQ.

● Prior to this offering, we were majority-owned by HOC, and a small group of shareholders.

● The transition to a new presidential administration in the United States, including the potential use and effects of tariffs to address the administration's policy goals, could materially impact the macroeconomic framework in which we operate.

● Significant tariffs or other restrictions imposed on imports by the U.S. and related countermeasures taken by impacted countries could have a material adverse effect on our operations and financial results.

**Summary of Risks Related to Our Direct Listing and Volatility of Our Common Stock Following the Offering**

We cannot predict the prices at which our common stock may trade on Nasdaq following the listing of our common stock, and the market price of our common stock may fluctuate significantly in response to various factors, some of which are beyond our control. In particular, prior to the opening trade, there will not be a price at which underwriters initially sold shares of common stock to the public as there would be in a firm-commitment underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by Nasdaq from various broker-dealers. Consequently, upon listing on Nasdaq, the public price of our common stock may be more volatile than in a firm-commitment underwritten initial public offering and could decline significantly and rapidly.

Our listing differs significantly from an initial public offering conducted on a firm commitment basis. There have been very few companies that have undertaken direct listings on a national securities exchange. Accordingly, there is insufficient historical data to predict what level of price and volume volatility may be incurred. Consequently, significant and swift negative price movement in our common stock is very possible. In addition, because of our novel listing process, individual investors, retail or otherwise, may have greater influence in setting the opening public price and subsequent public prices of our common stock on Nasdaq and may participate more in our initial trading than is typical for a firm-commitment underwritten initial public offering. These factors could result in a public price of our common stock that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading price of our common stock and an unsustainable trading price if the price of our common stock significantly rises upon listing and institutional investors believe our common stock is worth less than retail investors, in which case the price of our common stock may decline over time. Further, if the public price of our common stock is above the level that investors determine is reasonable for our common stock, some investors may attempt to short our common stock after trading begins, which would create additional downward pressure on the public price of our common stock.

Finally, there can be no assurance that the Registered Stockholders and other existing stockholders will not sell all of their shares of common stock, resulting in an oversupply of our common stock on Nasdaq. In the case of a lack of supply of our common stock, the trading price of our common stock may rise to an unsustainable level. Further, institutional investors may be discouraged from purchasing our common stock if they are unable to purchase a block of our common stock in the open market due to a potential unwillingness of our existing stockholders to sell a sufficient amount of common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading price. If institutional investors are unable to purchase our common stock, the market for our common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our common stock. In the case of a lack of market demand for our common stock, the trading price of our common stock could decline significantly and rapidly after our listing. Therefore, an active, liquid and orderly trading market for our common stock may not initially develop or be sustained, which could significantly depress the public price of our common stock and/or result in significant volatility, which could affect your ability to sell your shares of common stock.

**RISK FACTORS**

*Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this prospectus, before purchasing our securities. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled "Cautionary Statement Regarding Forward-Looking Statements".*

 

*We may not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.*

**Risks Related to our Financial Condition and Capital Requirements**

***Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.***

Our auditor's report on our 2024 audited financial statements expresses an opinion that doubt exists as to whether we can continue as an ongoing business. Our recurring losses, negative cash flows and accumulated deficit raise doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

It is critical that we meet our sales goals and increase sales going forward as our operating plan already reflects prior significant cost containment measures and may make it difficult to achieve top-line growth if further significant reductions become necessary. If we do not meet our sales goals, our available cash and working capital will decrease and our financial condition and results of operation will be negatively impacted. These factors raise substantial doubt about our ability to continue as a going concern.

***We may be unable to effectively manage future growth.***

We may be subject to growth-related risks, including capacity constraints and pressure on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve our operational and financial systems and to expand, train and manage our employee base. Rapid growth of our business may significantly strain our management, operations and technical resources. If we are successful in obtaining large orders for its products, we will be required to deliver large volumes of products to our customers on a timely basis and at a reasonable cost. We may not obtain large-scale orders for our products and if we do, we may not be able to satisfy large-scale production requirements on a timely and cost-effective basis. Our inability to deal with this growth may have a material adverse effect on our business, financial condition, results of operations and prospects.

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***We will need additional financing in the future, which may not be available when needed or may be costly and dilutive.***

We will require additional financing to support our working capital needs in the future. The amount of additional capital we may require, the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and operating plans, the performance of our business and the market conditions for debt or equity financing. Additionally, the amount of capital required will depend on our ability to meet our sales goals and otherwise successfully execute our operating plan. We believe it is imperative that we meet these sales objectives in order to lessen our reliance on external financing in the future. We intend to continually monitor and adjust our operating plan as necessary to respond to developments in our business, our markets and the broader economy. Although we believe various debt and equity financing alternatives will be available to us to support our working capital needs, financing arrangements on acceptable terms may not be available to us when needed. Additionally, these alternatives may require significant cash payments for interest and other costs or could be highly dilutive to our existing shareholders. Any such financing alternatives may not provide us with sufficient funds to meet our long-term capital requirements. If necessary, we may explore strategic transactions that we consider to be in our best interest of our company and the best interest of our shareholders, which may include, without limitation, public or private offerings of debt or equity securities, a rights offering, and other strategic alternatives; however, these options may not ultimately be available or feasible when needed.

***Functional Brands Inc. has a limited operating history, and we may not be able to successfully operate our business or execute our business plan.***

We are a development stage company and are therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources and lack of revenue. Given our limited operating history, it is hard to evaluate our proposed business and prospects. Our proposed business operations will be subject to numerous risks, uncertainties, expenses and difficulties associated with early- stage enterprises. There is no assurance that we will be successful in achieving a return on shareholders' investment, and the likelihood of success must be considered in light of the early stage of our hemp operations.

***We may incur significant debt to finance our operations.***

There is no assurance that we will not incur debt in the future, that we will have sufficient funds to repay our indebtedness, or that we will not default on our debt, jeopardizing our business viability. Furthermore, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to conduct our business.

***Existing events of default under the Asset Purchase Agreement could have a material adverse effect on our financial condition, results of operations and prospects.***

On June 28, 2019, HTO Holdings Inc. ("HTO Holdings") a wholly owned subsidiary of HOC and the owner of all issued and outstanding stock of HTO Nevada (as "Purchaser"), entered into an asset purchase agreement ("APA") for the net assets of Kirkman Group Inc. a Nevada corporation, Kirkman Laboratories Inc., an Oregon corporation and Kirkman Group International, Inc. a Nevada corporation (collectively "Kirkman" or the "Seller," and together with Purchaser, the "Parties") for a consideration equal to $5 million with payout in a business combination of cash and deferred consideration. The "Seller" is David Humphrey. Under the APA, Purchaser and HTO Holdings were to make certain additional payments toward the purchase price. The APA was amended on November 30, 2021 by the Parties, with the purpose of modifying the payment schedule of the deferred consideration; and in exchange for amending the payment schedule of the deferred consideration, the Purchaser and HTO Holdings agreed to enter into a security agreement, and amend the APA and other agreements attached to the APA (including, but not limited to, the non-competition agreement, the trademark assignment agreement, the domain names transfer agreement, the assignment of intangible assets, and the intellectual property security agreement (collectively, the "IP Collateral Agreements")) to, among other things, provide additional collateral as security to Seller. Upon payment in full in cash of the deferred consideration or set-off of the deferred consideration, as amended: (i) each of the Parties agreed that the security agreement and amended intellectual property security agreement would be automatically terminated and be of no further force and effect, and (ii) Seller would, at its sole cost and expense, release all liens in the IP Collateral, as defined in the respective security agreement and intellectual property security agreement, and all rights therein would forthwith revert to Purchaser. On May 16, 2022, the APA was amended again by the Parties, to reflect further modifications to the schedules and exhibits to the APA and IP Collateral Agreements. On May 31, 2022, Purchaser paid Seller certain amounts ("Immediate Payments"), and on July 23, 2022, Purchaser and Seller executed a forbearance agreement ("Forbearance Agreement") to extend the payments due under the APA to August 31, 2022. After Purchaser's default, and partial payment to Seller in September 2022, the Parties executed an amendment to the Forbearance Agreement on December 27, 2022, to extend certain payments due under the APA, at which time the remaining balance due was $3,032,000 . A Fourth Forbearance amendment was signed by Seller and Buyer dated September 24, 2024 where additional principal and interest payments began to accrue. On May 28, 2025 the Company executed a Sixth Amended Forbearance Agreement which extended forbearance on the exercise of available remedies against the Company to July 20 ,2025. On July 9, 2025 the Company executed a Seventh Amended Forbearance Agreement which extended the forbearance termination date to August 30, 2025. As of July 9, 2025, the balance due to Seller is $2,227,366 (the "Existing Default"). We intend to use a portion of the proceeds of the private placement to cure the Existing Default.

**Risk Factors Relating to Our Business and Industry**

***We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.***

Our business is substantially dependent upon awareness and market acceptance of our products and brands by our target market: trendy, young consumers looking for a distinctive product tonality and/or the perceived benefits of hemp, CBD and CBG in their smokables as compared to nicotine or tobacco-based smokables. In addition, our business depends on acceptance by our independent distributors and retailers of our brands that have the potential to provide incremental sales growth. If we are not successful in the growth of our brand and product offerings, we may not achieve and maintain satisfactory levels of acceptance by independent distributors and retail consumers. Any failure of our brands to maintain or increase acceptance or market penetration would likely have a material adverse effect on our revenues and financial results.

***Our brand and image are keys to our business and any inability to maintain a positive brand image could have a material adverse effect on our results of operations.***

Our success depends on our ability to maintain the brand image for our existing products and effectively build up a brand image for new products and brand extensions. We cannot predict whether our advertising, marketing and promotional programs will have the desired impact on our products' branding and on consumer preferences. In addition, negative public relations and product quality issues, including negative perceptions regarding the hemp industry, whether real or imagined, could tarnish our reputation and image of the affected brands and could cause consumers to choose other products. Our brand image can also be adversely affected by unfavorable reports, studies and articles, litigation, or regulatory or other governmental action, whether involving our products or those of our competitors.

***Competition from traditional and large, well-financed product manufacturers or distributors may adversely affect our distribution relationships and may hinder the development of our existing markets, as well as prevent us from expanding our markets.***

The hemp industry is highly competitive. We compete with other hemp companies, manufacturers and distributors, not only for consumer acceptance but also for shelf space in retail outlets and for marketing focus by our distributors, many of whom also distribute other brands. Our products compete with hemp derived products, many of which are marketed by companies with substantially greater financial resources than ours. Some of these competitors are placing severe pressure on independent distributors not to carry competitive hemp brands such as ours. We also compete with regional hemp derived producers and "private label" suppliers.

Our direct competitors in the hemp industry include large domestic and international traditional hemp companies and distributors as well as regional or niche companies. These national and international competitors have advantages such as lower production costs, larger marketing budgets, greater financial and other resources and more developed and extensive distribution networks than ours. We may not be able to increase our volumes or maintain our selling prices, whether in existing markets or as we enter new markets.

Increased competitor consolidations, market-place competition, particularly among branded hemp smokables products, and competitive product and pricing pressures could impact our earnings, market share and volume growth. If, due to such pressure or other competitive threats, we are unable to sufficiently maintain or develop our distribution channels, we may be unable to achieve our current revenue and financial targets. As a means of maintaining and expanding our distribution network, we intend to introduce additional brands. We may not be successful in doing this, or it may take us longer than anticipated to achieve market acceptance of these new products and brands, if at all. Other companies may be more successful in this regard over the long term. Competition, particularly from companies with greater financial and marketing resources than ours, could have a material adverse effect on our existing markets, as well as on our ability to expand the market for our products.

The supplements industry is highly competitive. We compete with other supplement companies, manufacturers, and distributors, not only for consumer acceptance, but also for shelf space in retail outlets and for marketing focus by our wholesalers and professional accounts. Our products are sold over the counter and do not require a doctor's prescription since they are not FDA approved. Our products compete with other nutraceutical products, many of which are marketed by companies with substantially greater financial resources than ours. Our direct competition in the supplement industry includes domestic and international traditional nutraceutical companies and distributors as well as regional or niche companies. These national and international competitors have advantages such as lower production costs, larger marketing budgets, greater financial and other resources and more developed and extensive distribution networks than ours. We may not be able to increase our volumes or maintain our selling prices, whether in existing markets or as we enter new markets.

***We compete in an industry characterized by rapid changes in consumer preferences and public perception, so our ability to continue developing new products to satisfy our consumers' changing preferences will determine our long-term success.***

Failure to introduce new brands, products or product extensions into the marketplace as current ones mature and to meet our consumers' changing preferences could prevent us from gaining market share and achieving long-term profitability. Product lifecycles can vary, and consumers' preferences and loyalties change over time. We may not succeed at innovating new products to introduce to our consumers. Customer preferences also are affected by factors other than taste, such as health and nutrition considerations, shifting consumer needs, changes in consumer lifestyles, increased consumer information and competitive product and pricing pressures. Sales of our products may be adversely affected by the negative publicity associated with these issues. If we do not adequately anticipate or adjust to respond to these and other changes in customer preferences, we may not be able to maintain and grow our brand image and our sales may be adversely affected.

***We may be unable to respond effectively to technological changes in our industry, which could reduce the demand for our products.***

Our future business success will depend upon our ability to maintain and enhance our product portfolio with respect to advances in technological improvements for certain products and market products that meet customer needs and market conditions in a cost-effective and timely manner. Maintaining and enhancing our product portfolio may require significant investments in licensing fees and royalties. We may not be successful in gaining access to new products that successfully compete or are able to anticipate customer needs and preferences, and our customers may not accept one or more of our products. If we fail to keep pace with evolving technological innovations or fail to modify our products and services in response to customers' needs or preferences, then our business, financial condition and results of operations could be adversely affected.

***We may experience a reduced demand for some of our products due to health concerns and legislative initiatives against smokables products.***

Consumers are concerned about health and wellness; public health officials and government officials are increasingly vocal about smoking, vaping, and their adverse consequences. There has been a trend among many public health advocates to pursue generalized reduction in consumption of smokables products, as well as increased public scrutiny, new taxes on smokables products, and additional governmental regulations concerning the marketing and labeling/packing of smokable products. Additional or revised regulatory requirements, whether labeling, tax or otherwise, could have a material adverse effect on our financial condition and results of operations. Further, increasing public concern with respect to smokables could reduce demand for our hemp smokables products.

***Legislative or regulatory changes that affect our products, including new taxes, could reduce demand for products or increase our costs.***

Taxes imposed on the sale of certain of our products by federal, state, and local governments in the United States, or other countries in which we operate could cause consumers to shift away from purchasing our hemp smokables products. These taxes could materially affect our business and financial results.

***Some products we sell are subject to developing and unpredictable regulations.***

Some of our products may be subject to uncertain and evolving federal, state and local regulations concerning hemp, CBD, CBG, Hemp Derived Delta 9 and other non-tobacco consumable products. Regulatory and related enforcement initiatives by authorities related to such products are unpredictable and impossible to anticipate. We anticipate that all levels of government that have not already done so, are likely to seek in some way to regulate these products, but the type, timing, and impact of such regulations remains uncertain. These regulations include, or could include, restrictions prohibiting certain form factors, such as smokable hemp products, or age restrictions. Accordingly, we cannot give any assurance that such actions will not have a material adverse effect on this emerging business and our strategy.

***Possible yet unanticipated changes in federal and state law could cause any of our current products containing hemp-derived CBD to be illegal, or could otherwise prohibit, limit or restrict any of our products containing CBD.***

We have certain products containing hemp-derived CBD, and we may develop and launch additional products containing hemp-derived CBD in the future. Until 2014, when 7 U.S. Code §5940 became federal law as part of the Agricultural Act of 2014 (the "*2014 Farm Ac*t"), products containing oils derived from hemp, notwithstanding a minimal or non-existing THC content, were classified as Schedule I illegal drugs. The 2014 Farm Act expired on September 30, 2018, and was thereafter replaced by the Agricultural Improvement Act of 2018 on December 20, 2018 (the "*2018 Farm Act*"), which amended various sections of the U.S. Code, thereby removing hemp, defined as cannabis with less than 0.3% THC, from Schedule 1 status under the Controlled Substances Act, and legalizing the cultivation and sale of industrial-hemp at the federal level, subject to compliance with certain federal requirements and state law, amongst other things. More specifically, industrial hemp is defined as "the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis." THC is the psychoactive component of plants in the cannabis family generally identified as marihuana or marijuana. There is no assurance that the 2018 Farm Act will not be repealed or amended such that our products containing hemp-derived CBD would once again be deemed illegal under federal law.

***The psychedelic therapy industry and market are relatively new and this industry and market may not continue to exist or grow as anticipated***

We operate our business in a relatively new industry and market. In addition to being subject to general business risks, we must continue to build brand awareness in this industry and market through significant investments in our strategy, our operational capacity, quality assurance and compliance with regulations. In addition, there is no assurance that the industry and market will continue to exist and grow as currently estimated or anticipated or function and evolve in the manner consistent with management's expectations and assumptions. Any event or circumstance that adversely affects the psychedelic therapy industry and market could have a material adverse effect on our business, financial conditions and results of operations. The psychedelic medicine market will face specific marketing challenges given the products' status as a controlled substance which resulted in past and current public perception that the products have negative health and lifestyle effects and have the potential to cause physical and social harm due to psychoactive and potentially addictive effects. Any marketing efforts by us would need to overcome this perception to build consumer confidence, brand recognition and goodwill.

***The expansion of the use of psychedelics in the medical industry may require new clinical research into effective medical therapies***

Research in United States and internationally regarding the medical benefits, viability, safety, efficacy, addictiveness, dosing and social acceptance of psychedelic and psychoactive products remains in early stages. There have been relatively few clinical trials on the benefits of such products. Although we believe that the articles, reports and studies support our beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of psychedelic and psychoactive products, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, psychedelic and psychoactive products. Given these risks, uncertainties and assumptions, readers should not place undue reliance on such articles and reports. Future research studies and clinical trials may draw opposing conclusions to those stated in this prospectus or reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to psychoactive products, which could have a material adverse effect on the demand for some of our products with the potential to lead to a material adverse effect on the Company's business, financial condition and results of operations.

***The Company may become subject to increasing regulation as a result of its hemp development activities, which could require it to incur additional costs associated with compliance requirements.***

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The Company develops hemp products. Hemp is legally distinct from marijuana and recognized as an agricultural crop by the United States government. There are federal and state laws and regulations on hemp that address hemp production, monitoring, manufacturing, distribution, and laboratory testing to ensure that that the hemp has a THC concentration of not more than 0.3% on a dry weight basis. Federal laws and regulations may also address the transportation or shipment of hemp or hemp products. It is difficult to predict whether regulators, such as the USDA or the MDA, will alter the manner in which they interpret existing federal and state laws and regulations on hemp or institute new regulations, or otherwise modify regulations in a way that will render compliance more burdensome. As the Company continues to pursue hemp, it may become subject to increasing regulation particular to hemp, which could require the Company to incur additional costs associated with compliance requirements.

***Our ability to develop, commercialize and distribute hemp derived products and comply with laws and regulations governing cannabis, hemp or related products may affect our operational results.***

As of September 1, 2024, 42 states have USDA approved state hemp farming plans while in eight states the USDA issues producer licenses directly to farmers under USDA's hemp farming plan. These eight states include Hawaii, Mississippi, Missouri, New Hampshire, North Carolina, Utah, Vermont, Wisconsin. The 2018 Farm Bill was signed into law on December 20, 2018. The 2018 Farm Bill removed hemp from the U.S. Controlled Substances Act (the "CSA") and established a federal regulatory framework for hemp production in the United States. Among other provisions, the 2018 Farm Bill: (a) explicitly amends the CSA to exclude all parts of the cannabis plant (including its cannabinoids, derivatives, and extracts) containing a THC concentration of not more than 0.3% on a dry weight basis from the CSA's definition of "marihuana"; (b) permits the commercial production and sale of hemp; (c) precludes states, territories, and Indian tribes from prohibiting the interstate transport of lawfully-produced hemp through their borders; and (d) establishes the USDA as the primary federal agency regulating the cultivation of hemp in the United States, while allowing states, territories, and Indian tribes to obtain (or retain) primary regulatory authority over hemp activities within their borders after receiving approval of their proposed hemp production plan from the USDA. Any such plan submitted by a state, territory, or Indian tribe to the USDA must meet or exceed minimum federal standards and receive USDA approval. Any state, territory, or Indian tribe that does not submit a plan to the USDA, or whose plan is not approved by the USDA, will be regulated by the USDA; provided that, states retain the ability to prohibit hemp production within their borders.

Marijuana continues to be classified as a Schedule I substance under the CSA. As a result, any cannabinoids (including CBD) derived from marijuana, as opposed to hemp, or any products derived from hemp containing in excess of 0.3% THC on a dry-weight basis, remain Schedule I substances under U.S. federal law. Cannabinoids derived from hemp are indistinguishable from those derived from marijuana, and confusion surrounding the nature of our smokable products containing hemp or CBD, inconsistent interpretations of the definition of "hemp", inaccurate or incomplete testing, farming practices and law enforcement vigilance or lack of education could result in our products being intercepted by federal and state law enforcement as marijuana and could interrupt and/or have a material adverse impact on our business. We could be required to undertake processes that could delay shipments, impede sales or result in seizures, proper or improper, that would be costly to rectify or remove and which could have a material adverse effect on our business, prospects, results of operations or financial condition. If we make mistakes in processing or labeling, and THC in excess of 0.3% on a dry-weight basis is found in our products, we could be subject to enforcement and prosecution under local, state, and federal laws which would have a negative impact on our business and operations.

Under the 2018 Farm Bill, states have authority to adopt their own regulatory regimes, and as such, regulations will likely continue to vary on a state-by-state basis. States take varying approaches to regulating the production and sale of hemp and hemp-derived products under state food and drug laws. The variance in state law and that state laws governing hemp production are rapidly changing may increase the chance of unfavorable law enforcement interpretation of the legality of the Company's operations as they relate to the cultivation of hemp. Further, such variance in state laws that may frequently change increases our compliance costs and risk of error.

While some states explicitly authorize and regulate the production and sale of hemp products or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities, other states maintain outdated drug laws that do not distinguish between marijuana, hemp and/or hemp-derived CBD, hemp-derived Delta 9 resulting in hemp being classified as a controlled substance under state law. In these states, sale of CBD and hemp-derived Delta 9, notwithstanding origin, is either restricted to state medical or adult-use marijuana program licensees or remains otherwise unlawful under state criminal laws. Variance in hemp regulation across jurisdictions is likely to persist. This patchwork of state laws may, for the foreseeable future, materially impact our business and financial condition, limit the accessibility of certain state markets, cause confusion amongst regulators, and increase legal and compliance costs.

There are no express protections in the United States under applicable federal or state law for possessing or processing hemp biomass derived from lawful hemp not exceeding 0.3% THC on a dry weight basis and intended for use in finished product, but that may temporarily exceed 0.3% THC during the interim processing stages. While it is a common occurrence for hemp biomass to have variance in THC content during interim processing stages after cultivation but prior to use in finished products, there is risk that state or federal regulators or law enforcement could take the position that such hemp biomass is a Schedule I controlled substance in violation of the CSA and similar state laws. Further, there is a risk that state regulators and/or law enforcement may interpret provisions of state law prohibiting unlawful marijuana activity to apply to in-process hemp at any facility where we manufacture our hemp smokables products so that such activity is considered unlawful under state law.

In the event that our operations are deemed to violate any laws or if we are deemed to be assisting others to violate a state or federal law, we could be subject to enforcement actions and penalties, and any resulting liability could cause us to modify or cease its operations.

Continued development of the industrial hemp and cannabis industries will be dependent upon new legislative authorization of industrial hemp and cannabis at the state level, and further amendment or supplementation of legislation at the federal level. Any number of events or occurrences could slow or halt progress all together in this space. While progress within the industrial hemp and cannabis industries is currently encouraging, growth is not assured. While there appears to be ample public support for favorable legislative action, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests. Any one of these factors could slow or halt use of industrial hemp and cannabis, which could negatively impact our business and financial results.

In addition, the general manufacture, labeling and distribution of our hemp smokables products is regulated by various federal, state, and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to sell products in the future.

The shifting compliance environment and the need to build and maintain robust systems to comply with different compliance in multiple jurisdictions increases the possibility that we may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to our business, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, any of which could adversely affect the ability to operate our business and its financial results.

***International expansion efforts would likely significantly increase our operational expenses.***

We may in the future expand into other geographic areas, which could increase our operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of our operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require us to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. We may not be able to successfully identify suitable acquisition and expansion opportunities or integrate such operations successfully with our existing operations.

***Our reliance on distributors, retailers and brokers could affect our ability to efficiently and profitably distribute and market our products, maintain our existing markets and expand our business into other geographic markets.***

Our ability to maintain and expand our existing markets for our products, and to establish markets in new geographic distribution areas, is dependent on our ability to establish and maintain successful relationships with reliable distributors, retailers and brokers strategically positioned to serve those areas. Most of our distributors, retailers and brokers sell and distribute competing products, including smokables products, and our products may represent a small portion of their business. The success of our distribution network will depend on the performance of the distributors, retailers, and brokers in our network. There is a risk they may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning our products in localities that may not be receptive to our product. Our ability to incentivize and motivate distributors to manage and sell our products is affected by competition from other hemp smokables companies who have greater resources than we do. To the extent that our distributors, retailers and brokers are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, including re-stocking the retail shelves with our products, our sales and results of operations could be adversely affected. Furthermore, such third parties' financial position or market share may deteriorate, which could adversely affect our distribution, marketing and sales activities.

Our ability to maintain and expand our distribution network and attract additional distributors, retailers and brokers will depend on a number of factors, some of which are outside our control. Some of these factors include:

● the level of demand for our brands and products in a particular distribution area;

● our ability to price our products at levels competitive with those of competing products; and

● our ability to deliver products in the quantity and at the time ordered by distributors, retailers and brokers.

We may not be able to successfully manage all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve success with regards to any of these factors in a geographic distribution area will have a material adverse effect on our relationships in that particular geographic area, thus limiting our ability to maintain or expand our market, which will likely adversely affect our revenues and financial results.

***We incur significant time and expense in attracting and maintaining key distributors, and a loss of distributors or retails accounts would harm our business.***

Our marketing and sales strategy depends in large part on the availability and performance of our independent distributors. We currently do not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments from some of our distributors. We may not be able to maintain our current distribution relationships or establish and maintain successful relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that we may have to incur additional expenditures to attract and maintain key distributors in one or more of our geographic distribution areas in order to profitably exploit our geographic markets.

We currently have approximately ten distributors who service numerous retail accounts. If we were to lose any of our distributors, or if they were to lose national, regional or larger retail accounts, our financial condition and results of operations could be adversely affected. While we continually seek to expand and upgrade our distributor network, we may not be able to maintain our distributor or retailer base. The loss of any of our distributors, or their significant retail accounts, could have adverse effects on our revenues, liquidity and financial results, could negatively impact our ability to retain our relationships with our other distributors and our ability to expand our market, and would place increased dependence on our other independent distributors and national accounts.

***Any pandemic, such as the COVID-19 pandemic, has and could continue to negatively affect various aspects of our business, make it more difficult for us to meet our obligations to our customers, and result in reduced demand for our products and services, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows.***

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, and it has since spread throughout other parts of the world, including the United States. Any outbreak of contagious diseases or other adverse public health developments could have a material adverse effect on our business operations. These impacts to our operations have included and could again in the future include disruptions or restrictions on the ability of our employees and customers to travel or our ability to pursue collaborations and other business transactions, travel to customers and/or promote our products at conferences or other live events, oversee the activities of our third-party manufacturers and suppliers. We may also be impacted by the temporary closure of the facilities of suppliers, manufacturers or customers.

In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, placed significant restrictions on travel and many businesses announced extended closures. These travel restrictions and business closures adversely impacted our operations locally and worldwide, including our ability to manufacture, market, sell or distribute our products. Such restrictions and closure have caused or may cause temporary closures of the facilities of our suppliers, manufacturers or customers. A disruption in the operations of our employees, suppliers, customers, manufacturers or access to customers would likely impact our sales and operating results. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.

***We rely on suppliers, manufacturers and contractors, and events adversely affecting them would adversely affect us.***

We intend to maintain a full supply chain for the provision of our hemp-based smokables products. Due to the novel and variable regulatory landscape for hemp and CBD/CBG/Delta 9 production in the United States, our third-party hemp and hemp smokables suppliers, manufacturers and contractors may elect, at any time, to decline or withdraw services necessary for our operations. Loss of these suppliers, manufacturers and contractors, including for non-hemp-based ingredients in our hemp smokables products, may have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, any significant interruption, negative change in the availability or economics of the supply chain or increase in the prices for the ingredients in our products provided by any such third-party suppliers, manufacturers and contractors could materially impact our business, financial condition, results of operations and prospects. Any inability to secure required supplies or to do so on appropriate terms could have a materially adverse impact on our business, financial condition, results of operations and prospects.

***We have two customers that account for a substantial portion of our revenues, and our business would be harmed were we to lose these customers.***

We have a purchase agreement in place with our largest customer, iHerb, since June 28, 2011. This agreement provides us with a license to commercialize and re-sell Kirkman products with set minimum order requirements. Our customer iHerb accounts for approximately 27% of the Company's total revenue for the year ended December 31, 2024, and approximately 22% for the year ended December 31, 2023. If we lose this customer, the company will lose a significant portion of our total revenues*.*

 

We have a reseller agreement in place with our second largest customer, OceanSide Health since April 18, 2022. This agreement provides OceanSide the ability to sell our Kirkman branded products on the Amazon platform. Oceanside represents approximately 26% of the Company's total revenue for the year ended December 31, 2024, and approximately 19% for the year ended December 31, 2023. We do have the ability to convert this business to a traditional Amazon account through another partner, so the risk of lost business is minimal.

***Wholesale price volatility may adversely affect operations.***

The hemp smokables industry is margin-based with gross profits typically dependent on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale and retail prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labor costs, shipping costs, economic situation and demand), taxes, government programs and policies for the hemp smokables and hemp industries (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the regulation of hemp and/or smokables products), and other market conditions, all of which are factors beyond our control. Our operating income will be sensitive to changes in the price of hemp and other product ingredients, and the overall condition of the hemp and smokables industries, as our profitability is directly related to the price of hemp and our other smokables ingredients. There is currently no established market price for hemp, and the price of hemp is affected by numerous factors beyond our control. Ingredient price volatility may have a material adverse effect on our business, financial condition, and results of operations.

***We may sustain losses that cannot be recovered through insurance or other preventative measures.***

There is no assurance that we will not incur uninsured liabilities and losses as a result of the conduct of its business. While we currently have some liability insurance coverage, but the policy does not provide a high level of coverage. We plan to continue to review our liability coverage in the light of our expanding operations in order to insure against potential major insurable liabilities. Should uninsured losses occur, shareholders could lose their invested capital.

***We may be subject to product liability claims and other claims of our customers and partners.***

The sale of hemp smokables products to consumers involves a certain level of risk of product liability claims and the associated adverse publicity. Because use of our hemp smokables products could cause injury to consumers if packaging or ingredients are defective, we are subject to a risk of claims for such injuries and damages. We could also be named as co-parties in product liability suits that are brought against manufacturing partners that produce our hemp smokables products, packaging for those products, or the ingredients in those products.

In addition, our customers and partners may bring suits against us alleging damages for the failure of our products to meet stated specifications or other requirements. Any such suit, even if not successful, could be costly, disrupt the attention of our management and damage our negotiations with distributors and/or customers. Any attempt by us to limit our product liability in our contracts may not be enforceable or may be subject to exceptions. While we do have product liability insurance, our amounts of coverage may be inadequate to cover all potential liability claims. Insurance coverage, particularly as it relates to products relating to the hemp industry, is expensive, and additional coverage may be difficult to obtain. Also, additional insurance coverage may not be available in the future on acceptable terms and may not be sufficient to cover potential claims. We cannot be sure that our contract manufacturers or manufacturing partners who produce our hemp smokables products, packaging and ingredients will have adequate insurance coverage themselves to cover against potential claims. If we experience a large insured loss, it may exceed any insurance coverage limits we have at that time, or our insurance carrier may decline to cover us or may raise our insurance rates to unacceptable levels, any of which could impair our financial position and potentially cause us to go out of business.

***If we encounter product recalls or other product quality issues, our business may suffer.***

Product quality issues, real or imagined, or allegations of product contamination, even when false or unfounded, could tarnish our image and could cause consumers to choose other products. In addition, because of changing government regulations or implementation thereof, or allegations of product contamination, we may be required from time to time to recall products entirely or from specific markets. Product recalls could affect our profitability and could negatively affect brand image.

***It is difficult to predict the timing and amount of our sales, and as a result our sales forecasts are uncertain.***

Many of our white label clients (clients who we manufacture product for, and which product is labeled with the clients' own branding and then sold by the clients) are required to place minimum orders with us, but we cannot accurately predict what our sales will be.

Our independent distributors and national accounts are not generally required to place minimum monthly orders for our products. In order to reduce their inventory costs, independent distributors typically order products from us on a "just in time" basis in quantities and at such times based on the demand for the products in a particular distribution area. Accordingly, we cannot accurately predict the timing or quantity of purchases by any of our independent distributors or whether any of our distributors will continue to purchase products from us in the same frequencies and volumes as they may have done in the past. Additionally, our larger distributors and regional partners may make orders that are larger than we have historically been required to fill. Shortages in inventory levels, supply of raw materials or other key supplies could also negatively affect us.

***If we do not adequately manage our inventory levels, our operating results could be adversely affected.***

We need to maintain adequate inventory levels to be able to deliver products to distributors on a timely basis. Our inventory supply depends on our ability to correctly estimate demand for our products. Our ability to estimate demand for our products is imprecise, particularly for new products, seasonal promotions and new markets. If we materially underestimate demand for our products or are unable to maintain sufficient inventory of raw materials, we might not be able to satisfy demand on a short-term basis. If we overestimate distributor or retailer demand for our products, we may end up with too much inventory, resulting in higher storage costs, increased trade spend and the risk of inventory spoilage. If we fail to manage our inventory to meet demand, we could damage our relationships with our distributors and retailers and could delay or lose sales opportunities, which would unfavorably impact our future sales and adversely affect our operating results. In addition, if the inventory of our products held by our distributors and retailers is too high, they will not place orders for additional products, which would also unfavorably impact our sales and adversely affect our operating results.

***Increases in costs or shortages of raw materials could harm our business and financial results.***

In addition to the primary ingredient, the hemp blend, we use other principal ingredients, which manufacturing costs are subject to fluctuation. Substantial increases in the prices of ingredients, raw materials and packaging materials, used to produce our products, to the extent that they cannot be recouped through increases in the prices of finished hemp smokables products, would increase our operating costs and could reduce our profitability. If the supply of these raw materials is impaired or if prices increase significantly, it could affect the affordability of our products and reduce sales.

If we or any contract manufacturers we may use are unable to secure sufficient ingredients or raw materials including hemp, the various paper products and filters, and other key supplies, we might not be able to satisfy demand for our hemp smokables products on a short-term basis. Moreover, in the past there have been industry-wide shortages of hemp, papers and other ingredients in our products, and these shortages could occur again from time to time in the future, which could interfere with and delay production of our products and could have a material adverse effect on our business and financial results.

In addition, suppliers could fail to provide ingredients or raw materials on a timely basis, or fail to meet our performance expectations, for a number of reasons, including, for example, disruption to the global supply chain as a result of the COVID-19 pandemic, which caused serious disruption to our business, increased our costs, decreased our operating efficiencies and had a material adverse effect on our business, results of operations and financial condition.

***Increases in costs of energy and increased regulations may have an adverse impact on our gross margin.***

Over the past few years, volatility in the global oil markets has resulted in high fuel prices, which many shipping companies have passed on to their customers by way of higher base pricing and increased fuel surcharges. If fuel prices increase, we expect to experience higher shipping rates and fuel surcharges, as well as energy surcharges on our raw materials. It is hard to predict what will happen in the fuel markets and beyond. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers.

***Disruption within our supply chain, contract manufacturing or distribution channels could have an adverse effect on our business, financial condition and results of operations.***

Our ability, through our suppliers, business partners, contract manufacturers, independent distributors and retailers, to make, move and sell products is critical to our success. Damage or disruption to our suppliers or to manufacturing or distribution capabilities due to weather, natural disaster, fire or explosion, terrorism, pandemics such as COVID-19, influenza, and other viruses, labor strikes or other reasons, could impair the manufacture, distribution and sale of our products. Many of these events are outside of our control. Failure to take adequate steps to protect against or mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations.

***If we are unable to attract and retain key personnel, our efficiency and operations would be adversely affected; in addition, staff turnover causes uncertainties and could harm our business.***

Our success depends on our ability to attract and retain highly qualified employees in such areas as finance, sales, marketing and product development and distribution. We compete to hire new employees, and, in some cases, must train them and develop their skills and competencies. We may not be able to provide our employees with competitive salaries, and our operating results could be adversely affected by increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs.

***If we lose the services of our executive officers, our future operations could be impaired until such time as a qualified replacement can be found.***

Our business plan relies significantly on the continued services of Eric Gripentrog, our Chief Executive Officer and Tariq Rahim, our Chief Financial Officer. If we were to lose the services of Mr. Gripentrog and/or Mr. Rahim, our ability to obtain new business and new strategic partners, as well as our ability to manage our operations and finances, could be materially impaired.

***We are required to indemnify our directors and officers.***

Our Articles of Incorporation and Bylaws provide that we will indemnify our officers and directors to the maximum extent permitted by Delaware law, provided that the officer or director did not act in bad faith or breach his or her duty to us or our stockholders, or that it is more likely than not that it will ultimately be determined that the officer or director has met the standards of conduct which make it permissible for under Delaware law for us to indemnify the officer or director. If we were called upon to indemnify an officer or director, then the portion of its assets expended for such purpose would reduce the amount otherwise available for our business.

***If we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively.***

We rely on a combination of trademark and trade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. Failure to protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks and trade secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly our trademarks and trade secrets, as crucial to our business and our success. However, the steps taken by us to protect these proprietary rights may not be adequate and may not prevent third parties from infringing or misappropriating our trademarks, trade secrets or similar proprietary rights. In addition, other parties may seek to assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit our products or recoup our associated research and development costs.

***Disruptions to our information technology systems due to cyber-attacks or our failure to upgrade and adjust our information technology systems, may materially impair our operations, hinder our growth and materially and adversely affect our business and results of operations.***

We believe that appropriate information technology, or IT, infrastructure is important in order to support our daily operations and the growth of our business. If we experience difficulties in implementing new or upgraded information systems or experience significant system failures, or if we are unable to successfully modify our management information systems or respond to changes in our business needs, we may not be able to effectively manage our business, and we may fail to meet our reporting obligations. Additionally, if our current arrangements and plans are not operated as planned, we may not be able to effectively recover our information system in the event of a crisis, which may materially and adversely affect our business and results of operations.

In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We can provide no assurance that our current IT system or any updates or upgrades thereto and the current or future IT systems of our potential distributors use or may use in the future, are fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats. Legislative or regulatory action in these areas is also evolving, and we may be unable to adapt our IT systems or to manage the IT systems of third parties to accommodate these changes. We have experienced and expect to continue to experience actual or attempted cyber-attacks of our IT networks. Although none of these actual or attempted cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future.

***Our business is subject to many regulations and noncompliance is costly.***

The production, marketing and sale of our hemp and nutraceutical products, including contents, labels, and containers, are subject to the rules and regulations of various federal, provincial, state and local health agencies. If a regulatory authority finds that a current or future product or production batch or "run" is not in compliance with any of these regulations, we may be fined, or production may be stopped, which would adversely affect our financial condition and results of operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market our products. Furthermore, the rules and regulations are subject to change from time to time and while we closely monitor developments in this area, we cannot anticipate whether changes in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have a material adverse effect on our financial condition and results of operations.

***Significant additional labeling or warning requirements may inhibit sales of affected products.***

Various jurisdictions may seek to adopt significant additional product labeling or warning requirements relating to the chemical content or perceived adverse health consequences of our hemp products. These types of requirements, if they become applicable to one or more of our products under current or future environmental or health laws or regulations, may inhibit sales of such products.

***Our industry may become subject to expanded regulation and increased enforcement by the Food and Drug Administration ("FDA") and the Federal Trade Commission ("FTC").***

The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, and distribution of food, dietary supplements, drugs, cosmetics, medical devices, biologics, and tobacco products. Our products are subject to law and regulation by the FDA. Moreover, the regulatory status of our products is currently in a state of flux as the FDA attempts to determine the appropriate manner in which to regulate these products. Thus, the regulatory approach is still evolving, and we may be required to seek the FDA's approval to market our products. It is also possible that the FDA may simply issue a regulation setting forth the conditions in which such products may be marketed, or it may simply prohibit these products.

Given the growing cannabidiol (CBD) products market, the U.S. Food and Drug Administration has convened a high-level internal working group to explore potential regulatory pathways for CBD products. After careful review, the FDA has concluded that a new regulatory pathway for CBD is needed that balances individuals' desire for access to CBD products with the regulatory oversight needed to manage risks. The agency is prepared to work with Congress on this matter.<sup>6</sup> Once the FDA makes a decision in relation to hemp-based products, we will follow the rules the FDA adopts.

<sup>6</sup> www.FDA.gov.

Because the FDA's regulatory process is subject to change, we cannot predict the likely outcome. In addition, the FTC under the Federal Trade Commission Act ("FTC Act") requires that product advertising be truthful, substantiated and not misleading. We believe that our advertising meets these requirements. However, the FTC may bring a challenge at any time in evaluating our compliance with the FTC Act. In addition, most states where our products are legal provide their own regulatory guidelines and regulations in connection with cigarette or other smokable product sales. Any failure by us to remain current on state regulatory changes could negatively affect our ability to operate our business.

At the moment, our hemp manufactured dietary supplement products are produced in an FDA registered and cGMP facility strictly following SOPs to ensure consumer safety and consistency and reliability batch to batch. Our supplement product packaging, labeling, and marketing collateral make no disease claims that would run afoul of the Dietary Supplement Heath and Education Act (DSHEA). Additionally, we design our product packaging to appeal to adults, not children. By taking these actions, we are substantially reducing the risk of any FDA enforcement because these are two primary areas of FDA enforcement.

Quality Control reviews production at specified check points. Raw materials are tested for ID, potency, and contamination using ISO 17025 certified labs. Finished products are tested for strength, composition, and contamination using ISO 17025 certified labs. All products are produced in isolated rooms, with cleaning and ATP testing performed prior to use. Rooms are thoroughly cleaned after use, and retested before new products are introduced. All hemp products are tested to ensure < 0.3% THC. They are also tested for solvents, pesticides, and mycotoxins (where relevant). QC oversight occurs from incoming of the raw material and components, through the entire manufacturing, packaging, labeling, and boxing processes. All hemp derived raw materials and finished products are stored under lock and key. Only authorized persons are allowed access.

FDA regulates both finished dietary supplement products and dietary ingredients. FDA regulates dietary supplements under a different set of regulations than those covering "conventional" foods and drug products. Under the Dietary Supplement Health and Education Act of 1994 (DSHEA):

● Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded. That means that these firms are responsible for evaluating the safety and labeling of their products before marketing to ensure that they meet all the requirements of the Federal Food, Drug, and Cosmetic Act as amended by DSHEA and FDA regulations.

● FDA has the authority to take action against any adulterated or misbranded dietary supplement product after it reaches the market.<sup>7</sup>

Our manufactured dietary supplement products are produced following SOPs, to ensure there is consistency and reliability batch to batch. Quality Control reviews production at specified check points. Raw materials are tested for ID, potency, and contamination using ISO 17025 certified labs. Finished products are tested for strength, composition, and contamination using ISO 17025 certified labs. All products are produced in isolated rooms, with cleaning and ATP testing performed prior to use. Rooms are thoroughly cleaned after use, and retested before new products are introduced. QC oversight occurs from incoming of the raw material and components, through the entire manufacturing, packaging, labeling, and boxing processes.

<sup>7</sup> www.fda.gov/food/dietary-supplements.

***Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.***

We may become party to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction of management attention away from our business operations. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from those envisioned by our current assessments and estimates. Our policies and procedures require strict compliance by our employees and agents with all U.S. and local laws and regulations applicable to our business operations, including those prohibiting improper payments to government officials. Nonetheless, our policies and procedures may not ensure full compliance by our employees and agents with all applicable legal requirements. Improper conduct by our employees or agents could damage our reputation or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits.

***Climate change may negatively affect our business.***

There is growing concern that a gradual increase in global average temperatures may cause an adverse change in weather patterns around the globe resulting in an increase in the frequency and severity of natural disasters. Changing weather patterns could have a negative impact on agricultural productivity, which may limit availability or increase the cost of certain key ingredients such as hemp, natural flavors and other ingredients used in our products. Also, increased frequency or duration of extreme weather conditions may disrupt the productivity of our facilities, the operation of our supply chain or impact demand for our products. In addition, the increasing concern over climate change may result in more regional, federal and global legal and regulatory requirements and could result in increased production, transportation and raw material costs. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.

***Our business and operations would be adversely impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.***

The proper functioning of our own information technology (IT) infrastructure is critical to the efficient operation and management of our business. We may not have the necessary financial resources to update and maintain our IT infrastructure, and any failure or interruption of our IT system could adversely impact our operations. In addition, our IT is vulnerable to cyberattacks, computer viruses, worms and other malicious software programs, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. We believe that we have adopted appropriate measures to mitigate potential risks to our technology infrastructure and our operations from these IT-related and other potential disruptions. However, given the unpredictability of the timing, nature and scope of any such IT failures or disruptions, we could potentially be subject to downtimes, transactional errors, processing inefficiencies, operational delays, other detrimental impacts on our operations or ability to provide products to our customers, the compromising of confidential or personal information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.

***Our results of operations may fluctuate from quarter to quarter for many reasons, including seasonality.***

Our sales may be seasonal, and we experience fluctuations in quarterly results as a result of many factors. We expect to generate a greater percentage of our revenues during the warm weather months of April through September. The timing of customer purchases will vary each year, and sales can be expected to shift from one quarter to another. As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance period comparisons or results expected for the fiscal year.

In addition, our operating results may fluctuate due to a number of other factors including, but not limited to:

● Our ability to maintain, develop and expand distribution channels for current and new products, develop favorable arrangements with third party distributors of our products and minimize or reduce issues associated with engaging new distributors and retailers, including, but not limited to, transition costs and expenses and down time resulting from the initial deployment of our products in each new distributor's network;

● Unilateral decisions by distributors, grocery store chains, specialty chain stores, club stores, mass merchandisers and other customers to discontinue carrying all or any of our products that they are carrying at any time;

● Our ability to manage our resources to sufficiently support general operating activities, promotion allowances and slotting fees, promotion and selling activities, and capital expansion, and our ability to sustain profitability;

● Our ability to meet the competitive response by much larger, well-funded and established companies currently operating in the hemp smokables industry, as we introduce new competitive products, and our hemp smokables products; and

● Competitive products and pricing pressures and our ability to gain or maintain share of sales in the marketplace as a result of actions by competitors.

Due to these and other factors, our results of operations have fluctuated from period to period and may continue to do so in the future, which could cause our operating results in a particular quarter to fail to meet market expectations.

***Changes in our effective tax rate may impact our results of operations.***

We are subject to taxes in the U.S. and other jurisdictions. Tax rates in these jurisdictions may be subject to significant change due to economic and/or political conditions. A number of other factors may also impact our future effective tax rate including:

● the jurisdictions in which profits are determined to be earned and taxed;

● the resolution of issues arising from tax audits with various tax authorities;

● changes in valuation of our deferred tax assets and liabilities;

● increases in expenses not deductible for tax purposes, including write-offs of acquired intangibles and impairment of goodwill in connection with acquisitions;

● changes in availability of tax credits, tax holidays, and tax deductions;

● changes in share-based compensation; and

● changes in tax laws or the interpretation of such tax laws and changes in generally accepted accounting principles.

Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution by one or more taxing authorities could have a material impact on the results of our operations. Further, we may be unable to utilize our net operating losses in the event a change in control is determined to have occurred.

***Global economic, political, social and other conditions, may continue to adversely impact our business and results of operations.***

The hemp industry can be affected by macro-economic factors, including changes in national, regional, and local economic conditions, unemployment levels and consumer spending patterns, which together may impact the willingness of consumers to purchase our products as they adjust their discretionary spending. Adverse economic conditions may adversely affect the ability of our distributors to obtain the credit necessary to fund their working capital needs, which could negatively impact their ability or desire to continue to purchase products from us in the same frequencies and volumes as they have done in the past. If we experience similar adverse economic conditions in the future, sales of our products could be adversely affected, collectability of accounts receivable may be compromised, and we may face obsolescence issues with our inventory, any of which could have a material adverse impact on our operating results and financial condition.

 ***We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine and the continuing hostilities involving the State of Israel. Our business may be materially adversely affected by any negative impact on the global economy and capital markets resulting from such conflicts or any other geopolitical tensions.***

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U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.

Additionally, Russia's prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People's Republic, and the so-called Luhansk People's Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication ("SWIFT") payment system, expansive ban on imports and exports of products to and from Russia and ban on exportation of U.S denominated banknotes to Russia or persons located there. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds and sell the shares we are offering. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this prospectus.

Further, the continued hostilities between the State of Israel and Hamas and the potential for additional hostilities among Israel, Iran and the United States all contribute to geopolitical instability and economic uncertainty and may negatively affect the credit and capital markets.

***Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.***

The United States generally accepted accounting principles and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of matters that are relevant to our business, such as, but not limited to, stock-based compensation, inventory, revenue recognition, trade spend and promotions, and income taxes are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes to these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could adversely affect our reported financial results.

***The transition to a new presidential administration in the United States, including the potential use and effects of tariffs to address the administration's policy goals, could materially impact the macroeconomic framework in which we operate.***

The transition to a new presidential administration in the United States could impact our business and operations, including the macroeconomic framework in which we operate. We are unable to precisely predict what actions the new administration will take. For example, the Trump administration has expressed various intentions to impose tariffs on certain goods or other countries to the United States, and has indicated that his administration will treat national security much differently than the current and previous presidential administrations. Since taking office in January 2025, the Trump administration has already issued numerous executive orders, and has utilized the threat of tariffs and has imposed specific tariffs on products imported to the United States by various countries, including Canada, in connection with the implementation of its domestic policies. Any trade wars, through the implementation of tariffs or otherwise, could materially and adversely affect us, directly and indirectly, including by adversely impacting the supply chains for our operations, and increasing the costs of services we provide and utilize. Moreover, the change in presidential administration, as well as a transition of control in the House of Representatives and United States Senate, creates regulatory uncertainty and it remains unclear as to what specifically the President would or would not do with respect to certain programs and initiatives.

For the fiscal year ended December 31, 2024, The Company incurred supplier costs of approximately $2.960 million. During that period the Company sourced approximately one third of its raw materials from the United States, approximately one third from the People's Republic of China and the remaining third from a variety of other global jurisdictions. The status of current trade negotiations with China and other nations is uncertain and, therefore, the tariff level on imports from China and such nations is extremely volatile and unpredictable.

As of August 1, 2025 , the Company has not incurred increased costs or disruptions to our supply chain due to changes in tariff levels. The Company intends to offset increased costs attributable to tariffs, to the full extent reasonably practicable, by increasing prices or by instituting cost cutting measures such that Company margins are protected and maintained.

***Significant tariffs or other restrictions imposed on imports by the U.S. and related countermeasures taken by impacted countries could have a material adverse effect on our operations and financial results.***

If significant tariffs or other restrictions are imposed on imports by the U.S. and related countermeasures are taken by foreign countries, our business, including results of operations, cash flows and financial condition, may be adversely affected. In January 2025, during the initial days of U.S. President Trump's second term, the U.S. announced the imposition of additional substantial tariffs on imports from various countries, including China, Canada and Mexico, and the subject countries have imposed or indicated their intention to impose retaliatory counter measures .. These and other tariffs and countermeasures could increase the costs for our operations, disrupt global supply chains and create additional operational challenges. Additionally, ongoing trade tensions and uncertainty regarding future trade policies could negatively impact global economic conditions and consumer confidence, further affecting our business performance.

**Risks Related to This Offering and Ownership of Our Common Stock**

***The direct listing process differs from an initial public offering underwritten on a firm-commitment basis.***

 ****

This is not an underwritten initial public offering of common stock. This listing of our common stock on Nasdaq differs from an underwritten initial public offering in several significant ways, which include, but are not limited to, the following:

● There are no underwriters engaged on a firm-commitment basis. Consequently, prior to the opening of trading on Nasdaq, there will be no traditional book building process and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on Nasdaq. Therefore, buy and sell orders submitted prior to and at the opening of trading of our common stock on Nasdaq will not have the benefit of being informed by a published price range or a price at which the underwriters initially sold shares to the public, as would be the case in an initial public offering underwritten on a firm-commitment basis. Moreover, there will be no underwriters engaged on a firm-commitment underwritten basis assuming risk in connection with the initial resale of shares of our common stock. In an initial public offering underwritten on a firm-commitment basis, the underwriters may engage in "covered" short sales in an amount of shares representing the underwriters' option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise the underwriters' option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters' option to purchase additional shares. Purchases in the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have the effect of preventing a decline in the market price of shares. Given that there will be no underwriters' option to purchase additional shares and no underwriters engaging in stabilizing transactions, there could be greater volatility in the public price of our common stock during the period immediately following the listing. See also "Our shares of common stock have no prior public market. An active trading market may not develop or continue to be liquid and the market price of our shares of common stock may be volatile."

● There is not a fixed number of shares of common stock available for sale. Therefore, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any or all of their common stock and there may initially be a lack of supply of, or demand for, our common stock on Nasdaq. Alternatively, we may have a large number of Registered Stockholders or other existing stockholders who choose to sell their common stock in the near term resulting in an oversupply of our common stock, which could adversely impact the public price of our common stock once listed on Nasdaq and thereafter.

● None of our Registered Stockholders (except our executive officers, directors and holders of 5% or more of our common stock (the " Lock-Up Parties") who entered into lock-ups in connection with the private placement) or other existing stockholders have entered into contractual lock-up agreements or other contractual restrictions on transfer. In a firm-commitment underwritten initial public offering, it is customary for an issuer's officers, directors, and many of its other stockholders to enter into a 180-day contractual lock-up arrangement with the underwriters to help promote orderly trading immediately after such initial public offering. Consequently, any of our stockholders, other than the Lock-Up Parties, may sell any or all of their common stock at any time (subject to any restrictions under applicable law), including immediately upon listing. If such sales were to occur in a significant volume in a short period of time following our listing, it may result in an oversupply of our common stock in the market, which could adversely impact the public price of our common stock.

● We will not conduct a traditional "roadshow" with underwriters prior to the opening of trading on Nasdaq. Instead, we intend to host an investor day, as well as engage in certain other investor education meetings. In advance of the investor day, we will announce the date for such day over financial news outlets in a manner consistent with typical corporate outreach to investors. We will prepare an electronic presentation for this investor day, which will have content similar to a traditional roadshow presentation, and make one version of the presentation publicly available, without restriction, on a website. There can be no guarantees that the investor day and other investor education meetings will have the same impact on investor education as a traditional "roadshow" conducted in connection with a firm-commitment underwritten initial public offering. As a result, there may not be efficient price discovery with respect to our common stock or sufficient demand among investors immediately after our listing, which could result in a more volatile public price of our common stock.

There have been very few companies that have undertaken direct listings on a national securities exchange. Accordingly, there is insufficient historical data to predict what level of price and volume volatility may be incurred. Consequently, significant and swift negative price movement in our common stock is very possible.

Further the price of our securities sold in the private placement transaction may bear little or no relation to the trading price of our common stock at or subsequent to the opening of trading on Nasdaq.

Such differences from a firm-commitment underwritten initial public offering could result in a volatile trading price for our common stock and uncertain trading volume, which may adversely affect your ability to sell any common stock that you may purchase.

***Our common stock currently has no public market. An active trading market may not develop or continue to be liquid and the market price of shares of our common stock may be volatile.***

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We expect our common stock to be listed and traded on Nasdaq. Prior to the listing on Nasdaq, there has not been a public market for any of our securities, and an active market for our common stock may not develop or be sustained after the listing, which could depress the market price of shares of our common stock and could affect the ability of our stockholders to sell our common stock. In the absence of an active public trading market, investors may not be able to liquidate their investments in our common stock. An inactive market may also impair our ability to raise capital by selling shares of our common stock, our ability to motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using shares of our common stock as consideration.

In addition, we cannot predict the prices at which our common stock may trade on Nasdaq following the listing of our common stock. The opening trading price of our common stock may be unrelated to historical sales prices of our common stock and the market price of our common stock may fluctuate significantly in response to various factors, some of which are beyond our control. In particular, as this listing is taking place through a novel process that is not a firm-commitment underwritten initial public offering, there will be no traditional book building process and no price at which traditional underwriters initially sold shares to the public to help inform efficient price discovery with respect to the opening trades on Nasdaq. On the day that our shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy and sell orders and will begin to continuously generate the indicative Current Reference Price on the basis of such accepted orders. The Current Reference Price is calculated each second and, during a 10-minute "Display Only" period, is disseminated, along with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following the "Display Only" period, a "Pre-Launch" period begins, during which the Advisor, in its capacity as our financial advisor, must notify Nasdaq that our shares are "ready to trade." Once the Advisor has notified Nasdaq that our shares of common stock are ready to trade, Nasdaq will confirm the Current Reference Price for our shares of common stock, in accordance with Nasdaq rules. If the Advisor then approves proceeding at the Current Reference Price, the applicable orders that have been entered will be executed at such price and regular trading of shares of our common stock on Nasdaq will commence, subject to Nasdaq conducting validation checks in accordance with Nasdaq rules. The Advisor will determine when our shares of common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations of volume, timing and price. In particular, the Advisor will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. If the Advisor does not approve proceeding at the Current Reference Price (for example, due to the absence of adequate preopening buy and sell interest), the Advisor will request that Nasdaq delay the open until such a time that sufficient price discovery has been made to ensure a reasonable amount of volume crosses on the opening trade. For more information, see "*Plan of Distribution*."

Additionally, prior to the opening trade, there will not be a price at which underwriters initially sold shares of common stock to the public as there would be in a firm-commitment underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by Nasdaq from various broker-dealers. Consequently, upon listing on Nasdaq, the public price of our common stock may be more volatile than in a firm-commitment underwritten initial public offering and could decline significantly and rapidly.

Furthermore, because of our novel listing process on Nasdaq, Nasdaq's rules for ensuring compliance with its initial listing standards, such as those requiring a valuation or other compelling evidence of value, are untested. In the absence of a prior active public trading market for our common stock, if the price of our common stock or our market capitalization falls below those required by Nasdaq's eligibility standards, we may not be able to satisfy the ongoing listing criteria and may be required to delist.

In addition, because of our novel listing process, individual investors, retail or otherwise, may have greater influence in setting the opening public price and subsequent public prices of our common stock on Nasdaq and may participate more in our initial trading than is typical for a firm-commitment underwritten initial public offering. These factors could result in a public price of our common stock that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading price of our common stock and an unsustainable trading price if the price of our common stock significantly rises upon listing and institutional investors believe our common stock is worth less than retail investors, in which case the price of our common stock may decline over time. Further, if the public price of our common stock is above the level that investors determine is reasonable for our common stock, some investors may attempt to short our common stock after trading begins, which would create additional downward pressure on the public price of our common stock. To the extent that there is a lack of consumer awareness among retail investors, such a lack of consumer awareness could reduce the value of our common stock and cause volatility in the trading price of our common stock. In addition, demand for our common stock may be adversely affected by any actual or perceived damage to our public reputation or brand recognition. As a consequence, significant and swift declines in the price of our common stock are possible.

A direct listing, such as our Direct Listing, complicates the ability for a plaintiff to make a claim under Section 11 of the Securities Act. In order to bring such a claim a plaintiff must be able to trace their purchased shares to a specific registration statement that allegedly contains false or misleading information. In a firm commitment underwritten initial public offering it is fairly straightforward to tie shares to a specific registration statement. With a direct listing, and in light of today's vast electronic and fungible markets, it can be very difficult for a plaintiff to practically trace their specific shares to a particular registration statement. Notwithstanding this level of difficulty, in 2023 the Supreme Court affirmed the traceability requirement for all Section 11 claims. In a subsequent decision, the Ninth Circuit Court of Appeals also extended the traceability requirement to claims under Section 12(a)(2) of the Securities Act for an allegedly untrue statement of a material fact or omission of a material fact in a registration statement.

The public price of our common stock following the listing also could be subject to wide fluctuations in response to the risk factors described in this prospectus and others beyond our control, including:

● changes in the industries in which we operate;

● variations in our operating performance and the performance of our competitors in general;

● actual or anticipated fluctuations in our quarterly or annual operating results;

● publication of research reports by securities analysts about us or our competitors or our industry;

● the public's reaction to our press releases, our other public announcements and our filings with the SEC;

● our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;

● additions and departures of key personnel;

● changes in laws and regulations affecting our business;

● commencement of, or involvement in, litigation involving us;

● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

● the volume of shares of our common stock available for public sale; and

● general economic and political conditions such as recessions, interest rates, fuel prices, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism.

In addition, securities exchanges have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our common stock shortly following the listing of our common stock on Nasdaq as a result of the supply and demand forces described above. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results of operations and financial condition.

***We may not be able to satisfy listing requirements of NASDAQ or obtain or maintain a listing of our common stock on NASDAQ.***

If our common stock is listed on NASDAQ, we must meet certain financial and liquidity criteria to maintain such listing. If we violate NASDAQ's listing requirements, or if we fail to meet any of NASDAQ's listing standards, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from NASDAQ may materially impair our shareholders' ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.

***Listing our common stock on a securities exchange will increase our regulatory burden.***

We intend to apply for the listing of our common stock under the symbol "MEHA" on the NASDAQ. There is no guarantee that our application will be approved in connection with this offering. Although to date we have not been subject to the continuous and timely disclosure requirements of exchange rules, regulations and policies of NASDAQ, we are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial management control systems to manage our obligations as a public company listed on NASDAQ. These areas include corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal controls over financial reporting. However, we cannot assure holders of our shares that these and other measures that we might take will be sufficient to allow us to satisfy our obligations as a public company listed on NASDAQ on a timely basis and that we will be able to achieve and maintain compliance with applicable listing requirements. In addition, compliance with reporting and other requirements applicable to public companies listed on NASDAQ will create additional costs for us and will require the time and attention of management. We cannot predict the amount of the additional costs that we might incur, the timing of such costs or the effects that management's attention to these matters will have on our business.

***The market price of our common stock may fluctuate, and you could lose all or part of your investment.***

After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly and in part as a result of the Direct listing as opposed to an underwritten initial public offering. In addition, the market price of our common stock may fluctuate significantly in response to several factors, most of which we cannot control, including:

● actual or anticipated variations in our periodic operating results;

● increases in market interest rates that lead investors of our common stock to demand a higher investment return;

● changes in earnings estimates;

● changes in market valuations of similar companies;

● actions or announcements by our competitors;

● adverse market reaction to any increased indebtedness we may incur in the future;

● additions or departures of key personnel;

● actions by shareholders;

● speculation in the media, online forums, or investment community; and

● our intentions and ability to list our common stock on NASDAQ and our subsequent ability to maintain such listing.

Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.

***Future sales of common stock by our Registered Stockholders and other existing stockholders could cause our share price to decline.***

We currently expect our common stock to be listed and traded on Nasdaq. Prior to listing on Nasdaq, there has been no public market for our common stock and there has not been a sustained history of trading in our common stock in "over-the-counter" markets. While our common stock may be sold after our listing on Nasdaq by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 under the Securities Act, unlike a firm-commitment underwritten initial public offering, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any of their shares of common stock and there may initially be a lack of supply of, or demand for, common stock on Nasdaq. As described herein, certain shares of our common stock outstanding as of the date hereof will be registered under this registration statement. There can be no assurance that the Registered Stockholders and other existing stockholders will not sell all of their shares of common stock, resulting in an oversupply of our common stock on Nasdaq. In the case of a lack of supply of our common stock, the trading price of our common stock may rise to an unsustainable level. Further, institutional investors may be discouraged from purchasing our common stock if they are unable to purchase a block of our common stock in the open market due to a potential unwillingness of our existing stockholders to sell a sufficient amount of common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading price. If institutional investors are unable to purchase our common stock, the market for our common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our common stock. In the case of a lack of market demand for our common stock, the trading price of our common stock could decline significantly and rapidly after our listing. Therefore, an active, liquid and orderly trading market for our common stock may not initially develop or be sustained, which could significantly depress the public price of our common stock and/or result in significant volatility, which could affect your ability to sell your shares of common stock.

***You may be diluted by future issuances of preferred stock or additional common stock in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.***

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Prior to the effectiveness of the registration statement of which this prospectus forms a part, we may adopt an amended and restated certificate of incorporation which will authorize us to issue shares of common stock and options, rights, warrants and appreciation rights relating to our common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion. We could issue a significant number of shares of common stock in the future in connection with investments or acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our common stock.

The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of shares of our common stock, either by diluting the voting power of our common stock if the preferred stock votes together with the common stock as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote, even if the action were approved by the holders of our shares of our common stock.

The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price, causing economic dilution to the holders of common stock.

***Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.***

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We currently intend to retain all available funds and any future earnings to fund the development, commercialization and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Our future ability to pay cash dividends on our common stock may also be limited by the terms of any future debt securities or credit facility*.*** As a result, capital appreciation, if any, of the common stock you purchase in this offering will be your sole source of gain for the foreseeable future.

***We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.***

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We are an "emerging growth company," as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) having the option of delaying the adoption of certain new or revised financial accounting standards, (iii) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. Further, pursuant to Section 107 of the JOBS Act, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) December 31, 2028, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates was $700.0 million or more as of the last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.

It is possible that some investors will find our common stock less attractive as a result of the foregoing, which may result in a less active trading market for our common stock and higher volatility in our stock price.

 ***We will not receive any proceeds of this offering.***

Any proceeds derived from the sale of shares of our common stock pursuant to this offering shall solely be for the account of the respective selling Registered Stockholder. The Company will receive no proceeds from sale of any shares covered by this prospectus.

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***We do not intend to pay any cash dividends on our shares of common stock in the near future, so our shareholders will not be able to receive a return on their shares unless they sell their shares.***

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. There is no assurance that future dividends will ever be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell their shares, and they may be unable to sell their shares on favorable terms or at all.

***If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.***

Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.

***Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline and would result in the dilution of your holdings.***

Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lockups expire, could adversely affect the market price of our common stock.

***Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.***

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.

***We are authorized to issue "blank check" preferred stock without stockholder approval, which could adversely impact the rights of holders of our common stock.***

Our articles of incorporation authorize us to issue shares of "blank check" preferred stock, meaning our board of directors can designate the rights and preferences of classes or series of such preferred stock without shareholder approval. Any preferred stock that we issue in the future may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of common stock to current stockholders and could adversely affect the market price, if any, of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

***If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.***

The Securities and Exchange Commission, or the SEC, has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on NASDAQ or another national securities exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser's written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore shareholders may have difficulty selling their shares.

***We will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our shareholders could receive less information than they might expect to receive from more mature public companies.***

As a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"). An emerging growth company may take advantage of reduced disclosure and reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

● being permitted to present only two years of audited financial statements and only two years of related "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure in our periodic reports and registration statements, including this prospectus;

● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") on the effectiveness of our internal controls over financial reporting;

● reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, proxy statements and registration statements, including this prospectus; and

● exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; (ii) the date we qualify as a "large accelerated filer," with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.

We have taken advantage of the reduced disclosure obligations in the registration statement of which this prospectus is a part and intend to elect to take advantage of other reduced disclosure and reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company when we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Reports on Form 10-K and, like emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

This prospectus contains forward-looking statements that are based on our management's beliefs, expectations, and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled "*Prospectus Summary*," "*Risk Factors*," "*Management's Discussion and Analysis of Financial Condition and Results of Operations*" and "*Business*." These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

● our goal and strategies;

● our future business development, financial condition and results of operations;

● expected changes in our revenue, costs or expenditures;

● growth of and competition trends in our industry;

● our expectations regarding demand for, and market acceptance of, our products;

● our expectations regarding our relationships with investors, institutional funding partners and other parties with whom we collaborate;

● our expectation regarding the use of proceeds from this offering;

● fluctuations in general economic and business conditions in the markets in which we operate; and

● relevant government policies and regulations relating to our industry.

In some cases, you can identify forward-looking statements by terms such as "may," "could," "will," "should," "would," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "project" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading "*Risk Factors*" and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Although we will become a public company after this offering and have ongoing disclosure obligations under United States federal securities laws, except as required by applicable law, we do not intend to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise.

**USE OF PROCEEDS**

The Registered Stockholders may, or may not, elect to sell shares of our common stock covered by this prospectus. To the extent any Registered Stockholder chooses to sell shares of our common stock covered by this prospectus, we will not receive any proceeds from any such sales of our common stock. See "*Principal Shareholders.*"

**DIVIDEND POLICY**

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. See also "*Risk Factors—Risks Related to This Offering and Ownership of Our Common Stock—We do not intend to pay any cash dividends on our shares of common stock in the near future, so our shareholders will not be able to receive a return on their shares unless they sell their shares*."

**CAPITALIZATION**

The following table sets forth our capitalization as of June 30, 2025 (after giving effect to the Reverse Stock Split retroactively for all periods presented):

This table should be read in conjunction with, and is qualified in its entirety by reference to, our financial statements and related notes appearing elsewhere in this prospectus.

---

| | | | |
|:---|:---|:---|:---|
|  |<br> **Actual as of**<br> **June 30,**<br> **2025** |<br>**Post**<br> **Offering**<br> **June 30,**<br> **2025(1)** | **Post-Offering**<br> **Pro Forma<br> Assuming**<br> **Conversion**<br> **June 30,**<br> **2025(2)** |
| **Cash and cash equivalents** | $257683 | $6889789 | $6889789 |
| **Long-term debt** | $2038163 | $2038163 | $2038163 |
| **Total long-term debt** | $2038163 | $2038163 | $2038163 |
| **Stockholders' equity:** |  |  |  |
| Preferred Stock Series A $0.00001 par value |  |  |  |
| Preferred Stock Series B $0.00001 par value |  |  |  |
| Common stock, $0.00001 par value, 220,000,000 shares authorized; authorized and 7,027,255 shares issued and outstanding, actual  | 70 | 70 | 93 |
| Additional paid-in capital | 8270862 | 14902968 | 14902946 |
| Accumulated deficit | (8013768) | (8013768) | (8013768) |
| Total stockholders' equity (deficit) | $257164 | $6889270 | $6889270 |

---

(1) Assumes private placement
 transaction for the sale of our Series A Convertible Preferred Stock, together with a bonus
 Series B Convertible Preferred Stock, with a stated value of $18,000,000 for net proceeds
 of $6,464,106.

(2) Assumed conversion
 of $10,000,000 of Series A Preferred Stock and $8,000,000 of Series B preferred stock at
 $4 per share in 2,250,000 shares of common stock

As of June 30, 2025, current assets increased to $3,556,145 from $2,858,324 as of December 31, 2024. This increase was primarily due to an increase of the deferred offering costs incurred as part of preparation of this Registration Statement and an increase of Cash and Accounts Receivable. As of June 30, 2025, current liabilities increased to $5,375,529 from $5,202,950 as of December 31, 2024, primarily due to loan agreements executed between the company and a third party during the period.

At June 30, 2025, the Company had cash funds of $257,683.

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this prospectus. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the sections titled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements".*

**OUR COMPANY**

**Overview**

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 & focus, sleep, prenatal and urinary. Our end markets focus on end-consumers through different channels that include pharmacies, US wholesalers, international distributors and direct-to-consumers sales. Our products are sold over the counter, and consumers do not need a prescription to purchase our products. Our products are not approved by the FDA. Our company also operates in the hemp industry as a retailer of hemp derived products in categories such as capsules, cigarettes, gummies, and tinctures with a commercial end market, and end-consumers.

**Our Products**

 

*Kirkman Brand*

Our "Kirkman" brand products are manufactured in our FDA registered, cGMP certified facility in Lake Oswego, Oregon. Established in 1949, Kirkman specializes in manufacturing nutritional supplements and is one of the oldest companies dedicated to serving the special needs community.

Our Kirkman brand offers more than 150 products including probiotics, enzymes, vitamins, multivitamins, amino acids, antioxidants, immune support, essential fatty acids, preconception, prenatal supplements, personal care products and other specialty products. Kirkman treats patients with autism spectrum disorders and special dietary needs through an established network of over 2,000 doctors in over 40 countries. Our Kirkman brand operates in 95% of the major subsegments in the supplement industry. Kirkman has a long-standing loyal customer and consumer base due to the rigorous testing of products in compliance with FDA requirements. Kirkman has been endorsed by various businesses and celebrities, including the famous and original Shark Tank member, Kevin Harrington.

<u>Digestive enzymes</u>: Over the counter oral digestive enzyme supplements are a combination of proteases, which aid protein digestion; lipases, which aid in fat digestion; and amylases, which aid in carbohydrate digestion. These may be prescribed by a doctor in some cases, when the pancreas does not make enough digestive enzymes on its own. People are increasingly taking over the counter ("OTC") digestive enzymes in lower doses to support general gut health.

<u>Essential fatty acids</u>: Also called omega-3 fatty acids, essential fatty acids are important digestive chemicals that the body cannot make on its own.

Our products under the Kirkman Brand include, but are not limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;● Supplements for Autism; ● Essential Fatty Acids;

● Oxytocin; ● Vitamin B12;

● Vitamin B6 and Magnesium; ● Glutathione;

● Melatonin; ● Functional Mushrooms;

● Probiotics; ● Multivitamins and Minerals; and

● Digestive Enzymes; ● Antioxidants.

● Amino Acids;

 

*P2i (prenatal) Brand*

In April 2024, we launched a certified prenatal vitamin for expectant mothers under the P2i by Kirkman brand. These vitamins have been specially formulated by our company to provide essential nutrients for both the mother and the developing fetus. The International Federation of Gynecology and Obstetrics ("FIGO") published a position statement about toxic chemicals and environmental contaminants in prenatal vitamins. FIGO's recommendation from the October 2023 position statement highlights that patients should only consume, and clinicians should only prescribe, vitamins and supplements that have been independently assessed to make certain they do not contain contaminants. Manufacturers should be held to a standard of production that assures safety and minimizes contaminants and certification of all prenatal vitamins becomes the standard of care. The FIGO Committee report on Climate Change and Toxic Environmental Exposures brought together global scientists to review the reputable reference sources for chemicals that have the potential to impact maternal and newborn health, including the USA Environmental Protection Agency, the European Union, and the California EPA.

The group of experts recommended several approaches, including:

&nbsp;&nbsp;&nbsp;&nbsp;1. creating
 a list of toxic chemicals and contaminants that should be screened for in Prenatal Vitamins
 and reduced to de minimis standards; and

&nbsp;&nbsp;&nbsp;&nbsp;2. conducting
 assays of existing vitamins to assess ongoing risk to maternal and newborn health. This work
 can extend to personal exposure risk by offering women testing for the presence of potentially
 toxic environmental chemicals. Mass Spectrometry currently offers the most comprehensive
 measurement.

This first publication of a list of toxic chemicals and contaminants represents the most comprehensive testing available at present but does not purport to identify or eliminate all potential sources of toxicity.

We are currently the only certified prenatal vitamin in the market that aligns to the FIGO position statement. We have formulated and produced a prenatal vitamin called P2i by Kirkman. There are approximately 3.6 million pregnancies alone in the United States (https://www.cdc.gov/nchs/fastats/births.htm) and the initial market focus for this product will be the United States with the expectation to expand globally since FIGO's position statement reaches all countries.

 

The P2i by Kirkman prenatal vitamin has been certified by The FORUM, a nonprofit 501(c)(3) organization dedicated to promoting low-toxicity standards for prenatal healthy products. The FORUM operates under a MOU with FIGO, a globally recognized organization of obstetricians and gynecologists. This MOU establishes a shared objective to reduce environmental toxicity in prenatal products.

● The certification process involves rigorous testing and evaluation to ensure compliance with The FORUM's low-toxicity standards, which align with FIGO's objectives for maternal and fetal health. These standards include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Analysis
 of 24 Heavy Metals, ensuring levels are below stringent safety thresholds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Testing
 for the presence of 120 toxic chemicals, such as pesticides and endocrine disruptors, with
 strict limits to prevent potential harm

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Utilization
 of ISO 17025-accredited laboratories for all testing to ensure reliability and reproducibility
 of results

● Purity Labs, an ISO 17025-accredited laboratory, as directed by The FORUM, conducted testing, which confirmed the product's compliance with The FORUM's criteria. Based on this testing, The FORUM issued its certification, indicating that Kirkman's prenatal vitamin meets its standards for low toxicity and safety.

*HempTown Naturals Brand*

All HempTown Naturals products are produced and sold in compliance with the US 2018 Farm Bill and the US Agricultural Act of 2014. Cannabidiol ("CBD") and cannabigerol ("CBG") are cannabinoids present in the cannabis plant. Both CBD and CBG are used in hemp derived products. These products are believed to help in treating certain neurodegenerative and inflammatory conditions<sup>1</sup>.

<sup>1</sup> https://www.medicalnewstoday.com/articles/cgb-vs-cbd

CBD

CBD is the second most prevalent ingredient in cannabis. While CBD is an integral component of medical marijuana, it is derived directly from the hemp plant, both of which are the same species: Cannabis sativa L. One of the hundreds of components of Cannabis sativa L., CBD does not cause a "high" by itself. According to a report from the World Health Organization, "In humans, CBD exhibits no effects indicative of any abuse or dependance potential…. To date, there is no evidence of public health related products associated with the use of pure CBD."<sup>2</sup>

As reported by Forbes Health, CBD is applied topically or consumed through smoke inhalation or edible consumption. CBD interacts with neuroreceptors in your endocannabinoid system, which sends signals between your cells to help regulate your movement, mood, homeostasis, and immune system. Different studies have shown that CBD can offset everyday anxiety and depression.<sup>3</sup>

CBG

CBG is another compound found in hemp which doesn't have intoxicatingly psychoactive effects. CBG, often referred to by experts as "the mother of all cannabinoids," is the cannabinoid from which other types of cannabinoids (including CBD) are derived, says Michelle Sexton, a naturopathic doctor who works at the Pain Trauma Institute in San Diego. "CBG is the first compound in the biosynthesis (the production of chemical compounds by a living organism) of the other cannabinoids," she adds.

CBG is available in many forms, including tinctures, gummies, capsules and topical creams and lotions. CBG is often coupled with CBD in these products because the two cannabinoids can provide complimentary benefits, such as decreasing inflammation and pain, says Fraser Smith, a naturopathic doctor, as well as assistant dean and associate professor at the National University of Health Services in Lombard, Illinois. CBD and CBG occur naturally in hemp extract which is the source of our cannabinoids.<sup>4</sup>

 

*Golf Mellow Brand*

The Company has utilized existing product formulations with plans to introduce 12 different products under the Golf Mellow brand. A brand logo and packaging has been created to support the existing formulations. These supplements will be targeting the golf industry and golf professionals. These products include capsules, a powder, a cream and tinctures to help golfers of all levels improve their game and overall well-being. The capsules are packed with a blend of essential vitamins and minerals that support joint health, flexibility, and energy levels. The tinctures are made from all-natural ingredients and provide a quick and easy way to support focus and mental clarity, helping athletes stay in the zone and make the perfect shot. The creams are specially designed to provide targeted relief for sore muscles and joints, helping them stay comfortable and focused on the course. Some of these products include Sleep Caps to ensure that players are well rested the night before, Super B12 Powder which provides the energy needed for the perfect round, Calm Caps which help manage anxiety when players need it most, and Epsom Salt Cream & Recovery Caps, which aids with recovery.

According to data from the National Golf Foundation 25.1 million people (aged six and over) played on a golf course in the United States in 2021 – furthermore there were another 12.4 million people who took part in off-course activities like driving ranges, indoor golf simulators or venues like Topgolf and Drive Shack.<sup>5</sup>

<sup>2</sup> www.health.harvard.edu

<sup>3</sup> www.forbes.com/health/body/cbd-oil-benefits/

<sup>4</sup> www.forbes.com/health/body/cannabigerol-cbg/

<sup>5</sup> https://www.golfmonthly.com/news/how-many-golfers-are-there-in-the-united-states

**Competitive Strengths**

The Kirkman brand has been in business for over 70 years with a loyal consumer base and we believe that we maintain high purity and quality standards in the industry. We source all materials from high quality suppliers.

We test our finished goods in certified laboratories with state-of-the-art equipment and manufacture our supplements in our US-based cGMP certified and FDA registered facility located in Lake Oswego, Oregon. The FDA requires that we conduct at least one appropriate test or examination to verify and identify any component that is a dietary ingredient. We conduct ingredient testing by verifying the identity through ISO certified 3rd party laboratories. We also test for residual solvents and pesticides (where applicable), presence of up to 24 heavy metals and microbial contamination that could lead to illness or death. Microbial tests can include, but are not limited to, aerobic plate count, yeast & mold, coliforms, E. coli, pseudomonas, staphylococcus aureus, Bile Tolerant gram negative, Salmonella, Aflatoxins and listeria. Heavy metals testing includes beryllium, aluminum, vanadium, chromium, manganese, cobalt, nickel, copper, zinc, arsenic, selenium, molybdenum, palladium, silver, cadmium, tin, antimony, barium, tungsten, platinum, thallium, lead, uranium and mercury. For incoming raw ingredients, we ID using the following methods: Botanicals – HPLC (High Pressure Liquid Chromatography) or TLC (Thin Layer Chromatography), or an approved Chemical test; Vitamins – IR (Infrared) absorption, Chemical test, UV (Ultraviolet) absorption, UV fluorescence, GC (Gas Chromatography), HPLC; Minerals – ICP-MS (Inductively Coupled Plasmas – Mass Spectroscopy), IR (Infrared), Chemical tests, TLC (Thin Layer Chromatography); Enzymes – HPLC (High Pressure Liquid Chromatography), PCR (Polymerase Chain Reaction); Amino Acids – IR absorption, Optical Rotation, HPLC, TLC, GC (Gas Chromatography), Assay; Probiotics – PCR and HPLC; Metals – HPLC or ICP-MS; Micros – Cell culture and cell identification.

The FDA requires that a finished batch of the dietary supplement meets product specifications for identity, purity, strength, composition, and for limits on those types of contamination that may adulterate or that may lead to adulteration of the finished batch of the dietary supplement. This can be conducted for a subset of finished dietary supplement batches through a sound statistical sampling plan (or for every finished batch). For our business, we test every batch of products to ensure heavy metals are below Pop 65 limits. In addition, every batch is tested for microbial contamination. Our 75+ year history in the industry, along with our rigorous material testing, allows Kirkman to use statistical sampling to ensure the identity, purity and strength of each product is met. Our formulations use proprietary blends.

Although we are authorized to produce hemp derived products because we hold a hemp handler's license, we currently do not grow any hemp, but we source our hemp derived products from registered growers in operation. The FDA does not require any testing on dietary supplements whereas we test for approximately 90 metals and toxins in raw materials.

As previously mentioned, we've recently launched P2i by Kirkman prenatal vitamin, which is the only certified prenatal vitamin that aligns to FIGO's position statement.

The P2i by Kirkman prenatal vitamin has been certified by The FORUM, a nonprofit 501(c)(3) organization dedicated to promoting low-toxicity standards for prenatal healthy products. The FORUM operates under a Memorandum of Understanding (MOU) with FIGO, a globally recognized organization of obstetricians and gynecologists. This MOU establishes a shared objective to reduce environmental toxicity in prenatal products.

● The certification process involves rigorous testing and evaluation to ensure compliance with The FORUM's low-toxicity standards, which align with FIGO's objectives for maternal and fetal health. These standards include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Analysis
 of 24 Heavy Metals, ensuring levels are below stringent safety thresholds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Testing
 for the presence of 120 toxic chemicals, such as pesticides and endocrine disruptors, with
 strict limits to prevent potential harm

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Utilization
 of ISO 17025-accredited laboratories for all testing to ensure reliability and reproducibility
 of results

● Purity Labs, an ISO 17025-accredited laboratory, as directed by The FORUM, conducted testing, which confirmed the product's compliance with The FORUM's criteria. Based on this testing, The FORUM issued its certification, indicating that Kirkman's prenatal vitamin meets its standards for low toxicity and safety.

We have an exclusive license agreement with the Trailer Park Boys ("TBP") to market and sell hemp derived products. There are two product categories that include Hemp Derived Delta 9 products. This includes Delta 9 gummies and Delta 9 Drink Enhancers. The revenue from these two product categories represents approximately 0.6% of total company revenue. entered. To date, $575,000 has been paid to TBP under the license agreement and TBP has been issued 14,440 shares of common stock of the Company. The Company and TBP are negotiating a termination of the license agreement effective as of December 31, 2025, with up to a maximum of $150,000 in remaining accrued royalties to be paid by the Company to TBP no later than March 31, 2026.

**Growth Strategy**

We aim to be a leader in the nutraceutical space by manufacturing products held to the highest standard of quality in terms of toxins, metals, and other impurities. Our goal is to build a well-rounded portfolio of products including mushroom-based supplements targeted for everyday use, prenatal, athletes and beyond.

We plan to do this by:

● Strengthening our existing 70-year-old Kirkman brand with its established base of consumers in the autism community by curating our product mix to cater to their specific needs;

● Launching multiple brands, broad as well as niche, including P2i by Kirkman which is the only certified prenatal vitamin supporting FIGO's October 2023 position statement, to allow us to increase our market share;

● Modernizing our manufacturing capabilities by reorganizing the space and introducing new and efficient machinery and equipment to significantly enhance our output;

● Investing heavily into our sales and marketing activities as well as business development in order to increase sales and distribution; and

● Identify key companies with synergistic strengths for partnerships or acquisitions.

**Challenges, Risks and Limitations** 

Our ability to utilize our competitive advantages in order to strengthen and expand our business and achieve our growth plan is subject to a number of risks and uncertainties more fully discussed under "Risk Factors" in this Prospectus. As discussed in our financial statements, we have suffered recurring losses from operations and have a significant accumulated deficit. In addition, we continue to experience negative cash flows from operations. This limited working capital capabilities may delay or make the accomplishment of our growth plans difficult. In assessing the likelihood of our future success, investors in this offering should note our history of losses and the likelihood of our operating profitability in the future. Further, some of our products may be subject to unpredictable and evolving federal, state and local regulations concerning hemp, CBD and other non-tobacco consumable products. Because the type, timing, and impact of such regulations remain uncertain, we cannot give any assurance that such actions will not have a material adverse effect on this emerging business and our strategy.

**Our Corporate History and Structure**

Functional Brands was organized under the General Corporation Law in the State of Delaware on November 19, 2020 under the name HT Naturals Inc. HT Naturals Inc. changed its name to Functional Brands Inc. on March 23, 2023. Our principal business is the production, marketing, sales, and distribution of nutraceutical products through our Kirkman division, alongside our hemp derived products under the Hemptown brand in certain states within the United States that permit such sales. We ship our Kirkman products to all US states. As for hemp derived products, we only sell to states which permit this activity with certain restrictions such as the content of THC which differs depending on the state.

The states in which we have sold hemp derived products in the past are Alabama, Arizona, Arkansas, California (D9 ingestible and CBD/CBG ingestible only), Colorado (CBD/CBG inhalable only), Connecticut, Delaware (D9 ingestible), Florida, Georgia (D9 ingestible and CBD/CBG ingestible only), Hawaii (CBD/CBG ingestible only), Illinois(D9 ingestible and CBD/CBG inhalable), Indiana (D9 ingestible only), Iowa (D9 ingestible only), Kansas, Kentucky (D9 ingestible only), Louisiana, Maine (D9 ingestible and CBD/CBG inhalable), Maryland (CBD/CBG inhalable only), Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York (D9 and CBD/CBG ingestible only), North Carolina, North Dakota (CBD/CBG ingestible only), Ohio, Oklahoma, Oregon (CBD/CBG ingestible only), Pennsylvania, Rhode Island, South Carolina, South Dakota (D9 ingestible only), Tennessee (CBD/CBG inhalable only), Texas, Virgina (CBD/CBG ingestible and inhalable only), Washington (CBD/CBG Inhalable only), West Virginia, Wisconsin, Wyoming.

We have engaged specialized hemp counsel to provide regular updates on the 50 states and the legality of our hemp products in each state. In addition, we have established and followed a standard of operating procedure (SOP) to ensure sales do not occur in the states where hemp products may not be sold consistent with the regular updates provided by our hemp counsel. We have an internal policy that prohibits us as a company and any of our executives, directors, employees, sales representatives and distributors to distribute any of the Company's hemp derived products in places in which the sale of hemp derived products is prohibited. We are a 98% subsidiary of HOC, a British Columbia, Canada private operating holding company with various interests in nutraceutical manufacturing and federally legal industrial hemp products. We were granted a licensing agreement by Hemptown Organics Corp. The licensing agreement, dated December 10, 2020, provides Functional Brands Inc. as licensee, a license to use the Hemptown USA and Hemptown Naturals brand and trademarks on a perpetual, non-exclusive, non-transferable basis, with no expiry date. This licensing agreement will transfer full ownership to Functional Brands upon the public offering and listing on the exchange, at which time HOC will dividend out the majority of the Company's shares currently held by HOC.

On July 3, 2019, HTO Holdings Inc. ("HTO Holdings") a wholly owned subsidiary of HOC and the owner of all issued and outstanding stock of HTO Nevada (as "Purchaser"), entered into an asset purchase agreement ("APA") for the net assets of Kirkman Group Inc. a Nevada corporation, Kirkman Laboratories Inc., an Oregon corporation and Kirkman Group International, Inc. a Nevada corporation (collectively "Kirkman" or the "Seller," and together with Purchaser, the "Parties") for a consideration equal to $5 million with payout in a business combination of cash and deferred consideration. The "Seller" is David Humphrey. Under the APA, Purchaser and HTO Holdings were to make certain additional payments toward the purchase price. The APA was amended on November 30, 2021 by the Parties with the purpose of modifying the payment schedule of the deferred consideration; and in exchange for amending the payment schedule of the deferred consideration, the Purchaser and HTO Holdings agreed to enter into a security agreement, and amend the APA and other agreements attached to the APA (including, but not limited to, the non-competition agreement, the trademark assignment agreement, the domain names transfer agreement, the assignment of intangible assets, and the intellectual property security agreement (collectively, the "IP Collateral Agreements") to, among other things, provide additional collateral as security to Seller. Upon payment in full in cash of the deferred consideration or set-off of the deferred consideration, as amended: (i) each of the Parties agreed that the security agreement and amended intellectual property security agreement would be automatically terminated and be of no further force and effect; and (ii) Seller would, at its sole cost and expense, release all liens in the IP Collateral, as defined in the respective security agreement and intellectual property security agreement, and all rights therein would forthwith revert to Purchaser. On May 16, 2022, the APA was amended again by the Parties, to reflect further modifications to the schedules and exhibits to the APA and IP Collateral Agreements. On May 31, 2022, Purchaser paid Seller certain amounts ("Immediate Payments"), and on July 23, 2022, Purchaser and Seller executed a forbearance agreement ("Forbearance Agreement") to extend the payments due under the APA to August 31, 2022. After Purchaser's default, and partial payment to Seller in September 2022, the Parties executed an amendment to the Forbearance Agreement on December 27, 2022, to extend certain payments due under the APA, at which time the remaining balance due was $3,032,000..

On September 24, 2024, the Company executed a Fourth Amended Forbearance Agreement which allowed the postponement of principal payments. The remaining balance due is $2,227,366 (the "Existing Default"). On May 28, 2025, the Company executed a Sixth Amended Forbearance Agreement (the "Sixth Amendment") to provide Purchaser with a period of time to cure the Existing Default and Purchaser and the Company also executed a Confession of Judgement for Money Awarded and Decree of Foreclosure which upon a default by Purchaser under the Sixth Amendment (a "Forbearance Default") may be filed with the Circuit Court of the State of Oregon allowing assets of the Purchaser and the Company to be foreclosed upon to satisfy payment of the Existing Default. Subject to compliance by Purchaser with the terms and conditions of this Sixth Amendment, Sellers agreed to forbear from exercising their rights and remedies against Purchaser under the transaction documents with respect to the Existing Default during the period commencing on the date of execution of the Sixth Amendment by all parties and ending on the earlier to occur of (i) July 20, 2025 and (ii) the date that any Forbearance Default occurs, upon which, Sellers' forbearance, as provided herein, shall immediately and automatically cease without any requirement of notice or further action by any party (the "Termination Date"). On July 9, 2025, the Company executed a Seventh Amended Forbearance Agreement extending clause (i) of the Termination Date to August 30, 2025. On and from the Termination Date, Sellers may, in their sole discretion, exercise any and all remedies available to them under the transaction documents that otherwise would be available only by reason of the occurrence of any Events of Default thereunder or the continuation of any Existing Default. As of August 12, 2025, the balance of $2,227,366 owed to Seller is due and payable by August 30, 2025. We intend to use a portion of the proceeds of the private placement to cure the Existing Default.

As a part of our restructuring efforts, HTO Nevada, formerly owned by HTO Holdings, was acquired by Functional Brands on May 19, 2023, through a share exchange agreement executed by HOC, HTO Holdings and Functional Brands. On August 5, 2025, Functional Brands ceased to be deemed a controlled company, As of the date of this prospectus, HOC holds no shares of Functional Brands. Our fiscal year-end is December 31.

**Corporate Information**

We are currently incorporated and in good standing in the State of Delaware. Our registered address is 6400 SW Rosewood Street, Lake Oswego, Oregon 97035 and our telephone number is (800) 245-8282. We maintain the following websites: https://functtionalbrandsinc.com, https://kirkmangroup.com and https://hemptownnaturals.com. Information available on our website is not incorporated by reference in and is not deemed a part of this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.

**NASDAQ Listing**

We intend to list our common stock on NASDAQ. There is no assurance that our listing application will be approved by NASDAQ. If our application to NASDAQ is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on NASDAQ, we will not complete the offering.

 **Results of Operations**

 ***Comparison Six Months Ended June 30, 2025, to the Six Months Ended June 30, 2024***

  ****

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six Months Ended<br> June 30, 2025** <br> **(Unaudited)**  | **Six Months Ended<br> June 30, 2024** <br> **(Unaudited)**  | **$ Change** | **% Change** |
| **Statements of Operations Data** | | | | |
| Net Revenue | 3422789 | 3490446 | (67657) | -2% |
| Cost of Goods Sold | (1587928) | (1636792) | (48864) | -3% |
| Sales & Marketing | (343669) | (298217) | 45452 | 15% |
| General & Administrative | (1678728) | (1430011) | 248717 | 17% |
| Operating Income / (Loss) | (187536) | 125426 | (312962) | -250% |
| Other Income / (Expense), Net | (165302) | (118951) | (46351) | 39% |
| **Net Loss** | $**(352838)** | **6475** | $**(359313)** | **-5549%** |

---

 *Revenue*

 

Revenue for the six months ended June 30, 2025, was $3,422,789 compared to $3,490,446 in revenue for the six months ended June 30, 2024, representing a decrease of approximately 2%. This decrease in revenue was primarily attributed to lower demand from contract manufacturing customers.

 *Operating Costs and Expenses*

 

 <u>Cost of goods sold (COGS)</u>

Cost of goods sold for the six months ended June 30, 2025 was $1,587,928, compared to $1,636,792 in cost of goods sold for the six months ended June 30, 2024, representing a decrease of approximately 3%. This decrease of $48,864 is primarily attributed to a 2% decrease in net revenue recorded for the six months ended June 30, 2025, as well as tightening cost controls and negotiating better terms with vendors.

 

 <u>Selling and marketing costs (S&M)</u>

Selling and marketing costs consisted of payroll, ecommerce expenses, as well as advertising & promotion.

Selling and marketing costs for the six months ended June 30, 2025, was $343,669 compared to $298,217 for the six months ended June 30, 2024, representing an increase of approximately 15%. This increase of selling and marketing costs is primarily attributed to the efforts from the Company to acquire more customers through various methods (email blasts, Amazon marketing) and increase of P2i product advertising campaign.

 <u>General and administrative expenses (G&A)</u>

General and administrative costs consisted of professional services, consulting service, legal fees, rent, utilities, insurances and payroll.

General and administrative expenses for the six months ended June 30, 2025, increased to $1,678,728, compared to $1,430,011 for the six months ended June 30, 2024, representing an increase of approximately 17%. This increase was primarily attributed to issuance of shares for services rendered during the period.

 <u>Operating Loss</u> 

Operating loss for the six months ended June 30, 2025, was $187,536 compared to operating income of $125,426 during the six months ended June 30, 2024, representing a decrease of approximately 250%. This decrease is primarily attributed to the decline of sales and the increase in expenses for the six months ended June 30, 2025, as explained above.

 <u>Other income / (expenses)</u>

Other expenses for the six months ended June 30, 2025 were $165,302, compared to other expenses of $118,951 for the six months ended June 30, 2024, representing an increase of approximately 39%. This increase was the result of interest in loans acquired by the Company during the six months ended June 30, 2025.

 

 *Net loss*

Net loss for the six months ended June 30, 2025 was $352,838, compared to a net income of $6,475 for the six months ended June 30, 2024, representing a decrease of approximately 5,549%. The net loss is primarily attributed to the explanations above.

 ***For the Year Ended December 31, 2024, compared to the Year Ended December 31, 2023***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** <br> **(Audited)**  | **December 31, 2023** <br> **(Audited)**  | **$ Change** | **% Change** |
| **Statements of Operations Data** | | | | |
| **Net Revenue** | $6566455 | $6820499 | $(254044) | -4% |
| **Cost of Goods Sold** | (2959609) | (3641648) | 682039 | -19% |
| **Sales & Marketing** | (576315) | (588772) | 12457 | -2% |
| **General & Administrative** | (3259623) | (3672582) | 412959 | -11% |
| **Operating Loss** | (229092) | (1082503) | 853411 | -79% |
| **Other Income / (Expense), Net** | (330264) | (158591) | (171673) | 108% |
| **Net Loss** | $**(559356)** | $**(1241094)** | $**681738** | **-55%** |

---

 *<u>Revenue</u>*

 

Revenue for 2024 was $6,566,455 compared to $6,820,499 for revenue in 2023, resulting in a decrease of 4% year over year. This decrease is primarily attributed to lower demand from contract manufacturing customers.

 

 *Operating Costs and Expenses*

 

 <u>Cost of goods sold (COGS)</u>

Cost of goods sold for 2024 was $2,959,609 compared to $3,641,648 for cost of goods sold in 2023 representing a decrease approximately 19%. This decrease of $682,039 is partially attributable to 4% lower net revenue recorded for the year ended December 31, 2024, as well as tightening costs controls and negotiating better terms with vendors.

 <u>Selling and marketing costs (S&M)</u>

Selling and marketing costs consisted of payroll, ecommerce expenses, as well as advertising & promotion.

Selling and marketing costs for 2024, was $576,315 compared to $588,772 for the year ended December 31, 2023, resulting in a 2% decrease year over year.

 <u>General and administrative expenses (G&A)</u>

General and administrative costs consisted of professional consulting & legal fees, as well as rent & utilities, insurance and payroll.

General and administrative expenses for 2024 was $3,259,623, compared to $3,672,582 for the year ended December 31, 2023, resulted in an 11% decrease. This Decrease primarily attributed to less consulting expenses incurred year over year.

 <u>Operating Loss</u> 

Operating loss for 2024 was $229,092 compared to $1,082,503 in 2023, representing a decrease of approximately 79%. This is the result of the Company's continuous work to stabilize the company by tightening costs including COGS and G&A, as described above.

 <u>Other income / (expenses)</u>

Other expenses for 2024 was $330,264 compared to $158,591 in 2023, representing an increase of approximately 108%. This increase is the result of interest amended to the asset purchase acquisition taking place in 2024 and interest incurred on extension of loan agreement.

 *Net loss*

 

Net loss for 2024 was $559,356 compared to a net loss of $1,241,094 in 2023, representing a decrease of approximately 55%. The net loss is attributable to the explanation above.

 **Liquidity and Capital Resources**

 ***Sources and Uses of Cash for the six months ended June 30, 2025 and 2024***

The table below, for the periods indicated, provides selected cash flow information:

---

| | | |
|:---|:---|:---|
|  | **Six-months Period Ended<br> June 30,<br> 2025** <br> **(Unaudited)**  | **Six-months Period Ended<br> June 30,<br> 2024** <br> **(Unaudited)**  |
| Net cash used in operating activities | $647757 | 3844 |
| Net cash used in investing activities |  | 1881 |
| Net cash provided by financing activities | (601716) | 66618 |
| Net increase in cash | $46041 | 72343 |

---

Material cash requirements from known contractual and other obligations:

Excluding debt obligations from ongoing operations, the Company owes $2,227,367 payable for acquisition as of June 30, 2025. On September 24, 2024, the Company executed a Forbearance Agreement with the former owner of Kirkman. This allows the postponement of principal payment. On the same date, the Company executed a Confession of Judgement in connection with the principal owed. This allowed the seller to enter a judgement against the Company in The Circuit Court of The State of Oregon for the County of Clackamas. On July 9, 2025 the Company executed the seventh amended forbearance agreement to extend the deadline until August 30, 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.

 *Source of cash*

During the six-months period, the Company executed multiple loan agreements which served as a source of cash as the Company was no longer raising funds for Reg CF nor Reg D.

 *<u>Cash Flows from Operating Activities</u>*

Provided by operating activities for the six months ended June 30, 2025 was $647,757, compared to cash used in operating activities of $3,844 during the six months ended June 30, 2024, representing an increase of approximately 16,751%. This increase in net cash provided by operating activities is attributable to stock-based compensation for the period.

 *<u>Cash Flows from Financing Activities</u>*

Cash used in financing activities for the six months ended June 30, 2025 was $601,716, compared to cash provided by financing activities of $66,618 in the six months ended June 30, 2024, representing an increase of approximately 1,003%. This is increase of cash used in financing activities is the result of capitalization of cost incurred for the IPO and repayments of loans and the asset purchase acquisition.

Source of cash

On April 29, 2025, the Company entered into a loan agreement with a third-party whereby the Company received $100,000. The term of the loan is for 1 year with a 22.95% finance charge.

On March 10, 2025, the Company executed a loan agreement with a related party in the amount of $225,000, with an annual interest rate of 18% to be paid off in 4 years.

 ***Sources and Uses of Cash for the Years Ended December 31, 2024 and 2023***

The table below, for the periods indicated, provides selected cash flow information:

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> December 31,<br> 2024** <br> **(Audited)**  | **Year Ended<br> December 31,<br> 2023** <br> **(Audited)**  |
| Net cash provided by operating activities | $1990 | 248169 |
| Net cash used in investing activities | (1881) | (3500) |
| Net cash used in provided by financing activities | (162902) | (73061) |
| Net increase (decrease) in cash | $(162793) | 171608 |

---

Material cash requirements from known contractual and other obligations:

Excluding debt obligations from ongoing operations, the Company owes $2,342,366 payable for acquisition as of December 31, 2024. On September 24, 2024, the Company executed a Forbearance Agreement with the former owner of Kirkman. This allows the postponement of principal payment. On the same date, the Company executed a Confession of Judgement in connection with the principal owed. This allowed the seller to enter a judgement against the Company in The Circuit Court of The State of Oregon for the County of Clackamas. On March 5, 2025 the Company executed the fifth amended forbearance agreement.

 *<u>Cash Flows from Operating Activities</u>*

Cash provided by operating activities for 2024 was $1,990 compared to $248,169 for 2023, representing a decrease of approximately 99%. This decrease in net cash provided by operating activities is attributable to lower inventory turnover, higher balance for accounts payable, accruals, and higher balance for accounts receivable.

 *<u>Cash Flows from Investing Activities</u>*

Cash used in investing activities for 2024 was $1,881 compared to $3,500 for 2023, representing a decrease approximately 46%. This decrease was primarily attributed to the purchase of capital property and equipment for lesser value.

 *<u>Cash Flows from Financing Activities</u>*

Cash used in financing activities for 2024 was $162,902, compared to cash provided by financing activities of $73,061 in 2023, representing a decrease of approximately 123%. The change in net cash used in financing activities was primarily the result of repayment of lines of credit, payable for acquisition of Kirkman and capitalization of cost incurred in IPO.

Use of cash

During the year ended December 31, 2024 the Company entered into multiple lines of credit agreements with third parties to finance invoices to satisfy multiple vendors of which the following agreements are to be repaid during the year ended December 31, 2025, as the Company was longer raising funds for Reg CF nor Reg D.

On June 18, 2024, the Company executed a loan agreement with a lender in the amount of $150,000. The payment terms are 12.5% OID, initial principal amount consisting of a $150,000 loan plus $21,500 OID totaling $171,500. In addition, the loan required the Company to issue 37,500 warrants with anti-dilution protection as well as an equity interest in the amount of 2,045 shares of the Company's stock with reverse split protection through the Senior Exchange Listing. Loan is to mature the earlier of six months from execution, completion of a senior exchange listing of the Company or as mutually agreed, with an interest rate of the higher of 12% or WSJ Prime plus 4% guaranteed.

On March 11, 2024, the Company executed a loan agreement with a related party in the amount of $130,000, with an annual interest rate of 20% to be paid off in 7 years.

On January 20, 2023, the Company entered a line of credit agreement with a third-party whereby the Company received $300,000. The terms of the loan were for one year, with a 27% contract interest rate. On January 22, 2024, the loan was settled in full, at which point the security interest was released by the lender.

On July 14, 2023, the Company entered into an additional line of credit agreement with a third-party whereby the Company received $100,000. The terms of the loan were for 42 weeks, with a 5% contract interest rate. On July 7, 2024, the loan was settled in full, at which point the security interest was released by the lender.

In December 2023, the Company entered into a short-term debt facility with a related party, an officer and director of the parent company – Hemptown Organics Corp., whereby the Company received $247,634. The loan is non-interest-bearing and remains outstanding as at December 31, 2024.

We anticipate that our cash needs for the next twelve months for working capital and capital expenditures will be approximately $3,600,000. As of December 31, 2024, we had approximately $200,000 in cash, and we believe that our current cash and cash flow from operations will only be sufficient to meet anticipated cash needs for the next six months for working capital and capital expenditures. We will likely also require additional cash resources due to possible changed business conditions or other future developments. We plan to seek to sell additional equity securities to generate additional cash to continue operations. We may also sell debt securities to generate additional cash. The sale of equity securities, or of debt securities that are convertible into our equity, could result in additional dilution to our shareholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including the following: investors' perception of, and demand for, securities of cigarette and hemp companies; conditions of the U.S. and other capital markets in which we may seek to raise funds; future results of operations, financial condition and cash flow. Therefore, our management cannot assure that financing will be available in amounts or on terms acceptable to us, or if at all. Any failure by us to raise additional funds on terms favorable to us could have a material adverse effect on our liquidity and financial condition.

**Going Concern**

In the event we are not successful in reaching our sustained revenue targets, we anticipate that depending on market conditions and our plan of operations, we will likely incur continued operating losses. We base this expectation, in part, on the fact that we may not be able to generate enough gross profit to cover our operating expenses. Consequently, we may not continue to operate as a going concern in the long term. As described in the section entitled "*Risk Factors*," we are subject to many factors which could detrimentally affect us. Many of these risk factors may be outside management's control, including demand for our products, our ability to hire and retain talented and skilled employees and service providers, as well as other factors. We do not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way. We do not know of any significant changes in expected sources and uses of cash. We do not have any commitments or arrangements from any person to provide us with any equity capital.

**Off-Balance Sheet Arrangements**

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources**.** 

**Critical Accounting Policies**

Our financial statements are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 5 to our financial statements. While these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.

**Recent Accounting Pronouncements**

From time to time, new accounting pronouncements are issued by FASB that are adopted by us as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our financial statements upon adoption.

**BUSINESS**

**Overview**

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 & focus, sleep, prenatal and urinary. Our end markets focus on end-consumers through different channels that include pharmacies, US wholesalers, international distributors and direct-to-consumers sales. Our products are sold over the counter and consumers do not need a prescription to purchase our products. Our products are not approved by the FDA. Our company also operates in the hemp industry as a retailer of hemp derived products in categories such as capsules, cigarettes, gummies, and tinctures with a commercial end market, and end-consumers.

**Our Products**

 

*Kirkman Brand*

Our "Kirkman" brand products are manufactured in our FDA registered, cGMP certified facility in Lake Oswego, Oregon. Established in 1949, Kirkman specializes in manufacturing nutritional supplements and is one of the oldest companies dedicated to serving the special needs community.

Our Kirkman brand offers more than 150 products including probiotics, enzymes, vitamins, multivitamins, amino acids, antioxidants, immune support, essential fatty acids, preconception, prenatal supplements, personal care products and other specialty products. Kirkman treats patients with autism spectrum disorders and special dietary needs through an established network of over 2,000 doctors in over 40 countries. Our Kirkman brand operates in 95% of the major subsegments in the supplement industry. Kirkman has a long-standing loyal customer and consumer base due to the rigorous testing of products in compliance with FDA requirements. Kirkman has been endorsed by various businesses and celebrities, including the famous and original Shark Tank member, Kevin Harrington.

<u>Digestive enzymes</u>: Over the counter oral digestive enzyme supplements are a combination of proteases, which aid protein digestion; lipases, which aid in fat digestion; and amylases, which aid in carbohydrate digestion. These may be prescribed by a doctor in some cases, when the pancreas does not make enough digestive enzymes on its own. People are increasingly taking over the counter ("OTC") digestive enzymes in lower doses to support general gut health.

<u>Essential fatty acids</u>: Also called omega-3 fatty acids, essential fatty acids are important digestive chemicals that the body cannot make on its own.

Our products under the Kirkman Brand include, but are not limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;● Supplements
 for Autism; ● Essential
 Fatty Acids;

● Oxytocin; ● Vitamin
 B12;

● Vitamin
 B6 and Magnesium; ● Glutathione;

● Melatonin; ● Functional
 Mushrooms;

● Probiotics; ● Multivitamins
 and Minerals; and

● Digestive
 Enzymes; ● Antioxidants.

● Amino Acids;

 

*P2i (prenatal) Brand*

In April 2024, we launched a certified prenatal vitamin for expectant mothers under the P2i by Kirkman brand. These vitamins have been specially formulated by our company to provide essential nutrients for both the mother and the developing fetus. The International Federation of Gynecology and Obstetrics ("FIGO") published a position statement about toxic chemicals and environmental contaminants in prenatal vitamins. FIGO's recommendation from the October 2023 position statement highlights that patients should only consume, and clinicians should only prescribe, vitamins and supplements that have been independently assessed to make certain they do not contain contaminants. Manufacturers should be held to a standard of production that assures safety and minimizes contaminants and certification of all prenatal vitamins becomes the standard of care. The FIGO Committee report on Climate Change and Toxic Environmental Exposures brought together global scientists to review the reputable reference sources for chemicals that have the potential to impact maternal and newborn health, including the USA Environmental Protection Agency, the European Union, and the California EPA.

The group of experts recommended several approaches, including:

&nbsp;&nbsp;&nbsp;&nbsp;1. creating
 a list of toxic chemicals and contaminants that should be screened for in Prenatal Vitamins
 and reduced to de minimis standards; and

2. conducting
 assays of existing vitamins to assess ongoing risk to maternal and newborn health. This work
 can extend to personal exposure risk by offering women testing for the presence of potentially
 toxic environmental chemicals. Mass Spectrometry currently offers the most comprehensive
 measurement.

This first publication of a list of toxic chemicals and contaminants represents the most comprehensive testing available at present but does not purport to identify or eliminate all potential sources of toxicity.

We are currently the only certified prenatal vitamin in the market that aligns to the FIGO position statement. We have formulated and produced a prenatal vitamin called P2i by Kirkman. There are approximately 3.6 million pregnancies alone in the United States (https://www.cdc.gov/nchs/fastats/births.htm) and the initial market focus for this product will be the United States with the expectation to expand globally since FIGO's position statement reaches all countries.

 

The P2i by Kirkman prenatal vitamin has been certified by The FORUM, a nonprofit 501(c)(3) organization dedicated to promoting low-toxicity standards for prenatal healthy products.

 

The FORUM operates under a Memorandum of Understanding (MOU) with FIGO, a globally recognized organization of obstetricians and gynecologists. This MOU establishes a shared objective to reduce environmental toxicity in prenatal products.

● The certification process involves rigorous testing and evaluation to ensure compliance with The FORUM's low-toxicity standards, which align with FIGO's objectives for maternal and fetal health. These standards include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Analysis
 of 24 Heavy Metals, ensuring levels are below stringent safety thresholds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Testing
 for the presence of 120 toxic chemicals, such as pesticides and endocrine disruptors, with
 strict limits to prevent potential harm

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Utilization
 of ISO 17025-accredited laboratories for all testing to ensure reliability and reproducibility
 of results

● Purity Labs, an ISO 17025-accredited laboratory, as directed by The FORUM, conducted testing, which confirmed the product's compliance with The FORUM's criteria. Based on this testing, The FORUM issued its certification, indicating that Kirkman's prenatal vitamin meets its standards for low toxicity and safety.

 

*HempTown Naturals Brand*

All HempTown Naturals products are produced and sold in compliance with the US 2018 Farm Bill and the US Agricultural Act of 2014. Cannabidiol ("CBD") and cannabigerol ("CBG") are cannabinoids present in the cannabis plant. Both CBD and CBG are used in hemp derived products. These products are believed to help in treating certain neurodegenerative and inflammatory conditions<sup>1</sup>.

CBD

CBD is the second most prevalent ingredient in cannabis. While CBD is an integral component of medical marijuana, it is derived directly from the hemp plant, both of which are the same species: Cannabis sativa L. One of the hundreds of components of Cannabis sativa L., CBD does not cause a "high" by itself. According to a report from the World Health Organization, "In humans, CBD exhibits no effects indicative of any abuse or dependance potential…. To date, there is no evidence of public health related products associated with the use of pure CBD."<sup>2</sup>

As reported by Forbes Health, CBD is applied topically or consumed through smoke inhalation or edible consumption. CBD interacts with neuroreceptors in your endocannabinoid system, which sends signals between your cells to help regulate your movement, mood, homeostasis, and immune system. Different studies have shown that CBD can offset everyday anxiety and depression.<sup>3</sup>

CBG

CBG is another compound found in hemp which doesn't have intoxicatingly psychoactive effects. CBG, often referred to by experts as "the mother of all cannabinoids," is the cannabinoid from which other types of cannabinoids (including CBD) are derived, says Michelle Sexton, a naturopathic doctor who works at the Pain Trauma Institute in San Diego. "CBG is the first compound in the biosynthesis (the production of chemical compounds by a living organism) of the other cannabinoids," she adds.

CBG is available in many forms, including tinctures, gummies, capsules and topical creams and lotions. CBG is often coupled with CBD in these products because the two cannabinoids can provide complimentary benefits, such as decreasing inflammation and pain, says Fraser Smith, a naturopathic doctor, as well as assistant dean and associate professor at the National University of Health Services in Lombard, Illinois. CBD and CBG occur naturally in hemp extract which is the source of our cannabinoids.<sup>4</sup>

 

<sup>1</sup> https://www.medicalnewstoday.com/articles/cgb-vs-cbd

<sup>2</sup> www.health.harvard.edu

<sup>3</sup> www.forbes.com/health/body/cbd-oil-benefits/

<sup>4</sup> www.forbes.com/health/body/cannabigerol-cbg/

 

 

*Golf Mellow Brand.* The Company has utilized existing product formulations with plans to introduce 12 different products under the Golf Mellow brand. A brand logo and packaging has been created to support the existing formulations. These supplements will be targeting the golf industry and golf professionals. These products include capsules, a powder, a cream and tinctures to help golfers of all levels improve their game and overall well-being. The capsules are packed with a blend of essential vitamins and minerals that support joint health, flexibility, and energy levels. The tinctures are made from all-natural ingredients and provide a quick and easy way to support focus and mental clarity, helping athletes stay in the zone and make the perfect shot. The creams are specially designed to provide targeted relief for sore muscles and joints, helping them stay comfortable and focused on the course. Some of these products include Sleep Caps to ensure that players are well rested the night before, Super B12 Powder which provides the energy needed for the perfect round, Calm Caps which help manage anxiety when players need it most, and Epsom Salt Cream & Recovery Caps, which aids with recovery.

According to data from the National Golf Foundation 25.1 million people (aged six and over) played on a golf course in the United States in 2021 – furthermore there were another 12.4 million people who took part in off-course activities like driving ranges, indoor golf simulators or venues like Topgolf and Drive Shack.<sup>5</sup>

**Competitive Strengths**

The Kirkman brand has been in business for over 70 years with a loyal consumer base and we believe that we maintain high purity and quality standards in the industry. We source all materials from high quality suppliers. We test our finished goods in certified laboratories with state-of-the-art equipment and manufacture our supplements in our US-based cGMP certified and FDA registered facility located in Lake Oswego, Oregon. The FDA requires that we conduct at least one appropriate test or examination to verify and identify any component that is a dietary ingredient. We conduct ingredient testing by verifying the identity through ISO certified 3rd party laboratories. We also test for residual solvents and pesticides (where applicable), presence of up to 24 heavy metals and microbial contamination that could lead to illness or death. Microbial tests can include, but are not limited to, aerobic plate count, yeast & mold, coliforms, E. coli, pseudomonas, staphylococcus aureus, Bile Tolerant gram negative, Salmonella, Aflatoxins and listeria. Heavy metals testing includes beryllium, aluminum, vanadium, chromium, manganese, cobalt, nickel, copper, zinc, arsenic, selenium, molybdenum, palladium, silver, cadmium, tin, antimony, barium, tungsten, platinum, thallium, lead, uranium and mercury. For incoming raw ingredients, we ID using the following methods: Botanicals – HPLC (High Pressure Liquid Chromatography) or TLC (Thin Layer Chromatography), or an approved Chemical test; Vitamins – IR (Infrared) absorption, Chemical test, UV (Ultraviolet) absorption, UV fluorescence, GC (Gas Chromatography), HPLC; Minerals – ICP-MS (Inductively Coupled Plasmas – Mass Spectroscopy), IR (Infrared), Chemical tests, TLC (Thin Layer Chromatography); Enzymes – HPLC (High Pressure Liquid Chromatography), PCR (Polymerase Chain Reaction); Amino Acids – IR absorption, Optical Rotation, HPLC, TLC, GC (Gas Chromatography), Assay; Probiotics – PCR and HPLC; Metals – HPLC or ICP-MS; Micros – Cell culture and cell identification. The FDA requires that a finished batch of the dietary supplement meets product specifications for identity, purity, strength, composition, and for limits on those types of contamination that may adulterate or that may lead to adulteration of the finished batch of the dietary supplement. This can be conducted for a subset of finished dietary supplement batches through a sound statistical sampling plan (or for every finished batch). For our business, we test every batch of products to ensure heavy metals are below Pop 65 limits. In addition, every batch is tested for microbial contamination. Our 75+ year history in the industry, along with our rigorous material testing, allows Kirkman to use statistical sampling to ensure the identity, purity and strength of each product is met. Our formulations use proprietary blends. Although we are authorized to produce hemp derived products because we hold a hemp handler's license, we currently do not grow any hemp, but we source our hemp derived products from registered growers in operation. The FDA does not require any testing on dietary supplements whereas we test for approximately 90 metals and toxins in raw materials.

As previously mentioned, we launched P2i by Kirkman prenatal vitamin, in 2024, which is the only certified prenatal vitamin that aligns to FIGO's position statement.

<sup>5</sup> https://www.golfmonthly.com/news/how-many-golfers-are-there-in-the-united-states

The P2i by Kirkman prenatal vitamin has been certified by The FORUM, a nonprofit 501(c)(3) organization dedicated to promoting low-toxicity standards for prenatal healthy products. The FORUM operates under a Memorandum of Understanding (MOU) with FIGO, a globally recognized organization of obstetricians and gynecologists. This MOU establishes a shared objective to reduce environmental toxicity in prenatal products.

● The certification process involves rigorous testing and evaluation to ensure compliance with The FORUM's low-toxicity standards, which align with FIGO's objectives for maternal and fetal health. These standards include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Analysis
 of 24 Heavy Metals, ensuring levels are below stringent safety thresholds

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Testing
 for the presence of 120 toxic chemicals, such as pesticides and endocrine disruptors, with
 strict limits to prevent potential harm

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Utilization
 of ISO 17025-accredited laboratories for all testing to ensure reliability and reproducibility
 of results

● Purity Labs, an ISO 17025-accredited laboratory, as directed by The FORUM, conducted testing, which confirmed the product's compliance with The FORUM's criteria. Based on this testing, The FORUM issued its certification, indicating that Kirkman's prenatal vitamin meets its standards for low toxicity and safety.

We have an exclusive license agreement with the Trailer Park Boys ("TBP") to market and sell hemp derived products. There are two product categories that include Hemp Derived Delta 9 products. This includes Delta 9 gummies and Delta 9 Drink Enhancers. The revenue from these two product categories represents approximately 0.6% of total company revenue. To date, $575,000 has been paid to TBP under the license agreement and TBP has been issued 14,440 shares of common stock of the Company. The Company and TBP are negotiating a termination of the license agreement effective as of December 31, 2025, with up to a maximum of $150,000 in remaining accrued royalties to be paid by the Company to TBP no later than March 31, 2026.

**Growth Strategy**

We aim to be a leader in the nutraceutical space by manufacturing products held to the highest standard of quality in terms of toxins, metals, and other impurities. Our goal is to build a well-rounded portfolio of products, including mushroom-based supplements targeted for everyday use, prenatal, athletes and beyond.

We plan to do this by:

● Strengthening our existing 70-year-old Kirkman brand with its established base of consumers in the autism community by curating our product mix to cater to their specific needs;

● Launching multiple brands, broad as well as niche, including P2i by Kirkman which is the only certified prenatal vitamin supporting FIGO's October 2023 position statement, to allow us to increase our market share;

● Modernizing our manufacturing capabilities by reorganizing the space and introducing new and efficient machinery and equipment to significantly enhance our output;

● Investing heavily into our sales and marketing activities as well as business development in order to increase sales and distribution; and

● Identify key companies with synergistic strengths for partnerships or acquisitions.

**Challenges, Risks and Limitations** 

Our ability to utilize our competitive advantages in order to strengthen and expand our business and achieve our growth plan is subject to a number of risks and uncertainties more fully discussed under "Risk Factors" in this Prospectus. As discussed in our financial statements, we have suffered recurring losses from operations and have a significant accumulated deficit. In addition, we continue to experience negative cash flows from operations. This limited working capital capabilities may delay or make the accomplishment of our growth plans difficult. In assessing the likelihood of our future success, investors in this offering should note our history of losses and the likelihood of our operating profitably in the future. Further, some of our products may be subject to uncertain and evolving federal, state and local regulations concerning hemp, CBD and other non-tobacco consumable products. Because the type, timing, and impact of such regulations remains uncertain, we cannot give any assurance that such actions will not have a material adverse effect on this emerging business and our strategy.

**Our Corporate History and Structure**

Functional Brands was organized under the General Corporation Law in the state of Delaware on November 19, 2020 under the name HT Naturals Inc. HT Naturals Inc. changed its name to Functional Brands Inc. on March 23, 2023. Our principal business is the production, marketing, sales, and distribution of nutraceutical products through our Kirkman division, alongside our hemp derived products under the Hemptown brand in certain states within the United States that permit such sales. We ship our Kirkman products to all US states. As for hemp derived products, we only sell to states which permit this activity with certain restrictions such as the content of THC which differs depending on the state.

The states in which we have sold hemp derived products in the past are Alabama, Arizona, Arkansas, California (D9 ingestible and CBD/CBG ingestible only), Colorado (CBD/CBG inhalable only), Connecticut, Delaware (D9 ingestible), Florida, Georgia (D9 ingestible and CBD/CBG ingestible only), Hawaii (CBD/CBG ingestible only), Illinois(D9 ingestible and CBD/CBG inhalable), Indiana (D9 ingestible only), Iowa (D9 ingestible only), Kansas, Kentucky (D9 ingestible only), Louisiana, Maine (D9 ingestible and CBD/CBG inhalable), Maryland (CBD/CBG inhalable only), Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York (D9 and CBD/CBG ingestible only), North Carolina, North Dakota (CBD/CBG ingestible only), Ohio, Oklahoma, Oregon (CBD/CBG ingestible only), Pennsylvania, Rhode Island, South Carolina, South Dakota (D9 ingestible only), Tennessee (CBD/CBG inhalable only), Texas, Virgina (CBD/CBG ingestible and inhalable only), Washington (CBD/CBG Inhalable only), West Virginia, Wisconsin, Wyoming. We have engaged specialized hemp counsel to provide regular updates on the 50 states and the legality of our hemp products in each state. In addition, we have established and follow a standard of operating procedure (SOP) to ensure sales do not occur in the states where hemp products may not be sold consistent with the regular updates provided by our hemp counsel. We have an internal policy that prohibits us as a company and any of our executives, directors, employees, sales representatives and distributors to distribute any of the Company's hemp derived products in places in which the sale of hemp derived products is prohibited. We are a 98% subsidiary of HOC, a British Columbia, Canada private operating holding company with various interests in nutraceutical manufacturing and federally legal industrial hemp products. We were granted a licensing agreement by Hemptown Organics Corp. The licensing agreement, dated December 10, 2020, provides Functional Brands Inc. as licensee, a license to use the Hemptown USA and Hemptown Naturals brand and trademarks on a perpetual, non-exclusive, non-transferable basis, with no expiry date. This licensing agreement will transfer to full ownership to Functional Brands upon the public offering and listing on the exchange, at which time HOC will dividend out the majority of the Company's shares currently held by HOC.

On July 3, 2019, HTO Holdings Inc. ("HTO Holdings") a wholly owned subsidiary of HOC and the owner of all issued and outstanding stock of HTO Nevada (as "Purchaser"), entered into an asset purchase agreement ("APA") for the net assets of Kirkman Group Inc. a Nevada corporation, Kirkman Laboratories Inc., an Oregon corporation and Kirkman Group International, Inc. a Nevada corporation (collectively "Kirkman" or the "Seller," and together with Purchaser, the "Parties") for a consideration equal to $5 million with payout in a business combination of cash and deferred consideration. The "Seller" is David Humphrey. Under the APA, Purchaser and HTO Holdings were to make certain additional payments toward the purchase price. The APA was amended on November 30, 2021 by the Parties with the purpose of modifying the payment schedule of the deferred consideration; and in exchange for amending the payment schedule of the deferred consideration, the Purchaser and HTO Holdings agreed to enter into a security agreement, and amend the APA and other agreements attached to the APA (including, but not limited to, the non-competition agreement, the trademark assignment agreement, the domain names transfer agreement, the assignment of intangible assets, and the intellectual property security agreement (collectively, the "IP Collateral Agreements") to, among other things, provide additional collateral as security to Seller. Upon payment in full in cash of the deferred consideration or set-off of the deferred consideration, as amended: (i) each of the Parties agreed that the security agreement and amended intellectual property security agreement would be automatically terminated and be of no further force and effect; and (ii) Seller would, at its sole cost and expense, release all liens in the IP Collateral, as defined in the respective security agreement and intellectual property security agreement, and all rights therein would forthwith revert to Purchaser. On May 16, 2022, the APA was amended again by the Parties, to reflect further modifications to the schedules and exhibits to the APA and IP Collateral Agreements. On May 31, 2022, Purchaser paid Seller certain amounts ("Immediate Payments"), and on July 23, 2022, Purchaser and Seller executed a forbearance agreement ("Forbearance Agreement") to extend the payments due under the APA to August 31, 2022. After Purchaser's default, and partial payment to Seller in September 2022, the Parties executed an amendment to the Forbearance Agreement on December 27, 2022, to extend certain payments due under the APA, at which time the remaining balance due was $3,032,000..

On September 24, 2024, the Company executed a Fourth Amended Forbearance Agreement which allowed the postponement of principal payments. As of May 28, 2025, the remaining balance due is $2,227,366 (the "Existing Default"). On May 28, 2025, the Company executed a Sixth Amended Forbearance Agreement (the "Sixth Amendment") to provide Purchaser with a period of time to cure the Existing Default and Purchaser and the Company also executed a Confession of Judgement for Money Awarded and Decree of Foreclosure which upon a default by Purchaser under the Sixth Amendment (a "Forbearance Default") may be filed with the Circuit Court of the State of Oregon allowing assets of the Purchaser and the Company to be foreclosed upon to satisfy payment of the Existing Default. Subject to compliance by Purchaser with the terms and conditions of this Sixth Amendment, Sellers agreed to forbear from exercising their rights and remedies against Purchaser under the transaction documents with respect to the Existing Default during the period commencing on the date of execution of the Sixth Amendment by all parties and ending on the earlier to occur of (i) July 20, 2025 and (ii) the date that any Forbearance Default occurs, upon which, Sellers' forbearance, as provided herein, shall immediately and automatically cease without any requirement of notice or further action by any party (the "Termination Date"). On July 9, the Company executed the Seventh Amended Forbearance Agreement which extended clause (i) of the Termination Date to August 30, 2025. On and from the Termination Date, Sellers may, in their sole discretion, exercise any and all remedies available to them under the transaction documents that otherwise would be available only by reason of the occurrence of any Events of Default thereunder or the continuation of any Existing Default. As of August 12, 2025, the balance of $2,227,366 owed to Seller is due and payable by August 30, 2025. We intend to use a portion of the proceeds of the private placement to cure the Existing Default.

As a part of our restructuring efforts, HTO Nevada, formerly owned by HTO Holdings, was acquired by Functional Brands on May 19, 2023, through a share exchange agreement executed by HOC, HTO Holdings and Functional Brands.,. On July 11, 2025, Functional Brands ceased to be a controlled company. As of the date of this prospectus, HOC holds no shares of Functional Brands. Our fiscal year-end is December 31.

**Industry**

According to Grand View Research, the Global Nutritional Supplements Market is valued at approximately $405.15B in 2023, and is expected to expand at a compound annual growth rate (CAGR) of 6.3% from 2023 to 2030. Growing attention to health has significantly helped the market thrive. Moreover, the rising prevalence of non-communicable diseases has resulted in the faster adoption of nutritional supplements to enrich overall well-being. According to the Global Alliance for Chronic Diseases (GACD), approximately 75% of deaths globally occur due to non-communicable diseases (NCDs). Thus, these alarming statistics have shifted the focus on well-being and health, which is expected to increase the demand for nutritional supplements.

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The United States Nutritional Supplements Market is valuated at approximately $95.2 billion in 2023 and is expected to expand at a compound annual growth rate (CAGR) of 4.8% from 2023 to 2030. The United States accounted for 23.5% of the global nutritional supplements market in 2023. The U.S. is expected to lead the global market in terms of revenue in 2030. North America nutritional supplements market is projected to lead the regional market in terms of revenue in 2030.

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**\*** Source: Grand View Research

According to Grand View Research, the United States Dietary Supplement Market is valued at approximately $53.6 billion in 2023 and is expected to expand at a compound annual growth rate (CAGR) of 5.7% from 2024 to 2030. The United States emerged as a leading market for dietary supplements in the North America region owing to the higher spending capacity of the consumers. Increasing spending on healthcare products, the rising geriatric population, rising interest in preventive healthcare, and growing interest in attaining wellness through diet are expected to augment market growth over the forecast period. We expect that a growing number of fitness centers, health clubs and gymnasiums coupled with growing awareness about fitness among younger generations will increase the demand for energy and weight management. Increasing acceptance of sports as a career is expected to increase the demand for sports nutrition, which we expect will benefit the market for dietary supplements.

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According to Grand View Research, the global prenatal vitamin supplement market was valued at USD 542.8 million in 2023 and is projected to grow at a CAGR of 8.5% from 2024 to 2030. Increasing awareness about healthy eating habits and proper medication among pregnant women is the major factor driving the market. The overweight and sedentary lifestyle of pregnant women increases the deficiency of minerals and vitamins. In addition, malnutrition in infants, increasing incidence of other congenital disabilities, and increasing awareness about the benefits of prenatal supplements are some of the factors driving the market. The U.S. prenatal vitamin supplements market was identified as a lucrative region in 2023. Strong endorsements and guidelines from healthcare providers such as the CDC and ACOG bolster confidence in the efficacy and necessity of prenatal vitamins among expectant mothers, driving widespread adoption and market growth in the U.S. According to the American College of Obstetricians and Gynecologists (ACOG), during pregnancy, essential nutrients such as iron, folic acid, choline, calcium, omega-3 fatty acids, vitamin D, B vitamins, and vitamin C are crucial for fetal development and maternal health. A balanced diet rich in sources such as leafy greens, dairy, lean meats, fortified foods, and a prenatal vitamin containing folic acid ensures adequate intake to support both mother and baby's needs.

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According to Grand View Research, the global CBD consumer health market was valued at USD $19.5B in 2023 and is anticipated to grow at a CAGR of 18.1% during the forecast period. The leading factor attributed to the growth is the positive government reforms for the legalization of CBD in various regions. CBD consumer products are gaining significant acceptance due to the rising awareness of their health benefits. Furthermore, the demand for hemp-derived CBD products is increasing globally due to the legalization of hemp in various countries. These statements have not been reviewed and/or approved by the FDA. The U.S. market value for CBD in 2023 was valued at USD $8.3B, and is expected to grow at a CAGR of 7.6% through 2030.

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We believe that increasing awareness regarding CBD's benefits has influenced buyers to buy CBD products. Because CBD products have a greater profit margin, commercial retailers are now focusing on selling cannabis-based products. Numerous health and wellness retailers, such as Rite Aid, CVS Health, and Walgreens Boots Alliance are now offering CBD-based products. For example, CVS Health decided to offer CBD topicals at its 800 stores and Walgreens Boots Alliance is selling CBD-containing topicals across 1,500 of its stores in the United States. As referenced by Forbes health, there are several benefits for CBD that include offsetting anxiety and depression, treating select epilepsy syndromes, reducing PTSD symptoms, treating opioid addiction, alleviating ALS symptoms, relieving unmanageable pain, easing diabetic complications, protecting against neurological disease, and inhibiting arthritic symptoms. Given the growing cannabidiol (CBD) products market, the U.S. Food and Drug Administration has convened a high-level internal working group to explore potential regulatory pathways for CBD products. On January 26, 2023, the FDA announced that it would not seek to regulate CBD as a dietary supplement. Rather, after careful review, the FDA has concluded that a new regulatory pathway for CBD is needed that balances individuals' desire for access to CBD products with the regulatory oversight needed to manage risks. The agency is prepared to work with Congress on this matter<sup>10</sup>. With FDA's lack of regulating CBD products, numerous states have authorized hemp-derived extract (CBD and other cannabinoids) products and affirmatively regulate their consumer safety. Meanwhile, FDA's enforcement priorities focus directly on disease claims and intoxicating products appealing to children. As discussed above, we make sure that our products and marketing collateral neither make disease claims or appeal to youth<sup>11</sup>. FDA still has not issued any regulations regarding CBD. The agency is awaiting direction from Congress.

FDA has approved Epidiolex, which contains a purified form of the drug substance cannabidiol (CBD) for the treatment of seizure associated with Lennox-Gastaut syndrome or Dravet syndrome in patients 2 years of age and older. That means the FDA has concluded that this particular drug product is safe and effective for its intended use.

The FDA has also approved Marinl and Syndros for therapeutic uses in the United States, including for nausea associated with cancer chemotherapy and for the treatment of anorexia associated with weight loss in AIDS patients. Mariol and Syndros include the active ingredient dronabinol, a synthetic delta-9-tetrahydrocannabinol (THC) which is considered the psychoactive intoxicating component of cannabis (i.e. the component responsible for the ''high'' people may experience from using cannabis). Another FDA-approved drug, Cesamet, contains the active ingredient nabilone, which has a chemical structure to THC and is synthetically derived. Cesamet, like dronabinol-containing products, is indicated for nausea associated with cancer chemotherapy.

According to Grand View Research, CBD derived from hemp is anticipated to witness rapid growth owing to the increasing demand from the pharmaceutical sector and rising awareness among consumers regarding health. Increasing consumer disposable income along with the legalization of medicinal cannabis is anticipated to have a positive impact on the demand for CBD in the pharmaceutical sector. Oils, tinctures, concentrates, capsules, topical solutions such as salves, lip balms, lotions and edibles such as baked goods, coffee, chocolates, gums and candies are some of the CBD products that are in high demand.

**Competitive Strengths**

Our competitive strengths lie in the fact that the Kirkman brand has been in business for over 70 years with a loyal consumer base and we believe that we maintain high purity and quality standards in the industry. We source all materials from high quality suppliers. We test our finished goods in certified laboratories with state-of-the-art equipment and manufacture our supplements in our US-based cGMP certified and FDA registered facility located in Lake Oswego, Oregon. Our formulations use proprietary blends. Although we are authorized to produce hemp derived products because we hold a hemp handler's license, we currently do not grow any hemp. Instead, we source our hemp derived products from registered growers in operation. Our products are not FDA approved and they do not require a prescription; all our products are sold over the counter. The FDA does not require any testing on dietary supplements; however, we test for approximately 90 metals and toxins in raw materials.

**Growth Strategy**

We aim to be a leader in the nutraceutical space by manufacturing products held to the highest standard of quality in terms of toxins, metals, and other impurities. Our goal is to build a well-rounded portfolio of products including regular as well as mushroom-based supplements targeted for everyday use, prenatal, athletes and beyond.

We plan to do this by using the net proceeds from the Offering in the following manner. Net proceeds are defined after deducting the estimated underwriter discounts and commissions and offering expenses payable by us, we expect to invest the net process of approximately $5,801,250.

● Approximately 13% of net proceeds (approximately $750,000) for Go-Public Attorney / Partner Fees

● Approximately 7% of net proceeds (approximately $350,000) for market awareness marketing

● Approximately 42% of the net proceeds (approximately $2.4 million) for a deferred payment in connection with the Kirkman acquisition which has a maturity date of January 1, 2025. The payment is comprised solely of principal, since there is currently a $20,000 monthly interest payment payable; and

● Approximately 39% of net proceeds (approximately $2,300,000) for sales, marketing and working capital

*Why do people on the spectrum need supplements?*

Some on the spectrum are restrictive in what they will eat, preferring certain textures or colors over others. This can lead to vitamin and mineral deficiencies since they aren't eating a wide variety of food types.

<sup>10</sup> www.forbes.com/health/body/cbd-oil-benefits/

<sup>11</sup> Source: www.FDA.gov

According to Grand View Research, there is evidence that people with autism may not absorb or metabolize nutrients in the way that persons without autism absorb or metabolize nutrients. This could mean that even if persons with autism are consuming the nutrients they need, their body cannot utilize them effectively.

**Technology& Intellectual Property**

On December 10, 2020, we were granted a licensing agreement from Hemptown Organics Corp. The licensing agreement, dated December 10, 2020, provides Functional Brands Inc. as licensee, a license to use the Hemptown USA and Hemptown Naturals brands and trademarks on a perpetual, non-exclusive, non-transferable basis, with no expiry date. This licensing agreement will be transferred to full ownership to Functional Brands upon the completion of the Offering, at which time HOC will dividend out the majority of the Company's shares currently held by HOC.

The following is a list of our current trademark registrations:

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**Marketing**

We market our products through various sales channels, primarily trade shows and through print and digital advertisements, focusing on several customer types. These customers include consumers, wholesalers, distributors, and those seeking private label products. We repeatedly test new marketing venues, platforms and approaches and measure results to improve the cost-effectiveness of our efforts.

*Trade Shows*

We participate in a variety of trade shows each year with differing attendee focuses. These include health and wellness shows, Autism conferences, OBGYN conferences, convenience and grocery stores, consumer product distribution, and private labels.

*Digital and Printed Advertisements*

 

We utilize sophisticated digital tools to place ads primarily through Google and Facebook (now Meta) that target potential customers and those showing interest in our products. In addition, we have recently begun to place traditional print ads in journals and magazines focused on convenience stores, distributors, and private label products.

In addition to new prospect acquisition programs, our marketing team produces newsletters that are distributed to our contacts with the goal of keeping our company top-of-mind, and this newsletter has historically resulted in conversion of contacts into current customers.

**Customers and Markets**

We sell our Kirkman branded supplements to 45 countries through international distributors that have partnered with the Kirkman brand for two decades. We have recurring consumers that purchase Kirkman brand products via our website at www.kirkmangroup.com, as well as through Amazon. Our core B2B customers are iHerb, Emerson and FullScript. We also have several hundred direct customers, classified as professionals, where we sell our supplements. These customers include doctors, chiropractors, and practitioners who sell our products to their patients. In addition, we plan to focus our commercial efforts for P2i by Kirkman prenatal to OBGYN's and expectant mothers.

Our hemp related products are sold in the United States. We have several thousand customers on our e-commerce sites. For Hemptown Naturals, we have 3,189 subscribers and 6,355 non-investor emails in our database. For Kirkman, we have 36,762 active emails in our email database. As for our white/private label business, we have twelve customers who use us to manufacture white/private label products for them.

**Competition**

● There are several competitors in the supplement space. Within the Vitamin segment, 66% of vitamins purchased are classified as multivitamins, as indicated by Nielsen Retail Measurement Data. Market leaders in the multi-vitamin segment are 'private label store brands' followed by Nature Made, Centrum, One-A-Day and Nature's Bounty, respectively.

● Minerals remain a steady category, and they include Calcium, Magnesium and Iron as the main mineral categories. Private Label brands, again, lead the way, followed by Nature Made, Caltrate, Citracal and Nature's Bounty.

● Supplement growth outpaces the Vitamin and Minerals categories (Source: Nielsen). The segments within the supplement category include, but are not limited to, Digestive Health, General Health, Heart Health, Energy, and Sleep Aids. The leaders within this space are Nature's Bounty, Nature Made, Emergen-C, Baush+Lomb and Airbourne. 91% of the supplement revenue (Nielsen Homescan Panel Data) is generated within the following four sales channels: Warehouse Club, Grocery, Super Centers and Drug Stores.

● There are several product delivery methods for vitamins, minerals and supplements. These delivery methods could be tablets, capsules, liquids, effervescent tablets, and powders. Kirkman has the ability to produce capsules, tablets, liquids and powders to properly compete with core competitors.

● Within the special needs category, competition includes New Beginnings, Claire Labs, Houston Enzymes and Lifetrients. These companies primarily focus on the dietary sensitivities of their respective consumers.

● Within the Hemp Industry, products include gummies, tinctures, creams/lotions and capsules, Charlotte's Web, cbdMD, Social CBD, Joy Organics, MedTerra produce CBD related products. There is limited market share data due to the fact that the majority of product sales occur online.

**Facilities**

We lease a 24,000 square foot facility located in Lake Oswego, OR. This facility houses our manufacturing operation, warehouse, back-end offices and fulfillment center. Although we are authorized to produce hemp derived products because we hold a hemp handler's license, we currently do not grow any hemp, instead, we source our hemp derived products from registered growers in operation.

**Employees**

As of the date of this prospectus, we have 32 full-time employees and 1 part-time employee, and we consider our employee relations to be good. Our human capital resource objectives are designed to attract, and retain, highly motivated and well-qualified employees. We have worked diligently to provide a flexible and safe work environment. The health and safety of our employees and clientele is of the upmost importance to us.

**Legal Proceedings**

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

On May 25, 2021, True Health Medical Center, S.C. ("True Health") amended an existing complaint against Kirkman Group, Inc. ("Kirkman"), James Hall and David Humphries to assert claims against HTO Nevada, Inc. and HTO Holdings, Inc. (collectively, HTO Nevada, Inc. and HTO Holdings, Inc. are referred to as the "HTO Parties"). Kirkman is the seller of certain assets to the HTO Parties and is a separate legal entity. Affiliates of the HTO Parties were first named in the lawsuit on September 23, 2020. The case is pending in the Circuit Court for the Eighteenth Judicial Circuit, DuPage County, Illinois. Kirkman had terminated a royalty agreement prior to selling its assets to the HTO Parties but the royalty agreement has a provision that allows True Health to continue to receive royalties after the termination of the agreement. True Health claims that Kirkman underpaid the royalties due to True Health prior to the sale of assets to the HTO Parties. There is no dispute that Kirkman stopped paying royalties to True Health around the time it terminated the agreement and that the HTO Parties have never paid royalties to True Health. True Health contends that as the purchaser of certain Kirkman assets, the HTO Parties should be bound by the terms of the royalty agreement. There is no certain amount at this time in connection with the alleged in the damages claim against the HTO Parties. It is not possible to predict the outcome of this proceeding at this time. To date, the parties have engaged in some discovery including a limited number of depositions. True Health has filed a motion for summary judgment that addresses its claims against Kirkman, but does not address any claim against the HTO Parties. Briefing is not yet complete on the summary judgment motion and a ruling is likely more than 60 days away. Regardless of how the court rules on summary judgment, there will be remaining claims in the case and it is likely that additional discovery will be conducted. No trial date has been scheduled at this time.

**Regulation**

***Trade Regulations***

Our suppliers generally source or manufacture finished goods in parts of the world that may be affected by the imposition of duties, tariffs or other import regulations by the United States. We believe that our redundant network of suppliers provides sufficient capacity to mitigate any dependency risks on a single supplier.

We buy necessary components or ingredients for our products from suppliers or factories both domestically and internationally. We do not depend on any single supplier. However, if we are unable to continue to obtain our finished products from international locations or if our suppliers are unable to source raw materials, it could significantly disrupt our business. Further, we are affected by economic, political and other conditions in the United States and internationally, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and widespread health emergencies, which could have a material adverse effect on our business.

***Laws and Regulations Relating to Our Products***

***Nutraceutical***

 ****

The dietary supplement industry is regulated on a federal level in the U.S. by the Food and Drug Administration ("FDA") and the Federal Trade Commission ("FTC") as well as by government agencies in each of the 50 states. FDA regulates both finished dietary supplement products and dietary ingredients. FDA regulates dietary supplements under a different set of regulations than those covering "conventional" foods and drug products. Under the Dietary Supplement Health and Education Act of 1994 (DSHEA):

Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded. That means that these firms are responsible for evaluating the safety and labeling of their products before marketing to ensure that they meet all the requirements of the Federal Food, Drug, and Cosmetic Act as amended by DSHEA and FDA regulations. The FDA has the authority to take action against any adulterated or misbranded dietary supplement product after it reaches the market. Most dietary supplement manufacturing, labeling and marketing is covered by extensive regulations issued and enforced by the FDA and the FTC. The FDA has regulatory authority under the Federal Food, Drug and Cosmetic Act as amended in 1994 by the Dietary Supplement Health and Education Act (DSHEA) and in 2006 by the Dietary Supplement and Nonprescription Drug Consumer Protection Act. Under the DSHEA, dietary supplements are regulated as a category of food. The FDA regulates both finished dietary supplement products and dietary ingredients. By law, it is illegal to manufacture or market dietary supplement products that are adulterated or misbranded, and the FDA has regulatory authority to remove such products from the marketplace.

Key Regulations

Responsible companies in the dietary supplement industry abide by extensive regulations that cover manufacturing, labeling, quality control, safety, post-market surveillance and more.

**New Dietary Ingredient Notifications**

The Food Drug & Cosmetic Act, as amended by the Dietary Supplement Health and Education Act (DSHEA), established that dietary supplements that were in commerce prior to 1994 have a history of safe use, and therefore, can remain on the market without additional safety review. All new ingredients marketed after that date, however, must submit a formal 75-day notice along with evidence that the product is reasonably expected to be safe. This is referred to as a new dietary ingredient (NDI) notification. If the FDA has concerns about the ingredient or its safety profile, the agency has clear authority to request more information or to reject the notification and deny the product's entry into the market.

**Dietary Supplement Labeling Requirements**

The following are the minimum labeling requirements:

&nbsp;&nbsp;&nbsp;&nbsp;1. **Statement of Identity** 

The statement must include the product name and identify itself as a dietary supplement. Although you may replace the term dietary with the type of ingredients that are in the product, having one of them on the product label is a mandatory requirement. The product must be labeled either as conventional foods and beverages or dietary supplement based on its actuals.

&nbsp;&nbsp;&nbsp;&nbsp;2. **Net Quantity of Contents** 

The net quantity of content informs consumers of the amount of dietary supplement that is in the container or package. The net quantity of content must be located on the product label as a distinct item in the bottom 30 percent of the principal display panel in lines generally parallel to the base of the container.

&nbsp;&nbsp;&nbsp;&nbsp;3. **Supplements Chart** 

The supplement facts must contain the list of names and quantities of dietary ingredients present in the product's serving size and servings per container.

&nbsp;&nbsp;&nbsp;&nbsp;4. **Ingredients List** 

The list of ingredients must be displayed in descending order of predominance by weight. If all source ingredients are listed in the supplement facts panel, and there are no other ingredients, such as excipients or fillers, an ingredient statement is not needed.

&nbsp;&nbsp;&nbsp;&nbsp;5. **Other Details** 

Other details required include manufacturer, packer, or distributor name and address, and domestic U.S. mail address and phone number to which a consumer can report a serious adverse event. If an adverse event is reported, the company must notify the FDA.

*Hemp and marijuana regulatory regimes in each state where we sell hemp derived products.*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **State** | **D9<br> Ingestibles** | **Legislative and Enforcement Notes** | **Registration/<br> License <br> Required** | **CBD /<br> CBG<br> Ingestibles** | **Notes <br> (THC <br> caps)** | **CBD /<br> CBG<br> Inhalables** | **Inhalables<br> prohibited?** |
| \*Alabama |  | 23 Leg session: SB 66 enacted limits psychoactive cannabinoid products to 21+; attempt by DPH to stop CBD sales challenged in court: TRO issued against DPH; SB 255 (2019) authorized hemp farming, including its derivatives and extracts, with less than 0.3% D9 on a dry weight basis; products not affirmatively authorized. Products must be less than 0.3% D9 | No |  | All states in this column that HT is selling into are OK but must meet THC cap, if applicable |  | No |
| \*Arizona |  | 24 Leg session: SB 1401 would have criminalized D8, etc. as a dangerous drug but it DIED in committee; 23 Leg Session: SB 1271 would have authorized the manufacturing of hemp-derived products, license required but it stalled in the House; SB 1098 (2018) authorized hemp farming with less than 0.3% D9 | No |  |  |  | No |
| \*Arkansas |  | HB 1640 (2021) authorized hemp/farming, including its derivatives and extracts, with less than 0.3% THC (all THCs) | No |  |  |  | No |
| \*California |  | 24 Leg Session: AB 2223 would cap THC at .25mg/1mg per serving/product (PASSAGE LIKELY); AB 45 (2021) authorized hemp manufacturing; 0.3% THC limit applies to final form extract ingredient, not final form product; otherwise, must be sold in cannabis retail | Yes, Extract and Product Manufacturer License; out-of-state extract manufacturer only |  |  |  | Yes, until a tax is adopted. |

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|:---|:---|:---|:---|:---|
| Colorado | 23 Leg Session: SB 23-271 caps total THC at 1.75 mg/serging and 5 serving/product | Yes | Total THC cap: 1.75 mg/serving & 5 mg/product | No |
| \*Connecticut | 24 Leg Session: HB 5150 ENACTED total THC limit: 1mg/serving and 5mg/product for edible products; 25mg/product for vape products; and 0.3% for flower; 23 Leg Update: HB 6699 enacted Caps total THC at 1mg/serving and 5mg/product; up to 25mg/product for tinctures/concentrates; D8/D9/HHC/THC-O included in total THC 0.3% limit for hemp products; otherwise must be sold in marijuana retail. SB 1201 (2021) separated hemp from marijuana and defined it the same as the federal act (less than 0.3% D9 including extracts/derivatives); D8/D9/HHC/THC-O included in total THC so \*\*all THCs considered in hemp products. | No | Total THC Cap: 1mg/serving & 5mg/product for edible products; 25mg/product for vape products; and 0.3% for flower | No |
| \*Delaware | 23 Leg session: HB 1 enacted relating to MJ possession for 21+, wholly removed hemp from MJ definition. This arguably authorizes possession of D9 etc. products. Title 3, Chapter 28 authorized hemp farming/research with less than 0.3% D9; flower derivatives and extracts not specifically authorized | No |  | No |

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| | | | | |
|:---|:---|:---|:---|:---|
| \*Florida | 24 Leg Session: AB 1698 would have included THCa in D9 count and cap D9 at 5mg/50mg per serving/product (GOV VETOED); 23 Leg Session: SB 1676 enacted and regulates hemp extract products under 0.3% D9, including D8, etc. limited to 21+; HB 333 (2019) authorized hemp/farming/products, including its derivatives and extracts, with less than 0.3% D9 on a dry weight basis; food establishment permit required for all products sold in state including inhalable products. Labeling/packaging requirements | Yes, Food Establishment Permit if presence in state beyond online sales |  | No |
| \*Georgia | 24 Leg Session: SB 494 (ENACTED) prohibits food infused w/THC/CBD - gummies excluded; now Total D9 THC/THCa standard (0.3% total D9 THC/THCa) for hemp products; HB 1127/SB 437/SB 350 would have limited all consumable hemp products to 21+ (DEAD); 23 Leg Session: SB 22 would have limited all hemp products to 18+ but stalled before the Legislature adjourned; HB 213 (2019) authorized hemp/farming/products, including its derivatives and extracts, with the federally defined THC (D9) level | No |  | Yes |
| Hawaii | 24 Leg Session HB 1424/SB516 would have invoked state protectionism in labels; and HB 2449/SB 3138 would have allowed hemp in food/bev (ALL DEAD); HB 2689 (2020) authorized hemp products with less than 0.3% D9, however, State code §328G-3 prohibits adding cannabinoids as an ingredient to foods and inhalable products | No |  | Yes |
| Idaho | State's CSA prohibits hemp products with any THC. The only CBD allowed is 0.00% Isolate products | No | 0 THC state | Yes |

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| | | | |
|:---|:---|:---|:---|
| \*Illinois | 24 Leg Session: HB 5306/SB 3790 would have limited all consumable hemp products to 21+; SB 3926 would have limited all hemp products to 0.5mg THC (ALL DEAD); Chicago Ordinance 4215 would cap D9 products at .5mg/serving / 2.5mg/product; SB 2298 (2018) authorized hemp farming/products with less than 0.3% D9. | No | No |
| \*Indiana | SEA 516 (2019) authorized hemp products with less than 0.3% D9. | No | Yes |
| \*Iowa | 24 Leg Session: HF 2605 (ENACTED) caps Total THC at 4mg/serving 10/mg/product; SF 2417 would have imposed 25% tax on hemp products in bars/restaurants (DEAD); Iowa Administrative Code 481, Chapter 32 (2021) requires a consumable hemp product registration for retailers (in store/online) and must be less than 0.3% total THC | Yes, Retailer registration | Yes |
| \*Kansas | SB 263 (2018) authorized hemp research farming with less than 0.3% D9; no specific product authorization, but, state statute 2-3908 prohibits extracts with D9 greater than 0.3% and also references federal law (FDA); from AG Opinion: "Thus, we conclude that the limit of 0.3% applies to the total amount of all tetrahydrocannabinols in a final hemp product, including Delta-8, Delta-9, and all other tetrahydrocannabinols." | No | No |

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| | | | | |
|:---|:---|:---|:---|:---|
| \*Kentucky | 23 Leg Session: HB 544 enacted and the state will strictly regulate intoxicating products and limit them to 21+; regulations in process; State law authorizes hemp products with less than 0.3% D9 | No |  | Flower prohibited/vapes OK |
| \*Louisiana | 24 Leg Session: SB 237 would have limited consumable hemp products to 0.0% THC; SB 495 would have prohibited out of state products (BOTH DEAD); HB 491 (2019 – Hemp Farming Act) 0.3% THC limit applies to D9 only. HB 491 (2019) authorized hemp, including extracts and derivatives, with D9 less than 0.3%; products must be approved by the state (RS 3-1483) and wholesalers are required to obtain a permit | Yes, Product registration and hemp vendor license |  | No |
| Maine | HP 459/LD 630 (2019) fully authorized hemp products with less than 0.3% D9 | No |  | No |
| Maryland | 24 Leg Session: SB 1109 would have restricted who can sell intoxicating hemp products (DEAD); 23 Update: Consumable and inhalable products with more than 0.5mg total THC/serving and 2.5mg THC/product are cannabis/MJ; tinctures OK w/less than 2.5mg total THC/serving and 100mg THC/product; HB 698 (2018) authorized hemp pilot program with less than 0.3% D9, flower derivatives and extracts not specifically authorized | No | Consumable and inhalable products with more than 0.5mg total THC/serving and 2.5mg THC/product are cannabis/MJ; \*\*tinctures OK w/less than 2.5mg total THC/serving and 100mg THC/product\*\* | No |

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| | | | | |
|:---|:---|:---|:---|:---|
| \*Massachusetts | 24 Update: Department of AG adopted a new policy prohibiting hemp flower and hemp products with any THC other than topicals; '23 Leg Session: H.90 would have regulated hemp products and license in-state manufacturers but stalled before leg. adjournment 8/1 (DEAD); state operates under USDA's state hemp plan program and the federal 0.3% D9 limit; CBD food/dietary supplement product wholesaling prohibited, but retail sales currently not regulated | Not yet |  | Sold in MJ retail only |
| \*Michigan | HB 4517 (2021) authorized hemp products with less than 0.3% THC on a dry weight basis (THC generally, not just D9) | MJ license/Hemp handler-processor license to sell hemp products including smokable flower |  | No |
| \*Minnesota | 24 Leg Session: HF 4629 would have allowed lower potency hemp products (DEAD); 23 Leg session: HF 100 enacted limits D9 to 5 mg and require a retail license. HF 3595 (2022) limits edible hemp products to 5mg/serving and 50mg/package total THC including D8, etc.; sales limited to 21+; RS 18K.02 (2021) authorized hemp, including extracts and derivatives, with<br> less 0.3% D9. | Retailer license | D9 cap: 5 mg/serving & 50 mg/product | No |
| Mississippi | 24 Leg Update: HB 1676 would have capped THC in consumable hemp products at 0.5mg/2.5mg & 20:1 CBD: THC (DEAD); SB 2725 (2020) adopted the federal D9 THC limit, including extracts and derivatives, but consumable hemp products must be "FDA approved". | No |  | No |

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| | | | |
|:---|:---|:---|:---|
| \*Missouri | 24 Leg Update: SB 984 would have moved all intoxicating cannabinoids to MJ retail (all ingestible/consumable products - not smoking) (DEAD); HB 2034 (2018) authorized hemp, including extracts and derivatives, with less 0.3% D9. | No | No |
| \*Montana | HB 701 (2021) kept hemp products with less than 0.3% D9 out of marijuana system and thus allowed, but not affirmatively authorized | No | No |
| Nebraska | 24 Leg Session: LB 999 would have prohibited all cannabinoids other than CBD in hemp products (DEAD); LB 657 (2019) authorized hemp/farming, including its derivatives and extracts, with less than 0.3% D9 on a dry weight basis; products not affirmatively authorized. | No | No |
| \*Nevada | Hemp farming authorized with less than 0.3% total THC; products not affirmatively authorized; SB 49 (2021) clarifies that 0.3% THC limit is total THC, not just D9 | No | No |
| \*New Hampshire | HB 459-FN (2019) limits hemp products to 0.3% D9 THC only. Product registration | Product registration | No |
| \*New Jersey | 24 Leg Session: A3580/S2313 would limit all hemp products w/any THC to 21+; S3235 would push all hemp products over 2.5mg total THC to MJ (ON GUV'S DESK); AB 5322 (2020) limits hemp products to 0.3% D9 THC only. Dept of Ag license for selling hemp products may be required. | Dept of Ag. license may be required for sales | No |
| \*New Mexico | HB 581(2019) limits hemp products to 0.3% D9 THC only | No | No |

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| | | | | |
|:---|:---|:---|:---|:---|
| \*New York | 24 Les Session: A09047/S8463 would have re-legalized synthetic hemp THC in MJ retail (DEAD); S3235 would have allowed up to 5mg THC in hemp beverages (DEAD); 23 update: Cannabis agency enforcement against high THC products imminent along with THC caps; Hemp products authorized in 2020 with less than 0.3% D9; hemp retailer license required for in store/online sales; food/beverage products limited to 25 mg total cannabinoids/product; supplement products have much higher total cannabinoid limits | Manufacturer and Retailer Permit | Cannabis regulatory agency enforcement against high THC hemp products and THC cap imminent | Flower prohibited; oil OK |
| \*North Carolina | 24 Leg Session: H563 would have established THC caps including synthetic THC (DEAD); '23 Leg session: HB 563 would have limited hemp cannabinoid products to 21+ but it appears to have died; SB 455 (2022) permanently authorized hemp products with less than 0.3% D9 only. All hemp derived cannabinoids removed from CSA | No |  | No |
| North Dakota | 24 Update: Adopted administrative rule caps total THC/serving at 1.25mg and 15:1 CBD:THC ratio for "cannabinoid product"; '23 Leg Session: SB 2096 enacted - prohibits all "chemically derived cannabinoids" including Delta 8, 9, etc. - \*\*full/broad spectrum OK with THC limit in an amount to be determined.\*\* HB 1045 authorizes hemp products with less than 0.3% THC (all THCs);<br> products with converted D9 prohibited | No |  | Yes |
| \*Ohio | 24 Leg Session: SB 278 would limit hemp products to 0.3% Total THC and products over 2.5mg/serving limited to 21+; HB 642 would direct depts. to do study re: adult use hemp limits; '23 Leg Session: A replacement of SB 9 would have prohibited any amount of D8/9/10 in hemp products. SB 57 (2019) limits hemp products to 0.3% D9 THC only (DIED) | No |  | No |

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| | | | |
|:---|:---|:---|:---|
| \*Oklahoma | 23 Leg Session: SB 365 would have required registration of hemp cannabinoid products but it died before adjournment. SB 238 (2019) authorized hemp products with less than 0.3% D9 | Not yet | No |
| Oregon | HB 3000 (2021) and OLCC have limited hemp products to 0.5mg THC/product; otherwise it must be sold in MJ retail | MJ license if exceed 0.5mg THC/product | Sold in MJ retail only |
| \*Pennsylvania | HB 967 (2016) authorized hemp farming with less than 0.3% total THC; products not affirmatively authorized | No | No |
| \*Rhode Island | Hemp-derived products with less than 0.3% D9 are authorized; retail license required | Yes, retailer license | No |
| \*South Carolina | 24 Leg Session: H4628 would have limited all hemp-derived cannabinoid products to 21+, excluding CBD, CBN, CBG, etc. (DEAD); Hemp products with less than 0.3% D9 are authorized as the state follows federal definition (HB 3449) | No | No |
| \*South Dakota | 24 Leg Session: HB1125 enacted prohibits synthetic/converted cannabinoids; HB 1292 (signed into law March '22) limits intoxicating product sales to 21 and over. HB 1008 (2020) authorized hemp products with less than 0.3% D9 | No | Yes |
| \*Tennessee | 24 Leg Session: Department regulations finalized on 7/2/24 adopt a total THC standard; '23 leg session: HB 403 enacted and limits any product w/non-Delta-9 THC to 21+; license required; SB 357 (2019) authorized hemp products with less than 0.3% D9; Smoking limited to 21+ | Not for D9 products | No, but 21+ only |

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| | | | | |
|:---|:---|:---|:---|:---|
| \*Texas | 23 Leg session: HB 4918 would have reversed in-state smokable hemp ban but died; HB 1325 (2019) authorized hemp products with less than 0.3% D9; Sup Ct. in June 22 upheld manufacturing smokable hemp ban | Consumable hemp product license |  | No |
| Utah | 23 leg session: HB 227 enacted and limits any product with THC to 21+; HB 58 (2016) and HB 3001 (2018) authorized hemp extract products with less than 0.3% THC (all THCs) and with at least 5% CBD by weight. HB 385 (2022) requires product class and cannabinoid product registration with the state. Smokable flower prohibited - vape products not identified. Attempting to register vape product will ferret out whether state agrees that smokable prohibition applies only to flower. | Retailer permit; Product class or cannabinoid product registration |  | Yes, but possibly not vapes |
| Vermont | 23 Leg Session: Cannabis Control Board issued emergency rule prohibiting synthetic THCs and limits hemp products to 1.5mg of THC per serving, or 10mg of THC per package (unless the product has at least 20:1 CBD-to-THC. State hemp rules adopt federal D9 limits for hemp products; however, all synthetically derived/converted THCs are prohibited (2020). | No | 1.5 mg/serving & 10 mg/product | No |
| Virginia | 24 Leg Session: \*\*SB 582 (ENACTED) limits inhaled products to 21+; SB 448 would have improved regulatory environment (lower tax) while HB 1509 would further restrict hemp businesses; Cap of 2.5mg THC/product or a 25:1 CBD:THC ratio | Yes, Retailer registration | 2.5mg THC/product or a 25:1 CBD:THC ratio | No |
| Washington | 23 leg session: SB 5367 enacted prohibits any detectable THC in hemp products. | No | 0 THC state | No |
| \*West Virginia | 24 Leg Session: SB 679 limits hemp cannabinoid products to 21+ and sales require business reg. certificate; '23 Leg Session: SB 220 enacted limits D9, D8, etc. products to 21+ and requires permit. HB 2694 (2019) Authorized hemp products with less than 0.3% THC (all THCs). Inhalable hemp products must be approved by the Commissioner. | Yes, permit |  | No, but must be approved |
| \*Wisconsin | Statute 94.55 authorizes hemp products with less than 0.3% D9. Products must be sold by a licensed retailer and meet strict packaging rules including flower. | Retailer license |  | No |
| \*Wyoming | 23 leg session: HB 108 enacted limits any edible or vaping product with any THC to 18+; HB 0171 (2019) authorized hemp products with less than 0.3% D9. Attempt to limit inhalable sales to 21+ failed. |  |  | No, but 18+ only |

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\* *asterisk* = we sell product in this state

**Good Manufacturing Practices**

Good manufacturing practices ("GMPs") for dietary supplements are specific rules for the manufacturing processes of vitamins, minerals, herbs and botanicals, amino acids and all other supplements. Finalized in 2007, these rigorous practices impose higher standards on dietary supplements than food GMPs applied to conventional foods. Dietary supplement GMPs include thorough requirements for identity testing for all ingredients as they arrive at the manufacturer's site. Manufacturers must qualify their suppliers before receiving goods, incoming ingredients must be quarantined until their identity is confirmed using scientifically valid methods of analysis, and all components of dietary supplements must meet specifications established by the manufacturer regardless of where the ingredient was sourced.

Manufacturers are accountable to the FDA for the manufacturing process as well as the ingredients. During an inspection, the FDA has access to all the manufacturers' records, including access to the country of origin of all supplement ingredients. The existing bioterrorism law already requires all parties in the production and distribution of dietary ingredients to keep records of suppliers and customers ("one up and one down") that permit the agency to trace the pedigree of ingredients back to their original source. In addition, the GMP rules examine sanitation, batch records for production, employee training, validation of the manufacturing procedures, and testing final products for conformance with the label.

**Adverse Event Reporting**

In 2006, Congress passed The Dietary Supplement and Nonprescription Drug Consumer Protection Act, commonly referred to as the "adverse event reporting law." The passage of this law was strongly supported by CRN and others in the industry as it provides an important regulatory tool for the FDA to protect consumers. Under this law, dietary supplement companies are required to report serious adverse events to the FDA no later than 15 business days after the company receives the report.

This post-market surveillance program alerts the FDA to possible signals or potential patterns of a problem, enabling the agency to identify concerns with ingredient safety, manufacturing issues, contamination (of either raw ingredients or finished products), tampering, and even bioterrorism. However, adverse events do not demonstrate a causal relationship between the product and the event.

Since the law went into effect, the dietary supplement industry's track record demonstrates a strong safety profile for the industry's products both in comparison to other FDA-regulated industries and considering that more than 170 million Americans take dietary supplements. In 2016, the FDA announced it would make data from the FDA Adverse Event Reporting System (FAERS) public.

**Additional Safety Protections**

Once a dietary supplement enters the stream of commerce, the FDA may remove a product if it is "adulterated" or "misbranded." A product is considered adulterated if it contains unlisted ingredients or is not prepared or packaged under good manufacturing conditions. It is misbranded if its labeling is false or misleading. In either case, the agency has enforcement authority to seize and destroy the product, impose fines or even imprisonment. In addition, the FDA can remove a product from the market if it "presents a significant or unreasonable risk of illness or injury" under conditions of use recommended in its labeling. A separate provision gives the FDA authority to declare a product "an imminent hazard to public health or safety." In less dramatic situations, the FDA can request manufacturers to modify products and claims or to provide warnings to consumers. The Food Safety & Modernization Act, signed into law in 2011, gave the FDA additional authority to issue a mandatory recall when a company fails to voluntarily recall an unsafe food (including dietary supplements) after being asked to by the FDA.

**Food Safety Regulations**

**Title 21 Code of Federal Regulations, Part 111: Current Good Manufacturing Practice in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements**

This regulation applies to manufacturers, packagers, labelers, or holders and includes importers as well. The manufacturing facilities of certain types of human food including dietary supplements are required to have a production and process control system in place.

 ****

***Hemp***

The production, distribution and sale in the United States of many of our products are subject to the Federal Food, Drug, and Cosmetic Act, the Federal Trade Commission Act, the Lanham Act, state consumer protection laws, competition laws, federal, state and local workplace health and safety laws, various federal, state and local environmental protection laws, various other federal, state and local statutes applicable to the production, transportation, sale, safety, advertising, labeling and ingredients of such products, and rules and regulations adopted pursuant to these laws. Outside the United States, the distribution and sale of our many products and related operations are also subject to numerous similar and other statutes and regulations. We only sell our hemp derived products to states which permit this activity with certain restrictions such as the content of THC which differs depending on the state.

On December 20, 2018, the Agricultural Improvement Act of 2018, which is also known as the "2018 Farm Bill," was enacted and, among other things, further legalized hemp under U.S. federal law, but with compliance still being required with all applicable state hemp laws. The 2018 Farm Bill includes certain benefits for the hemp industry in the United States, including: (i) the extension of the protections for hemp research and researchers and the conditions in which hemp research can be done, (ii) the protection of hemp farmers and hemp production under federal crop insurance programs, (iii) the permitting of the cultivation, interstate transportation and sale of hemp and hemp products in the U.S. in compliance with all other applicable federal and state laws, and (iv) the removal of hemp and hemp derived products from Schedule 1 of the Controlled Substances Act ("CSA").

As of August 1, 2024, all 50 states and the District of Columbia have legalized hemp

Our activities in the United States only involve legal hemp in compliance with the CSA. The hemp and the marijuana plants are both part of the same *cannabis* genus, except that hemp does not have more than 0.3% dry weight content of tetrahydrocannabinol ("THC"). While 2018 Farm Bill legalized hemp and cannabinoids extracted from hemp in the United States, such extracts remain subject to state laws and regulation by other U.S. federal agencies such as the FDA, U.S. Drug Enforcement Administration ("DEA"), and the U.S. Department of Agriculture ("USDA"). The same plant, with a higher THC content is marijuana, which is legal under certain state laws, but which is currently not legal under U.S. federal law. The similarities between these plants can cause confusion.

A California law known as Proposition 65 requires a specific warning to appear on any product containing a component listed by the state as having been found to cause cancer or birth defects. The state maintains lists of these substances and periodically adds other substances to these lists. Proposition 65 exposes all food and beverage producers to the possibility of having to provide warnings on their products in California because it does not provide for any generally applicable quantitative threshold below which the presence of a listed substance is exempt from the warning requirement. Consequently, the detection of even a trace amount of a listed substance can subject an affected product to the requirement of a warning label. However, Proposition 65 does not require a warning if the manufacturer of a product can demonstrate that the use of that product exposes consumers to a daily quantity of a listed substance that is:

● below a "safe harbor" threshold that may be established;

● naturally occurring;

● the result of necessary cooking; or

● subject to another applicable exemption.

In January 2019, New York State's governor announced the "Consumer Right to Know Act," a proposed law that would impose similar and potentially more stringent labeling requirements than California Proposition 65. The law has not yet been adopted, and to our knowledge California Proposition 65 remains the most onerous state-level chemical exposure labeling statutory scheme. However, due in part to the large size of California's market, promotional products sold or distributed anywhere in the United States may be subject to California Proposition 65.

We are unable to predict whether a component found in a product that we assisted a client in producing might be added to the California list in the future. Furthermore, we are also unable to predict when or whether the increasing sensitivity of detection methodology may become applicable under this law and related regulations as they currently exist, or as they may be amended.

We are subject to various federal, state and local laws and regulations, including but not limited to, laws and regulations relating to labor and employment, U.S. customs and consumer product safety, including the Consumer Product Safety Improvement Act, or the "CPSIA." The CPSIA created more stringent safety requirements related to lead and phthalates content in children's products. The CPSIA regulates the future manufacture of these items and existing inventories and may cause us to incur losses if we offer for sale or sell any non-compliant items. Failure to comply with the various regulations applicable to us may result in damage to our reputation, civil and criminal liability, fines and penalties and increased cost of regulatory compliance. These current and any future laws and regulations could harm our business, results of operations and financial condition.

Legal requirements apply in various jurisdictions in the United States and overseas requiring deposits or certain taxes or fees be charged for the sale, marketing and use of certain non-refillable beverage containers. The precise requirements imposed by these measures vary. Other types of beverage container-related deposit, recycling, tax and/or product stewardship statutes and regulations also apply in various jurisdictions in the United States and overseas. We anticipate additional, similar legal requirements may be proposed or enacted in the future at local, state and federal levels, both in the United States and elsewhere.

New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and e-commerce generally could result in significant additional taxes on our business. Further, we could be subject to fines or other payments for any past failures to comply with these requirements. The continued growth and demand for e-commerce is likely to result in more laws and regulations that impose additional compliance burdens on e-commerce companies.

***Laws and Regulations Relating to Data Privacy***

In the ordinary course of our business, we might collect and store in our internal and external data centers, cloud services and networks sensitive data, including our proprietary business information and that of our customers, suppliers and business collaborators, as well as personal information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.

A number of states in the United States have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information. For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information. Other state laws, particularly the California Consumer Privacy Act, as amended ("CCPA"), among other things, contain disclosure obligations for businesses that collect personal information about residents in their state and afford those individuals new rights relating to their personal information that may affect our ability to collect and/or use personal information. The Virginia Consumer Data Protection Act ("CDPA") also establishes rights for Virginia consumers to control how companies use individuals' personal data. The CDPA dictates how companies must protect personal data in their possession and respond to consumers exercising their rights, as prescribed by the law, regarding such personal data. The CDPA went into effect on January 1, 2023. Further, the California Privacy Rights Act (CPRA) was recently voted into law by California residents. The CPRA significantly amends the CCPA and imposes additional data protection obligations on covered companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023, and became enforceable on July 1, 2023. Meanwhile, several other states and the federal government have considered or are considering privacy laws like the CCPA. We will continue to monitor and assess the impact of these laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

Outside of the United States, data protection laws, including the EU General Data Protection Regulation (the "GDPR"), also might apply to some of our operations or business collaborators. Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data/information continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer personal data/information of persons located in the European Union (EU), a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of €20 million or 4% of total company revenue). Other governmental authorities around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.

The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and may require substantial costs to monitor and implement and maintain adequate compliance programs. Failure to comply with United States and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

***Environmental Regulations***

We use certain plastic, glass, fabric, metal and other products in our business which may be harmful if released into the environment. In view of the nature of our business, compliance with federal, state, and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon our operations or earnings, and we do not expect it to have a material impact in the foreseeable future.

***Tax Laws and Regulations***

Changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the tax laws are interpreted, could further impact our effective tax rate, further restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows.

We are also subject to tax audits in the United States and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition.

***Other Regulations***

We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the Foreign Corrupt Practices Act of 1977 (FCPA), various securities laws and regulations including but not limited to the Securities Exchange Act of 1934, as amended, the Securities Exchange Act of 1933, as amended, and the NASDAQ Rules, various labor, workplace and related laws, and environmental laws and regulations. Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations.

**MANAGEMENT**

**Directors and Executive Officers**

Set forth below is information regarding our directors and executive officers as of the date of this prospectus.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Eric Gripentrog | 57 | Chief Executive Officer and Director |
| Tariq Rahim | 38 | Chief Financial Officer, Principal Accounting Officer and Director |
| Lourdes Felix <sup>(1)</sup> | 57 | Nominee Director |
| Steven Rossi<sup>(1)</sup> | 39 | Nominee Director |
| Girard Smith<sup>(1)</sup> | 63 | Nominee Director |

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(1) Nominee
 director whose tenure shall be effective and commence immediately on the date in which this
 registration statement is declared effective by the SEC.

***Business Experience***

 

The following is a brief overview of the education and business experience of each of our directors, executive officers and director nominees during at least the past five years, including their principal occupations or employment during the period, the name and principal business of the organization by which they were employed.

**Eric Gripentrog, *Chief Executive Officer and Director***

Mr. Gripentrog combines over 30 years of experience in the Consumer-Packaged Goods industry ("CPG"). Previously, he worked with three other companies in the CPG space holding several positions including CEO, SVP, and other senior management positions including Board Member. From 1992 to 2018, Eric held multiple roles in the Kellogg Company, both domestically and internationally (Europe and Latin America) leading business units with P&L responsibility. His last two roles at the Kellogg Company were Vice President/General Manager of the Caribbean business unit from 2009 to 2014; and Vice President, Strategy and Operations for North America from 2014 - 2018. From 2018 to 2019, Mr. Gripentrog was the SVP and General Manager of Panera Bread's Consumer Packaged Goods division. This senior management position led this business unit covering six different product categories. He grew this division double-digit in both top-line and bottom-line performance, and his CPG division outperformed all other Panera business units and functions. From 2019 to 2020, Eric was the CEO and board member for Gina Cucina, Inc, a company involved in manufacturing and selling fresh soup into the retail grocery outlets and direct-to-consumer. His expertise in leading a business, managing the P&L and identifying margin enhancing opportunities for both business-to-business and direct-to-consumer clientele is critically important for the current role. Since 2020 Eric has been acting as the CEO of Hemptown USA, a director of Functional Brands, and a director of HTO Nevada, dba Kirkman. Whether Eric is leading a multi-billion-dollar operation or a small start-up; his experience in developing strategic plans and policies to bring the company vision to reality, implementing supporting plans, budgeting and forecasting, communicating with the Board of Directors, tracking company performance and establishing a high performing working culture, will enable his success in his current CEO role. Eric has an undergraduate degree from Western Michigan University.

**Tariq Rahim, *Chief Financial Officer, and Director***

Mr. Rahim brings over 15 years of professional experience with over 10 years as a qualified Chartered Professional Accountant (CPA, CA – Canada). Having worked in a wide variety of industries including cannabis, hemp, prop-tech, professional services spaces, among others. In addition to his current position as CFO at the Company since April 2023 and VP, Finance since June 2021, his previous roles included Controller at Nobul (prop-tech startup) from June 2020 to June 2021 and Controller at Tokyo Smoke (cannabis start-up) from September 2018 to May 2020. Beginning his post-qualification careers in the Fall of 2011, he has held consistently progressive roles from a junior in public accounting leading up to the current position as an executive. Having worked with companies ranging in size from small to multi-million dollar publicly listed companies, he has tremendous experience in leveraging his financial skills to lead companies and clients through the full gamut of accounting and finance challenges – strategic planning, financial reporting, financial planning & analysis, budgeting & forecasting, to mention just a few. From 2018 onward, Mr. Rahim focused his career on startups and utilizing his experience to build and scale. Since 2021 Tariq has been serving as CFO of Hemptown USA, director of Functional Brands, and director of HTO Nevada, dba Kirkman. He has an Honors Bachelor of Accounting degree in Accounting from Brock University.

**Girard Smith, *Director***

Girard Smith is a director nominee. Mr. Smith's tenure will commence upon the effective date of this registration statement. Mr. Smith is the general manager, growth strategy and solutions, and a member of the executive leadership team for Market Performance Group (MPG), a leading omnichannel commerce strategy and services agency. He is a highly accomplished business leader with extensive strategic and operational experience. Over the course of his career, he has successfully built and scaled numerous consumer packaged goods brands, driving exceptional growth, innovation, and operational excellence within the omnichannel commerce landscape. Girard brings a unique blend of visionary leadership, entrepreneurial thinking, and strategic depth. He has a proven track record for delivering transformative results and building high-performing teams. In his current role with MPG, Girard leads a team focused on enabling consumer packaged goods brands to thrive across the omnichannel marketplace, including in-store, Amazon, and direct to consumer retail. He leads the commercial consulting practice, supporting various client needs including due diligence, commercial investment, brand strategy, go-to-market strategy, and learning & development. He also leads the full-funnel marketing practice, which includes strategy, creative, media, social commerce, and end-to-end business management. Over a 25-year career at Bayer Consumer Health, Girard held executive leadership positions in marketing (Nutritional & OTC), Sales, and consumer research. Girard was recognized as a paradigm shifter, credited with identifying entrepreneurial solutions to address key challenges and opportunities, and enabling the company to gain a leading edge in the marketplace. He is recognized for restructuring Bayer's strategic and operational approach to the VMS category, to better leverage unique marketplace opportunities. His contributions led to category-defining product innovations and numerous game-changing initiatives in multivitamins and supplements. His new business model shaped the market in the company's favor over many years. Under his leadership, Bayer achieved significant growth of its $1 billion Nutritionals & Digestive Health portfolio, and the One A Day brand achieved the #1 position in the adult multivitamin category. He also delivered market-leading organic growth for Bayer's OTC business, revitalizing underperforming digestive health brands, while propelling significant market share growth for MiraLAX, the #1 laxative brand. In addition, he played a leading role in the acquisition and integration of the North American commercial activities for the Merck Consumer Health business. Girard's experience also includes his former role as an operating partner and board member for NetWell Nutrition, a private equity-owned company with a portfolio of premium eCommerce brands delivering clean-label, science-based products. In addition, he served on the board of directors and executive committee of the Council for Responsible Nutrition (CRN), the leading industry association for dietary supplement and functional food manufacturers, and B2B ingredient suppliers.

We believe that Mr. Smith's vast experience as a member of several companies' board of directors, his education, and professional credentials qualify him to serve as a member of the Company's Board of Directors.

**Lourdes Felix, *Director***

Lourdes Felix is a director nominee. Ms. Felix' tenure will commence upon the effective date of this registration statement. Ms. Felix is a female Hispanic entrepreneur and corporate finance executive with 30 years of combined experience in capital markets, public accounting, and the private sector who is driven by a passion for helping others. She presently serves as chief executive officer, chief financial officer and director of BioCorRx Inc. (OTCQB: BICX), a biotech company and leader in addiction treatment solutions and related disorders. She has been with BioCorRx since October 2012. Lourdes is also one of the founders and president of BioCorRx Pharmaceuticals Inc., a majority owned subsidiary of BioCorRx Inc that is focused on the development of addiction treatments and related disorders. Prior to joining BioCorRx her experience was in the private sector, public accounting including audit and public company experience. She has principles in finance, accounting, budgeting and internal control, including GAAP, SEC, and SOX Compliance. Thorough knowledge of federal and state regulations. Ms. Felix successfully managed and produced SEC regulatory filings. She has extensive experience in developing and managing financial operations. Lourdes has provided treasury and cash management functions. Ms. Felix is an excellent leader with a track record of documented contributions leading to improved financial performance, heightened productivity, and enhanced internal controls. Ms. Felix led corporate relationships with various major accounting firms and attorneys in preparing SEC filings and audited financial statements. Lourdes is very active in the Hispanic community and speaks fluent Spanish. Lourdes holds a Bachelor of Science degree in Accounting from the University of Phoenix. Since 2021 Ms. Felix has served as a member of the board of directors, audit committee chair, member compensation committee of Siyata Mobile Inc. (NASDAQ: SYTA). Since 2023, Ms. Felix has served as a member of the board of directors, compensation committee chair of Avalon Globocare (NASDAQ: ALBT)

We believe that Ms. Felix's vast experience as a member of several companies' board of directors, her education, and professional credentials qualify her to serve as a member of the Company's Board of Directors.

 ***Steven Rossi, Director***

Steven Rossi has served as the Chief Executive Officer, President, Secretary and Chair of the Board of Directors of WorkSport since November 7, 2014. Mr. Rossi attended the University of Toronto from 2005 to 2007, majoring in Life Science and pausing his post-secondary education to begin his career as an entrepreneur, visionary, and founder. Mr. Rossi founded two automotive-based companies in 2005 and 2006, respectively, and he managed and grew their respective operations for several years. Mr. Rossi then founded WorkSport Ontario, a wholly owned operating entity of WorkSport,, in 2011, and he has since been granted numerous patents across the United States and Canada – all of which he assigned exclusively to WorkSport. In a short time since raising substantial funds in 2021 with which to grow WorkSport, Mr. Rossi has been instrumental in retrofitting a distribution facility in West Seneca, New York into a manufacturing facility. He was further responsible for facilitating the research and development and planning the launch of new tonneau cover product lines; as these product lines were well-received by the consumer market, and as demand for them increased, Mr. Rossi then orchestrated the scaling of production through coordinating with teams across multiple states and disciplines to meet consumer demand. Through his two decades of business experience in the automotive sector, Steven Rossi possesses the knowledge and experience in establishing, managing, and growing companies that aid him in efficiently and effectively identifying and executing the Company's strategic priorities. As a CEO, Officer, Chair and Founder, Mr. Rossi brings to the Board extensive knowledge to be qualified as a member of the Functional Brands Inc. Board of Directors

**Family Relationships**

There are no family relationships among any of our officers or directors.

**Involvement in Certain Legal Proceedings**

To the best of our knowledge, except as described below, none of our directors or executive officers has, during the past ten years:

● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

**Corporate Governance**

***Governance Structure***

Upon the effective date of this registration statement, we will choose to appoint a separate Chairman of the Board who is not our Chief Executive Officer. Our board of directors' decision is based on the belief that an independent Chairman of the Board can act as a balance to the Chief Executive Officer, who also serves as a non-independent director.

***The Board's Role in Risk Oversight***

The board of directors oversees that the assets of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board's oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks. Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives.

While the board oversees risk management, company management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

Our board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration. Much of this work has been delegated to committees, which will meet regularly and report back to the full board. The audit committee oversees risks related to our financial statements, the financial reporting process, accounting and legal matters, the compensation committee evaluates the risks and rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee evaluates risk associated with management decisions and strategic direction.

***Independent Directors***

NASDAQ's rules generally require that a majority of an issuer's board of directors consist of independent directors. Our board of directors currently consists of two (2) directors, Mr. Eric Gripentrog and Mr. Tariq Rahim. Upon the effective date of this registration statement, our board of directors will consist of five (5) directors, with three (3) directors, with Girard Smith, Lourdes Felix and Steven Rossi considered independent within the meaning of NASDAQ's rules. We have entered into independent director agreements with Girard Smith, Lourdes Felix and Blake Janover, pursuant to which each nominee director has been appointed to serve as an independent director of our company, whose tenure shall be effective and commence immediately on the date in which this registration statement is declared effective by the SEC. As a result of these board changes, our board of directors will consist of three directors, all of which will be independent within the meaning of NASDAQ's rules.

***Committees of the Board of Directors***

Our board has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each with its own charter approved by the board. The committee charters have been filed as exhibits to the registration statement of which this prospectus is a part. Upon completion of this offering, we intend to make each committee's charter available on our website at https://functionalbrandsinc.com/.

In addition, our board of directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our board of directors.

*<u>Audit Committee</u>*

Girard Smith, Lourdes Felix and Steven Rossi, each of whom satisfies the "independence" requirements of Rule 10A-3 under the Exchange Act and NASDAQ's rules, will serve on our audit committee upon their appointment to the board, with Lourdes Felix serving as the chairman. Our board has determined that Lourdes Felix qualifies as an "audit committee financial expert." The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.

The audit committee is responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our chief executive officer and principal financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing hedging transactions; and (viii) reviewing and assessing annually the audit committee's performance and the adequacy of its charter.

*<u>Compensation Committee</u>*

Girard Smith, Lourdes Felix and Steven Rossi, each of whom satisfies the "independence" requirements of Rule 10C-1 under the Exchange Act and NASDAQ's rules, will serve on our compensation committee upon their appointment to the board, with Girard Smith serving as the chairman. The members of the compensation committee are also "outside directors" as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and "non-employee directors" within the meaning of Section 16 of the Exchange Act. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers.

The compensation committee is responsible for, among other things: (i) reviewing and approving the remuneration of our executive officers; (ii) making recommendations to the board regarding the compensation of our independent directors; (iii) making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and (iv) reviewing and assessing annually the compensation committee's performance and the adequacy of its charter.

*<u>Nominating and Corporate Governance Committee</u>*

Girard Smith, Lourdes Felix and Steven Rossi each of whom satisfies the "independence" requirements of NASDAQ's rules, will serve on our nominating and corporate governance committee upon their appointment to the board, with Steven Rossi serving as the chairman. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.

The nominating and corporate governance committee will be responsible for, among other things: (i) identifying and evaluating individuals qualified to become members of the board by reviewing nominees for election to the board submitted by shareholders and recommending to the board director nominees for each annual meeting of shareholders and for election to fill any vacancies on the board; (ii) advising the board with respect to board organization, desired qualifications of board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies; (iii) advising on matters relating to corporate governance and monitoring developments in the law and practice of corporate governance; (iv) overseeing compliance with the our code of ethics; and (v) approving any related party transactions.

The nominating and corporate governance committee's methods for identifying candidates for election to our board of directors (other than those proposed by our shareholders, as discussed below) will include the solicitation of ideas for possible candidates from a number of sources - members of our board of directors, our executives, individuals personally known to the members of our board of directors, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.

In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate's judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate's experience with the experience of other board members; (iii) the extent to which the candidate would be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate's ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual's experience, perspective, skills and knowledge of the industry in which we operate.

No person entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of such election, the corporation is subject to Section 2115(b) of the CGCL. During such time or times that the corporation is subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an election for directors may cumulate such stockholder's votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder's shares are otherwise entitled, or distribute the stockholder's votes on the same principle among as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so cumulate such stockholder's votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder's intention to cumulate such stockholder's votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

**Code of Ethics**

We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code.

**EXECUTIVE COMPENSATION**

*The following discussion and analysis of compensation arrangements should be read together with the compensation tables and related disclosures that follow. This discussion contains forward-looking statements that are based on our current plans and expectations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from the programs summarized in this discussion. The following discussion may also contain statements regarding corporate performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management's expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.*

**Summary Compensation Table – Years Ended December 31, 2024, and 2023**

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.

**Summary Compensation Table** 

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br>**Name and Principal Position** | **Fiscal**<br>**Year** |<br>**Salary** |<br>**Bonus** | **Stock**<br>**Awards** | **Option**<br>**Awards** | **All Other**<br>**Compensation** |<br>**Total** |
| Eric Gripentrog | 2024 | $280000 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $&nbsp;&nbsp;&nbsp;&nbsp;- | $&nbsp;&nbsp;&nbsp;&nbsp;- | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $280000 |
| &nbsp;&nbsp;&nbsp;Chief Executive Officer | 2023 | $280000 | $- | $- | $- | $- | $280000 |
| Tariq Rahim | 2024 | $200000 | $- | $- | $- | $- | $200000 |
| &nbsp;&nbsp;&nbsp;Chief Financial Officer | 2023 | $200000 | $- | $- | $- | $- | $200000 |

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**Employment Agreements**

We have entered into contractual agreements with our CEO and CFO.

*Employment Agreement – Eric Gripentrog, CEO* 

Effective as of March 11, 2025, the employment agreement has an original term of 12 months subject to automatic renewal unless terminated for cause. Effective upon achieving the Direct Listing, Mr. Gripentrog's annual salary will increase to $360,000. He is also entitled to an annual bonus up to 100% of his annual salary as determined by the Compensation Committee in its discretion. Mr. Gripentrog is also entitled to a performance-based equity awards based upon achieving the following:

&nbsp;&nbsp;&nbsp;&nbsp;(a) Restricted Stock Units equal to $500,000 which vest six
(6) months after the completion of the Direct Listing, and valued at the price of the stock upon the date of vesting.

&nbsp;&nbsp;&nbsp;&nbsp;(b) The value of $500,000 worth of Company common stock upon closing of each acquisition post Direct
 Listing with such shares valued at the price of the Company's stock upon completion of the acquisition.

&nbsp;&nbsp;&nbsp;&nbsp;(c) The value of $250,000 worth of Company common stock upon
the Company achieving positive EBIDTA for the first time in any calendar year with such shares valued at the price of the Company's
stock at the end of such calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;(d) The value of $1,000,000 worth of Company common stock
upon the Company achieving a positive EBIDTA of $5 million for the first time in any calendar year with such shares valued at the price
of the Company's stock at the end of such calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;(e) The value of $1,000,000 worth of Company common stock
upon the Company achieving a first time market valuation of $100 Million.

&nbsp;&nbsp;&nbsp;&nbsp;(f) The value of $2,500,000 worth of Company common stock
upon the Company achieving a first time market valuation of $250 Million.

During the Term, if (i) a Change in Control has occurred, Mr. Gripentrog shall be paid a bonus (the "Change in Control Transaction Bonus"), in cash, equal to two (2) times the Base Salary as in effect immediately before such Change in Control. If applicable, the Change in Control Transaction Bonus shall be paid in a lump sum within fifteen (15) days after the consummation of such Change in Control and the following certification by the Board of the occurrence of such Change in Control.

"Change in Control" means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A transaction or series of
 transactions (other than an offering of common stock to the general public through a registration statement filed by the Company
 with the Securities and Exchange Commission) whereby any "Person" or related "group" of "persons" (as
 such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, any benefit
 plan maintained by the Company or any of its subsidiaries or a "Person" that, prior to such transaction, directly or
 indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership
 (within the meaning of Rule 13(d)(3) under the Exchange Act) of securities of the Company possessing more than fifty percent (50%)
 of the total combined voting power of the Company's securities outstanding immediately after such acquisition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The consummation by the Company (whether directly
 involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization,
 or business combination, or (y) a sale or other disposition of all or substantially all of the Company's assets in any single
 transaction or series of related transactions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) which results in the Company's voting securities outstanding
 immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities
 of the Company or the Person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly
 or indirectly, all or substantially all of the Company's assets or otherwise succeeds to the business of the Company (the Company
 or such Person, the "Successor Entity") directly or indirectly, at least a majority of the combined voting power
 of the Successor Entity's outstanding voting securities immediately after the transaction, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) after which no Person or group beneficially owns voting securities
 representing fifty percent (50%) or more of the combined voting power of the Successor Entity; *provided, however,* that
 no Person or group shall be treated as beneficially owning fifty percent (50%) or more of the combined voting power of the Successor
 Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.

*Employment Agreement – Tariq Rahim, CFO*

Effective as of April 1, 2023, the employment agreement has an original term of 12 months subject to automatic renewal unless terminated for cause. In addition to the salary described above, the CFO will be issued 27,265 company restricted stock units with an exercise price and vesting period to be determined after the initial public offering and 190,854 stock options with an exercise price and date of issuance to be determined by the Company's board of directors, with an expiration term of three years after termination of the employment agreement unless terminated for cause. The CFO is also entitled to a performance-based bonus payout as set forth in the chart below, after giving effect to the Reverse Stock Split:

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| | |
|:---|:---|
| **Consolidated Revenue Target (USD)** | **Functional Brands Inc. Stock Payout (common shares)** |
| Below $10,000,000 | 27265 |
| $10000000 | 54530 |
| $15000000 | 81795 |
| $20000000 | 109059 |
| $25000000 | 136324 |
| $30000000 | 163589 |
| $35000000 | 190854 |
| $40000000 | 218119 |

---

**Outstanding Equity Awards at Fiscal Year-End**

Except as described in the employment agreement above, no executive officer named above had any unexercised options, stock that has not vested or equity incentive plan awards outstanding as of December 31, 2024, and 2023.

**Director Compensation**

No member of our board of directors received any compensation for his or her services as a director during the fiscal years ending December 31, 2024, and 2023, nor do they currently receive any compensation for such services.

**Equity Incentive Plans**

*Long-Term Incentive Plans.* We do not provide our officers or employees with pension, stock appreciation rights, long-term incentive or other plans, nor do we provide non-qualified deferred compensation to our officers or employees, and therefore, the Summary Compensation Table above does not include columns for nonequity incentive plan compensation and nonqualified deferred compensation earnings since there were none.

*Employee Pension, Profit Sharing or other Retirement Plans.* We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.

**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

**Transactions with Related Persons**

Except as described below, there were no transactions during the fiscal years ending December 31, 2024 and 2023, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under "*Executive Compensation*" above). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.

*Debt facility with related parties* 

 

On March 7, 2025, the Company executed a loan agreement with Eric Gripentrog, our Chief Executive Officer, in the amount of $225,000, with an annual interest rate of 18%, with a maturity date of March 7, 2029.

 

On March 11, 2024, the Company executed a loan agreement with Mr. Gripentrog in the amount of $130,000, with an annual interest rate of 20%, with a maturity date of March 10, 2031.

**PRINCIPAL AND REGISTERED STOCKHOLDERS**

The following table sets forth:

● certain information regarding the beneficial ownership of our voting securities as of the date of this prospectus by (i) each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our voting securities, (ii) each of our executive officers, (iii) each of our directors and director nominees and (iv) all of our directors, director nominees and executive officers as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their common stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their common stock; and

● the number of shares of our common stock held by and registered for resale by means of this prospectus for the Registered Stockholders.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock that such person or any member of such group has the right to acquire within sixty (60) days of the date of this prospectus. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of the date of this prospectus are deemed to be outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership by any person.

We have agreed to issue two classes of convertible preferred stock to unaffiliated third party accredited investors or qualified institutional buyers in a private placement for gross proceeds of approximately $8,000,000. Such preferred Stock is convertible into shares of our common stock and 13,000,000 shares of the common stock into which such preferred stock may be converted is being registered with this registration statement and prospectus. See "*Plan of Distribution"* for more information on the private placement and the preferred stock.

The Registered Stockholders include certain stockholders with "restricted securities" (as defined in Rule 144 under the Securities Act) who, because they acquired their common stock from an affiliate or us within the prior 12 months, would be unable to sell their securities pursuant to Rule 144 until we have been subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for a period of at least 90 days. The Registered Stockholders may, or may not, elect to sell their common stock covered by this prospectus, as and to the extent they may determine. The Registered Stockholders may offer, sell or distribute all or a portion of the shares of common stock hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. The Registered Stockholders may elect to sell their shares in connection with this Direct Listing and in market transactions following this Direct Listing. As such, we will have no input if and when any Registered Stockholder may, or may not, elect to sell their common stock or the prices at which any such sales may occur. See "*Plan of Distribution*."

Information concerning the Registered Stockholders may change from time to time and any changed information will be set forth in supplements to this prospectus, if and when necessary. Because the Registered Stockholders may sell all, some, or none of the common stock covered by this prospectus, we cannot determine the number of common stock that will be sold by the Registered Stockholders, or the amount or percentage of shares of common stock that will be held by the Registered Stockholders upon consummation of any particular sale. In addition, the Registered Stockholders listed in the table below may have sold, transferred, or otherwise disposed of, or may sell, transfer, or otherwise dispose of, at any time and from time to time, our common stock in transactions exempt from the registration requirements of the Securities Act, after the date on which they provided the information set forth in the table below.

The Registered Stockholders are not entitled to any registration rights with respect to the common stock. However, we currently intend to use our reasonable efforts to keep the registration statement effective for a period of 90 days after the effectiveness of the registration statement. We are not party to any arrangement with any Registered Stockholder or any broker-dealer with respect to sales of common stock by the Registered Stockholders. However, we will engage a financial advisor with respect to certain other matters relating to our listing. See "*Plan of Distribution*."

The percentages below are calculated based on 7,027,255 shares of our common stock, and no shares of preferred stock, issued and outstanding as of August 9, 2025. We do not have any outstanding options, warrants exercisable for, or other securities convertible into shares of our common stock within the next 60 days (other than the Series A and Series Convertible Preferred Stock) which are deemed beneficially owned by the holder thereof. The Registered Stockholders have not, nor have they within the past three years had, any position, office, or other material relationship with us, other than as disclosed in this prospectus. See "*Management's Discussion & Analysis of Financial Results and Condition*" and "*Certain Relationships and Related Party Transactions*" for further information regarding the Registered Stockholders. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o our company, Functional Brands Inc., 6400 SW Rosewood Street, Lake Oswego, Oregon 97035.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Name of Beneficial Owner** | **Title of Class** | **Amount and<br> Nature of<br> Beneficial<br> Ownership<sup>(1)</sup>** | **Percent of<br> Class** | **Number of Shares Being Offered** |
| Eric Gripentrog | Common Stock | 710924 | 10.00% | 710924 |
| Tariq Rahim | Common Stock | 174496 | 2.45% | 174496 |
| **All Officers and Directors as a Group (4)** | **Common Stock** | 885420 | 12.45% |  |

---

(1) After
 giving effect to the Reverse Stock Split.

**Other Registered Stockholders**

---

| | | | |
|:---|:---|:---|:---|
| **Name of Shareholder** | **Footnote** | **Number of<br> Shares of<br> Common<br> Stock<br> Beneficially<br> Owned** | **Number of<br> Shares<br> Being<br> Offered** |
| **1056365 BC LTD** | 1 | 65 | 39 |
| **1177883 BC LTD** | 2 | 1733 | 1040 |
| **514751 NB INC** | 3 | 99 | 60 |
| **576112 BC LTD** | 4 | 1444 | 867 |
| **680286 NB INC** | 5 | 99 | 60 |
| **7A J.A.M. CORPORATION** | 6 | 1805 | 1083 |
| **ADELE STONAWSKI** |  | 2382 | 1430 |
| **ADRIAN M SIMM** |  | 87 | 53 |
| **ADVISIR VENTURES LTD.** | 7 | 2888 | 1733 |
| **AKCCE INC** | 8 | 425 | 255 |
| **ALAN H FRIEDMAN** |  | 44 | 27 |
| **ALANA DROZDUKE** |  | 44 | 27 |
| **ALBERT O. MENN** |  | 29 | 18 |
| **ALESSANDRA BARION** |  | 7220 | 4332 |
| **ALEX HARVEY KAUFMAN** |  | 163 | 98 |
| **Alexander Schramek** |  | 2100 | 1260 |
| **ALEXANDRA YAMPOLSKY** |  | 7220 | 4332 |
| **ALEXANDRE SCHWAB** |  | 7220 | 4332 |
| **Alisen Tekeli** |  | 1444 | 867 |
| **ALL SEASONS CONSULTING INC** | 9 | 434 | 261 |
| **ALLEN WILSON** |  | 3899 | 2340 |
| **ALON KALIDYN** |  | 405 | 243 |
| **AMY HOWARD** |  | 85 | 51 |
| **AMY MACKAY** |  | 33 | 20 |
| **ANASTACIA L. TURNER** |  | 102 | 62 |
| **ANDREAS BRUCKNER** |  | 8 | 5 |
| **Andreas Brueckner** |  | 3543 | 2126 |
| **Andreas Elsner** |  | 1444 | 867 |
| **Andreas Krammer** |  | 1181 | 709 |
| **Andreas Rauber** |  | 919 | 552 |
| **Andreas Rusam** |  | 2100 | 1260 |
| **Andreas Schlagbauer** |  | 657 | 395 |
| **ANDREW D WILLIAMS** |  | 22 | 14 |
| **ANDY SHELTON** |  | 5415 | 3249 |
| **ANGELA MCKERRAL** |  | 4332 | 2600 |
| **ANGELO TURICIANO** |  | 85 | 51 |
| **ANNA CERVANTES** |  | 2383 | 1430 |
| **ANNE A LEGER** |  | 44 | 27 |
| **ANTHONY COLE** |  | 37 | 23 |
| **ANTHONY F DE ROSA** |  | 107 | 65 |
| **ANTHONY FEDELE** |  | 299 | 180 |

---

---

| | | | |
|:---|:---|:---|:---|
| **ANTONIO ANCONA** |  | 317 | 191 |
| **ARTILLERY ONE INC** | 10.0 | 11264 | 6759 |
| **ATHENA VENTURES INC** | 11.0 | 289 | 174 |
| **Aviso Wealth** | 12.0 | 4331 | 2599 |
| **BAKHTAWAR SINGH** |  | 67 | 41 |
| **BANISTER & MILLER, PLLC** | 13.0 | 11624 | 6975 |
| **BARBARA ROSENBERG & ODNEY ZOLT JT TEN** |  | 128 | 77 |
| **BERNARD WINKLER & LYNN WINKLER JT TEN** |  | 87 | 53 |
| **BHB GROUP PARTNERS LLC** | 14.0 | 190855 | 190855 |
| **BIG SKY PRIVATE EQUITY LLC** | 15.0 | 425 | 255 |
| **BILL LEACH** |  | 217 | 131 |
| **BIRKEN CAPITAL PARTNERS LTD.** | 16.0 | 8881 | 5329 |
| **BLAKE SANDOVAL** |  | 10906 | 10906 |
| **BLAKE W PELLETIER** |  | 15 | 9 |
| **BMO NESBITT BURNS INC TR A/C 270-06381-21** | 17.0 | 174 | 105 |
| **BMO NESBITT BURNS INC TR A/C 275-01248-24** | 18.0 | 224 | 135 |
| **BMO NESBITT BURNS INC TR A/C 275-05757-10** | 19.0 | 167 | 101 |
| **BMO NESBITT BURNS INC TR A/C 275-06167-12** | 20.0 | 325 | 195 |
| **BMO NESBITT BURNS INC TR A/C 275-06206-23** | 21.0 | 130 | 78 |
| **BMO NESBITT BURNS INC TR A/C 275-07045-26** | 22.0 | 97 | 59 |
| **BMO NESBITT BURNS INC TR A/C 275-07073-21** | 23.0 | 130 | 78 |
| **BMO NESBITT BURNS INC TR A/C 275-07311-23** | 24.0 | 65 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-07410-23** | 25.0 | 258 | 155 |
| **BMO NESBITT BURNS INC TR A/C 275-07555-10** | 26.0 | 333 | 200 |
| **BMO NESBITT BURNS INC TR A/C 275-07573-18** | 27.0 | 333 | 200 |
| **BMO NESBITT BURNS INC TR A/C 275-07936-28** | 28.0 | 650 | 390 |
| **BMO NESBITT BURNS INC TR A/C 275-07938-26** | 29.0 | 167 | 101 |
| **BMO NESBITT BURNS INC TR A/C 275-08381-26** | 30.0 | 325 | 195 |
| **BMO NESBITT BURNS INC TR A/C 275-08512-28** | 31.0 | 323 | 194 |
| **BMO NESBITT BURNS INC TR A/C 275-08619-20** | 32.0 | 65 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-08620-27** | 33.0 | 81 | 49 |
| **BMO NESBITT BURNS INC TR A/C 275-08656-24** | 34.0 | 65 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-08666-22** | 35.0 | 65 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-08684-20** | 36.0 | 968 | 581 |
| **BMO NESBITT BURNS INC TR A/C 275-08688-26** | 37.0 | 65 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-08689-25** | 38.0 | 193 | 116 |
| **BMO NESBITT BURNS INC TR A/C 275-08699-23** | 39.0 | 289 | 174 |
| **BMO NESBITT BURNS INC TR A/C 275-08729-27** | 40.0 | 129 | 78 |
| **BMO NESBITT BURNS INC TR A/C 275-08767-20** | 41.0 | 323 | 194 |
| **BMO NESBITT BURNS INC TR A/C 275-08769-28** | 42.0 | 64 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-08771-24** | 43.0 | 513 | 308 |
| **BMO NESBITT BURNS INC TR A/C 275-08773-14** | 44.0 | 73 | 44 |
| **BMO NESBITT BURNS INC TR A/C 275-08805-24** | 45.0 | 323 | 194 |
| **BMO NESBITT BURNS INC TR A/C 275-08894-18** | 46.0 | 97 | 59 |
| **BMO NESBITT BURNS INC TR A/C 275-08935-27** | 47.0 | 174 | 105 |
| **BMO NESBITT BURNS INC TR A/C 275-09004-21** | 48.0 | 448 | 269 |
| **BMO NESBITT BURNS INC TR A/C 275-09042-25** | 49.0 | 162 | 98 |
| **BMO NESBITT BURNS INC TR A/C 275-09054-20** | 50.0 | 51 | 31 |
| **BMO NESBITT BURNS INC TR A/C 275-09056-28** | 51.0 | 129 | 78 |
| **BMO NESBITT BURNS INC TR A/C 275-09059-25** | 52.0 | 643 | 386 |
| **BMO NESBITT BURNS INC TR A/C 275-09073-19** | 53.0 | 195 | 117 |
| **BMO NESBITT BURNS INC TR A/C 275-09074-18** | 54.0 | 195 | 117 |
| **BMO NESBITT BURNS INC TR A/C 275-09082-26** | 55.0 | 65 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-09094-22** | 56.0 | 162 | 98 |
| **BMO NESBITT BURNS INC TR A/C 275-09099-27** | 57.0 | 97 | 59 |
| **BMO NESBITT BURNS INC TR A/C 275-09108-26** | 58.0 | 129 | 78 |
| **BMO NESBITT BURNS INC TR A/C 275-09117-25** | 59.0 | 193 | 116 |
| **BMO NESBITT BURNS INC TR A/C 275-09126-24** | 60.0 | 64 | 39 |
| **BMO NESBITT BURNS INC TR A/C 275-09134-24** | 61.0 | 32 | 20 |
| **BMO NESBITT BURNS INC TR A/C 275-09135-23** | 62.0 | 128 | 77 |
| **BMO NESBITT BURNS INC TR A/C 275-09139-29** | 63.0 | 159 | 96 |
| **BMO NESBITT BURNS INC TR A/C 275-09140-26** | 64.0 | 325 | 195 |
| **BMO NESBITT BURNS INC TR A/C 275-09141-25** | 65.0 | 128 | 77 |

---

---

| | | | |
|:---|:---|:---|:---|
| **BMO NESBITT BURNS INC TR A/C 275-09142-24** | 66.0 | 159 | 96 |
| **BMO NESBITT BURNS INC TR A/C 275-99121-12** | 67.0 | 195 | 117 |
| **BMO NESBITT BURNS INC TR A/C 285-01278-26** | 68.0 | 174 | 105 |
| **BMO NESBITT BURNS INC TR A/C 285-02156-21** | 69.0 | 195 | 117 |
| **BMO NESBITT BURNS INC TR A/C 285-02415-28** | 70.0 | 145 | 87 |
| **BMO NESBITT BURNS INC TR A/C 285-02426-25** | 71.0 | 195 | 117 |
| **BMO NESBITT BURNS INC TR A/C 285-02536-14** | 72.0 | 130 | 78 |
| **BMO Nesbitt Burns ITF 608266 NB Ltd. 275-07177-18** | 73.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF 636579 NB Inc. 275-07528-14** | 74.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF 648557 NB Inc. 275-07938-26** | 75.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Allan Burgoyne 275-08767-20** | 76.0 | 21651 | 12991 |
| **BMO Nesbitt Burns ITF Bohdon Holdings Inc. 275-07936-28** | 77.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Bradley Deware 275-08700-12** | 76.0 | 8661 | 5197 |
| **BMO Nesbitt Burns ITF Brenda Young 275-06167-12** | 76.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Carolyn Shepherd** | 76.0 | 4331 | 2599 |
| **BMO Nesbitt Burns ITF Catherine Coyle Trust Holdings Inc. 275-07555-10** | 78.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Chris Grannan** | 76.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Corey Babineau 275-08855-23** | 76.0 | 4987 | 2993 |
| **BMO Nesbitt Burns ITF Covalent Enterprises Ltd. 275-08188-21** | 79.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Coyle Trust Holdings Inc. 275-07573-18** | 80.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Craig Brennan** | 76.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Danahelo Holdings Ltd. 275-06896-28** | 81.0 | 7873 | 4724 |
| **BMO Nesbitt Burns ITF Danny Cormier 275-09014-29** | 76.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Devon Strang 275-08745-27** | 76.0 | 2887 | 1733 |
| **BMO Nesbitt Burns ITF Donald McInnes** | 76.0 | 3543 | 2126 |
| **BMO Nesbitt Burns ITF Doug and Barb Anderson 275-07311-23** | 76.0 | 76 | 46 |
| **BMO Nesbitt Burns ITF Doug Simpson Investments Ltd. 275-09010-15** | 82.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Dr. D.E. Craig Professional Corporation 275-05922-28** | 83.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Dr. Jeff Sheppard Prof. Corp. 275-08671-17** | 84.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Dr. Pierre Andre Beaulieu Prof. Corp. 275-08894-18** | 85.0 | 9317 | 5591 |
| **BMO Nesbitt Burns ITF Greg Walton Investments Limited 275-07587-12** | 86.0 | 28868 | 17321 |
| **BMO Nesbitt Burns ITF James Avery Grace Corp. 275-07996-25** | 87.0 | 2100 | 1260 |
| **BMO Nesbitt Burns ITF Jeremy Pearson 275-99035-25** | 76.0 | 814 | 489 |
| **BMO Nesbitt Burns ITF John L. Murray Financial Services Ltd. 275-07165-20** | 88.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF John Young 275-05757-10** | 76.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Johnny Longphee 275-08656-24** | 76.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Kimberly Dolan 275-08772-23** | 76.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Mark and Lauren Anderson 275-07382-27** | 76.0 | 431 | 259 |
| **BMO Nesbitt Burns ITF Matthew Straight 275-99116-19** | 76.0 | 113 | 68 |
| **BMO Nesbitt Burns ITF Nilock Capital Corp. 275-08475-23** | 89.0 | 36085 | 21651 |
| **BMO Nesbitt Burns ITF Peach Investments Ltd.** | 90.0 | 7086 | 4252 |
| **BMO Nesbitt Burns ITF Peter Deware 275-08692-20** | 76.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF RDDS Holdings Ltd. 275-08805-24** | 91.0 | 28868 | 17321 |
| **BMO Nesbitt Burns ITF Robert & Elaine Steckler** | 76.0 | 3543 | 2126 |
| **BMO Nesbitt Burns ITF Robert &/or Stephanie Downey 275-09004-21** | 76.0 | 14434 | 8661 |
| **BMO Nesbitt Burns ITF Robert Strang 275-08889-23** | 76.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Ryan Carphin** |  | 3543 | 2126 |
| **BMO Nesbitt Burns ITF Samuel Mackay 275-0866-12** | 76.0 | 7217 | 4331 |
| **BMO Nesbitt Burns ITF Strang's Produce Inc. 275-08893-27** | 92.0 | 10760 | 6456 |
| **BMO Nesbitt Burns ITF The Streeter Family Trust 275-06778-13** | 93.0 | 5774 | 3465 |
| **BMO Nesbitt Burns ITF Trevor & Joan Heaver** | 76.0 | 2887 | 1733 |
| **BMO Nesbitt Burns ITF Val Streeter 275-99069-24** | 76.0 | 307 | 185 |
| **BMO Nesbitt Burns ITF William Dunnett 275-09011-22** | 76.0 | 10760 | 6456 |
| **BMO NESBITT BURNS TR CATHY PEARSON A/C 275-07200-27** | 76.0 | 1444 | 867 |
| **BMO Nesbitt Burns TR Daniel Kokan A/C 805-51932-24** | 94.0 | 525 | 315 |
| **BMO NESBITT BURNS TR GREG WALTON INVESTMENTS LIMITED A/C 275-07587-12** | 95.0 | 30 | 18 |
| **BMO NESBITT BURNS TR KIMBERLY DOLAN A/C 275-08772-23** | 76.0 | 8 | 5 |

---

---

| | | | |
|:---|:---|:---|:---|
| **BOESCH & COMPANY** | 96.0 | 255 | 153 |
| **BRAD MITCHELL** |  | 73 | 44 |
| **BRADLEY A DUSSAULT** |  | 217 | 131 |
| **BRADLEY JACOKES** |  | 6580 | 3948 |
| **BRANDON HOLDRIDGE** |  | 903 | 542 |
| **BRANDON ROOK** |  | 434 | 261 |
| **BRETT JOSEPH WOLTERMAN** |  | 258 | 155 |
| **BRIAN SHEARON** |  | 32 | 20 |
| **BRUCE MACKINNON** |  | 289 | 174 |
| **Brunhilde Paulus** |  | 1706 | 1024 |
| **BRYAN HENRY** | 97.0 | 2888 | 1733 |
| **CALVIN C ZOELLNER** |  | 29 | 18 |
| **CALVIN R BRAUNSTEIN** |  | 255 | 153 |
| **CAMM GLOBAL INC** | 98.0 | 1444 | 867 |
| **CANACCORD GENUITY CORP ITF MARK VENIER** | 99.0 | 138 | 83 |
| **CANACCORD GENUITY CORP ITF PETER FARNWORTH** | 99.0 | 111 | 67 |
| **Canaccord Genuity Corp ITF Philip W. Anderson** | 99.0 | 7217 | 4331 |
| **CANACCORD GENUITY CORP.** | 100.0 | 51675 | 31006 |
| **Canaccord Genuity Corp. ITF 0885093 BC Ltd.** | 99.0 | 20208 | 12125 |
| **Canaccord Genuity Corp. ITF 1073331 BC Ltd.** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF 1133918 B.C. LTD** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF 1136124 BC ULC** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF 2134255 Ontario Inc.** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF 4390270 Canada Inc.** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF 641470 Alberta Ltd** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF 678724 NB Inc.** | 99.0 | 57735 | 34641 |
| **Canaccord Genuity Corp. ITF 7198362 Man Pldg** | 101.0 | 144338 | 86603 |
| **Canaccord Genuity Corp. ITF ADPL Ventures Inc.** | 102.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Adrian Lamoureux** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Adrienne Fung** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Alcaron Capital Corp.** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Alexandria Martin** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Algonquin Holdings Inc.** | 103.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Alnashir Virani** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Amanda Holowachuk** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Anand &/or Aruna Vaidyanath** | 99.0 | 5774 | 3465 |
| **Canaccord Genuity Corp. ITF Andrew Morrisey** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Andrew/Stacey Hiew** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Anita Luszszak** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Arnold Dlin** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Arsenault Solutions Inc.** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Arthur L Cinnamon** | 99.0 | 17977 | 10787 |
| **Canaccord Genuity Corp. ITF Arthur L. Cinnamon** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF ATP Investments Inc** | 99.0 | 57735 | 34641 |
| **Canaccord Genuity Corp. ITF B.D. Corporate Services Inc.** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Barry &/or Sharon Larson** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Barry Chilibeck** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Bearcliff Trading Corp.** | 104.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF BENJAMIN CURRY** | 99.0 | 6281 | 3769 |
| **Canaccord Genuity Corp. ITF Blair Brown** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Blair GogoWich** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Blair Yorke-Slader** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Brenda-Lee Hill** | 99.0 | 4987 | 2993 |
| **Canaccord Genuity Corp. ITF Brendan Stutt** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Brent Holowachuk** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Brian & Leela Soares** | 99.0 | 11547 | 6929 |
| **Canaccord Genuity Corp. ITF Brian Kowall Holdings Ltd.** | 105.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Bruce Hill** | 99.0 | 15090 | 9054 |
| **Canaccord Genuity Corp. ITF Bryan Arthur** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Candice Prescott** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Cathryn J. Poole &/or David Boone** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Chantal Olson** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Charles Main** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Chris Lien** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Chris Parry** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Christian Stachow** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Christopher Kucharski &/or Stephanie Bold** | 99.0 | 7217 | 4331 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Canaccord Genuity Corp. ITF Clive Brookes** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Colby Bell** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Colin Topham** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Columbia St Holdings** | 106 | 28868 | 17321 |
| **Canaccord Genuity Corp. ITF Corey Babineau** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Corinne Chodzick** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Curtis Jansen** | 99 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF D. Baker Capital Inc.** | 107 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Dallas Manning** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Darlene Noble** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Darringer Enterprise** | 108 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Dave Delgreco** | 99 | 10760 | 6456 |
| **Canaccord Genuity Corp. ITF David Basche** | 99 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF David Beattie** | 99 | 5774 | 3465 |
| **Canaccord Genuity Corp. ITF David Bishop** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF David Edwards** | 99 | 8661 | 5197 |
| **Canaccord Genuity Corp. ITF David Ghermezian** | 99 | 10760 | 6456 |
| **Canaccord Genuity Corp. ITF David Holmes** | 99 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF David Wood** | 99 | 28868 | 17321 |
| **Canaccord Genuity Corp. ITF Davy Ly Lun &/or Jessica Lan Keng** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF DIG MEDIA INC.** | 109 | 194 | 117 |
| **Canaccord Genuity Corp. ITF Dirk Lohrisch** | 99 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF DLCS Holdings Ltd.** | 110 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Don Ghermezian** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Donald Buchinski** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Donald Greenfield** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Douglas Charlish** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Dr. Arnold Dlin** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Dwayne Lashyn** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Eric Blakely** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Eric Tomasek** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Fisher Pond Inc.** | 111 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF G & L Height Holdings Ltd.** | 112 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF G.A Beach Consultants Ltd.** | 113 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Gary & Annette Mario Bunz** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF GCPD Ontario Inc.** | 114 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Geoffrey P Stenger** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Gift2Gift Corp.** | 115 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Gordon and Barbara Johnston** | 99 | 10104 | 6063 |
| **Canaccord Genuity Corp. ITF Greg Davis** | 99 | 10760 | 6457 |
| **Canaccord Genuity Corp. ITF Greg Sewell** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Gregory & Elizabeth Kwong** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Gregory Sewell** | 99 | 4987 | 2993 |
| **Canaccord Genuity Corp. ITF Gregory Urton** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Halcorp Capital Ltd.** | 116 | 5774 | 3465 |
| **Canaccord Genuity Corp. ITF Hans & Terri Birker** | 99 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Ian Stewart** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF James Hansen** | 99 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF James O'Rourke** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Jamie McTavish & Karen Flavelle** | 99 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Jason Ropchan** | 99 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Jason Short** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Jeffrey Pilkington** | 117 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Jerry & Jackoline Dugger** | 99 | 14303 | 8582 |
| **Canaccord Genuity Corp. ITF Jerry Dugger** | 99 | 28868 | 17322 |
| **Canaccord Genuity Corp. ITF JNC Holdings Inc.** | 118 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Joey Taylor** | 99 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF John C. McLeod Law Corp.** | 119 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF John Macleod** | 99 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF John Reynolds** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF John Seaman** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF John-Paul Portelli** | 99 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Joseph Eugene Sekora** | 99 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Joseph Grosso** | 99 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Joseph M Fairbloom** | 99 | 5774 | 3465 |
| **Canaccord Genuity Corp. ITF Joyce and Channarong Ratanaseangsuang** | 99 | 21651 | 12991 |
| **Canaccord Genuity Corp. ITF Juniper Currie** | 99 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Justin Lee** | 99 | 4331 | 2599 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Canaccord Genuity Corp. ITF Keith James** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Kelley & Jeffrey Warner** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Kenneth Pinsky** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Kenneth Struss** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Kenneth Zandee** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Kevin Reinhart** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Kristen & Alex Harrison** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Langton, Cheney & Carol Lynn** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Larry Hammond &/or Karen Abbott** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Leslie O'Donoghue** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Liam Sauro** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Lisa C Cumming** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Lisa Van Hemert** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Little Puck Entertainment Inc.** | 120.0 | 36085 | 21651 |
| **Canaccord Genuity Corp. ITF Logan Craig &/or Mary Sloan-Craig** | 99.0 | 4987 | 2993 |
| **Canaccord Genuity Corp. ITF Lorick Holdings Ltd.** | 121.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Lorne Goodlet** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Loyola Keough** | 99.0 | 5774 | 3465 |
| **Canaccord Genuity Corp. ITF Luke Hamill** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF M.R.S. Leasing Corp.** | 122.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Maclachlan Investments Corp.** | 123.0 | 28868 | 17321 |
| **Canaccord Genuity Corp. ITF Manish Jain** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Marc Spicer** | 99.0 | 9317 | 5591 |
| **Canaccord Genuity Corp. ITF Mark Naccache** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Martine Peters** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Marty Staples** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Matthew Gowanlock** | 99.0 | 14565 | 8739 |
| **Canaccord Genuity Corp. ITF Michael &/or Celia McLeod** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Michael Bordeleau-Tassile** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Michael Boyes** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Michael Halvorson** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF MICHAEL HEWETT** |  | 1083 | 650 |
| **Canaccord Genuity Corp. ITF Michael Lysko** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Michael Parker** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Michel LeBlanc** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Michele Zampini** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Michelle Vincent** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Mikhail and Elena Solovyev** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Murray Caruth** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Neil &/or Susan Manning** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Neil Duffy** | 99.0 | 5905 | 3543 |
| **Canaccord Genuity Corp. ITF Nia Capital Corp.** | 124.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Nick Demare** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Norm & Christine Chung** | 99.0 | 3018 | 1811 |
| **Canaccord Genuity Corp. ITF ORCA Capital GmbH** | 125.0 | 10760 | 6456 |
| **Canaccord Genuity Corp. ITF Patcharin Smith** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Patricia Sowa** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Paul Pigeon** | 99.0 | 43958 | 26376 |
| **Canaccord Genuity Corp. ITF Peter & Glenda Philipchuk** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Peter Fay** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Peter Lubey** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Puetz Family Trust** | 126.0 | 10760 | 6456 |
| **Canaccord Genuity Corp. ITF Quantico Capital Corp.** | 127.0 | 21651 | 12991 |
| **Canaccord Genuity Corp. ITF Ram Platinum Pty Ltd.** | 128.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Raymond Reed Enterprises Ltd.** | 129.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Rebecca Darling** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Richard P. Borden Professional Corporation** | 130.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Robert Forrest** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Robert Geddes** | 99.0 | 14434 | 8661 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Canaccord Genuity Corp. ITF Robert Kossman** | 99.0 | 28868 | 17321 |
| **Canaccord Genuity Corp. ITF Robert Krahn** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Robert Malcolm** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Robert Mills Alter Ego Trust No. 1** | 131.0 | 36085 | 21651 |
| **Canaccord Genuity Corp. ITF Robert Rubinic** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Robert Sean King** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Robert Shore** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Rupert 2019 Settlement** | 132.0 | 43302 | 25982 |
| **Canaccord Genuity Corp. ITF Russell &/or Linda Holowachuk** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Samuel Feldman** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Sanders D. Lee** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Sascha Opel** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Satwant Brar** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Satwinder Mann** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF SEAN GERCSAK** | 99.0 | 7219 | 4333 |
| **Canaccord Genuity Corp. ITF Severin Samulski** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Shairole Henchall** | 99.0 | 4331 | 2599 |
| **Canaccord Genuity Corp. ITF Shlomo Baranovski** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Sophie Holtkamp** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Stanley Burton** | 99.0 | 3018 | 1811 |
| **Canaccord Genuity Corp. ITF Stefan Thies** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Stephen & Ellen Cronk** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Steve Kolanko** | 99.0 | 28868 | 17321 |
| **Canaccord Genuity Corp. ITF Stewart McGregor** | 99.0 | 36085 | 21651 |
| **Canaccord Genuity Corp. ITF Susan West** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Taylor Cumming** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Terence Wells** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF The Henri & Dorothy Pigeon Joint Partner Trust 2010** | 133.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF The Saunders Family Trust** | 134.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Timothy &/or Dianne Nakaska** | 99.0 | 2887 | 1733 |
| **Canaccord Genuity Corp. ITF Todd Hanas** | 99.0 | 1444 | 867 |
| **Canaccord Genuity Corp. ITF Tony Ghermezian** | 99.0 | 3543 | 2126 |
| **Canaccord Genuity Corp. ITF Tracy Henuset** | 99.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF Travis O'Donnell** | 99.0 | 5774 | 3465 |
| **Canaccord Genuity Corp. ITF Trevor Wallace** | 99.0 | 28868 | 17321 |
| **Canaccord Genuity Corp. ITF Vanguard Marketing** | 135.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. ITF Victoria K. Morisset** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITF Violetta Holdings Ltd.** | 136.0 | 2100 | 1260 |
| **Canaccord Genuity Corp. ITF VJMH Holdings Inc.** | 137.0 | 21651 | 12991 |
| **Canaccord Genuity Corp. ITF Water Street Assets Inc.** | 138.0 | 36085 | 21651 |
| **Canaccord Genuity Corp. ITF William Ferreira** | 99.0 | 7217 | 4331 |
| **Canaccord Genuity Corp. ITFDouglas Hunter & Christine Schuh** | 99.0 | 14434 | 8661 |
| **Canaccord Genuity Corp. Ursula Ulrich & Thomas JTWROS** | 99.0 | 3543 | 2126 |
| **CANNON BRIDGE CAPITAL CORP.** | 139.0 | 48590 | 29154 |
| **CAROL TOWNSEND** |  | 21660 | 12996 |
| **CARSON LEVIT TR LEVIT FAMILY REVOCABLE TRUST** |  | 2124 | 1275 |
| **CARSON TING** |  | 578 | 347 |
| **CATHERINE SHEARON** |  | 51 | 31 |
| **CDS & CO** | 140.0 | 20378 | 12227 |
| **CHAD MURRY** |  | 42 | 26 |
| **Charles E. Watson** |  | 14239 | 8544 |
| **CHRIS PARRY** |  | 434 | 261 |
| **CHRIS VETSCH** |  | 170 | 102 |
| **CHRISTIAN MUELLER** |  | 4353 | 2613 |
| **Christian Rupschus** |  | 1050 | 630 |
| **Christian Schoenfeld** |  | 2887 | 1733 |
| **CHRISTINE A CHARLES** |  | 15 | 9 |
| **CHRISTOPH KNUTTEL** |  | 2202 | 1322 |
| **Christopher Backus** | 99.0 | 3543 | 2126 |
| **CHRISTOPHER CAIAZZO** |  | 4332 | 2600 |
| **CHRISTOPHER RICCELLI** |  | 116 | 70 |
| **Christopher Schmidt** |  | 657 | 395 |
| **CHRISTOPHER TAYLOR** |  | 137 | 137 |
| **CI Investment Services Inc. ITF Jeffrey Gerstein A/C 229-01246-23** | 141.0 | 17977 | 10787 |
| **CLARK COLBY** |  | 361 | 217 |
| **CLEM ANZ JR** |  | 24 | 15 |
| **CLIFF ROBER** |  | 361 | 217 |
| **COLE WOLTERMAN** |  | 28880 | 17328 |

---

---

| | | | |
|:---|:---|:---|:---|
| **CONNIE PARKER** |  | 1191 | 716 |
| **COREY MCGILL** |  | 34 | 21 |
| **CORINNE WOLTERMAN** |  | 28880 | 17328 |
| **CORT HUGHES** |  | 299 | 180 |
| **CYNTHIA MARIE LOVE** |  | 61 | 37 |
| **DALE RAMBUR** |  | 116 | 70 |
| **DAMIEN LOWRY** |  | 11552 | 6932 |
| **DANIEL C FALLER TR THE DANIEL C FALLER LIVING TRUST DTD 08/29/11** | 142.0 | 217 | 131 |
| **Daniel J. McNellis and Jeanne Marie McNellis Revocable Trust Agreement Dated September 26, 2017** | 143.0 | 14178 | 8507 |
| **DANIEL M GREENE** |  | 37 | 23 |
| **DARA FELICE SEDAKA** |  | 44 | 27 |
| **DARRYL YEA** |  | 8664 | 5199 |
| **DARYL D. TAYLOR** |  | 73 | 44 |
| **DAVID DANKO** |  | 289 | 174 |
| **DAVID GODBER TR THE DAVID S GODBER TRUST** | 144.0 | 1444 | 867 |
| **DAVID IMSCHWEILER** |  | 289 | 174 |
| **DAVID INGRAM** |  | 29 | 18 |
| **DAVID KINGSLEY** |  | 73 | 44 |
| **DAVID NISSEN** |  | 44 | 27 |
| **DAVID SHIFFMAN** |  | 21 | 13 |
| **DEAN D PORTER** |  | 11 | 7 |
| **DEAN MAHER** |  | 183 | 110 |
| **DEAN MARTIN** | 97.0 | 73 | 44 |
| **DEAN MYLALSINGH** |  | 34 | 21 |
| **Dean Watt** |  | 6567 | 3941 |
| **DENA L HILTON** |  | 21660 | 12996 |
| **DENNIS GRAYSON** |  | 1035 | 622 |
| **DENNIS HOESGEN** |  | 2888 | 1733 |
| **DERRICK R KAUK** |  | 145 | 87 |
| **DIANA MARK** |  | 289 | 174 |
| **Dieter Anding** |  | 2100 | 1260 |
| **Dirk Heinrich** |  | 2887 | 1733 |
| **Dominic Schwoerer** |  | 1444 | 867 |
| **DON C. & SANDRA M. KERZEE** |  | 181 | 109 |
| **DORA COTTERELL** |  | 58 | 35 |
| **DOUG MARCH** |  | 9531 | 5719 |
| **DOUGLAS MILLS** |  | 289 | 174 |
| **Dr. Stefan Vollath** |  | 1444 | 867 |
| **EARL W. GRADEN** |  | 289 | 174 |
| **ED SCHUYLER** |  | 325 | 195 |
| **EDMUND G. SCHUYLER** |  | 1913 | 1149 |
| **EDOARDO MASSARO** |  | 34 | 21 |
| **EDWARD MORIN** |  | 2546 | 1529 |
| **EDWIN S TOPOREK** |  | 44 | 27 |
| **ELAINE LESLIE STRIDE** |  | 1986 | 1192 |
| **ELENA ANNA THEODORA VIKIS** |  | 434 | 261 |
| **ERIC HOESGEN** |  | 2888 | 1733 |
| **Exchange Listing** | 145.0 | 86420 | 86420 |
| **FANI M. ORDONEZ DE LA CRUZ** |  | 2527 | 1517 |
| **Felix Glueck** |  | 2100 | 1260 |
| **Fidelity Clearing Canada ITF 682501 Alberta Ltd.** | 146.0 | 7217 | 4331 |
| **Fidelity Clearing Canada ITF Justin Norbraten A/C H1H-SR00-E** | 147.0 | 3543 | 2126 |
| **FIDELITY CLEARING CANADA ULC ITF 2587557 ONTARIO INC** | 148.0 | 331 | 199 |
| **Fidelity Clearing Canada ULC ITF Andy Leuchter** | 147.0 | 3609 | 2166 |
| **Fidelity Clearing Canada ULC ITF Beacon Securities Ltd.** | 149.0 | 167 | 101 |
| **Fidelity Clearing Canada ULC ITF Beverly & Joseph Remai** | 150.0 | 1444 | 867 |
| **FIDELITY CLEARING CANADA ULC ITF GRIT CAPITAL ADVISORY INC.** | 151.0 | 321 | 193 |
| **FIDELITY CLEARING CANADA ULC ITF HYBRID FINANCIAL LTD.** | 152.0 | 337 | 203 |
| **Fidelity Clearing Canada ULC ITF Leonard & Laurie Kayter** | 150.0 | 1444 | 867 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Fidelity Clearing Canada ULC ITF Monte Sheppard** | 150.0 | 1444 | 867 |
| **FIDELITY CLEARING CANADA ULC ITF WEST POINT FISHING LTD** | 153.0 | 321 | 193 |
| **FOLKLORE ENTERTAINMENT LLC** | 154.0 | 44 | 27 |
| **FOUNTAINHEAD MERCHANT BANCORP INC.** | 155.0 | 650 | 390 |
| **Frances Hackett** |  | 1444 | 867 |
| **FRANCES M SINGERY** |  | 48012 | 28808 |
| **FRANK BERRY** |  | 85 | 51 |
| **FRANK FINDLAY** |  | 18 | 11 |
| **Frank Frysiek** |  | 5637 | 3383 |
| **FRANK SCHRECK** |  | 73 | 44 |
| **FRED JOSEPH HERCULES** |  | 759 | 456 |
| **FRED KOLYBABA** |  | 48 | 29 |
| **Gaby Hofmann** |  | 1050 | 630 |
| **GARY DOUGLAS THRASH** |  | 44 | 27 |
| **GARY FEENER** |  | 12493 | 7497 |
| **GARY KELLY** |  | 5 | 3 |
| **GENEVIEVE ENTERPRISE CORP** | 156.0 | 331 | 199 |
| **GEOFF BALDERSON** |  | 3610 | 2166 |
| **Georg Chimkowski** |  | 2100 | 1260 |
| **GEORGE VAN VALKENBURG JR** |  | 1444 | 867 |
| **GERD REINIG** |  | 85 | 51 |
| **GINA SENESE** |  | 59 | 36 |
| **GLENN ADAMS** |  | 14887 | 8933 |
| **GOKHAN DURUST** |  | 2945 | 1768 |
| **GORDON CHIU** |  | 21660 | 12996 |
| **GRACE L. SURDIS** |  | 405 | 243 |
| **GRANT MAGDOVITZ** |  | 478 | 287 |
| **GREG CLOUGH** |  | 4332 | 2600 |
| **GREG PRUITT** |  | 722 | 434 |
| **Greggory Troy Nixon** |  | 2887 | 1733 |
| **Gregor Tanner** |  | 2362 | 1418 |
| **GREYSTONE CORPORATE SERVICES INC.** | 157.0 | 2166 | 1301 |
| **GundyCo ITF MARK PERTUISET OR SUSANNE GENSMANN** | 117.0 | 2887 | 1733 |
| **Gundyco TR Alkin Corporation** | 158.0 | 3543 | 2126 |
| **Gundyco TR Joseph N. Blinick** | 117.0 | 1444 | 867 |
| **GUNDYCO TR KANGARLOO CONSULTING INC** | 159.0 | 2100 | 1260 |
| **GUNDYCO TR ROGER ROGERS** | 117.0 | 642 | 386 |
| **H.T. MERIDIAN, LLC** | 160.0 | 37 | 23 |
| **Hannes Demske** |  | 788 | 473 |
| **HANS-JUERGEN THOMAS** |  | 1058 | 635 |
| **HARRY M RAPKIN** |  | 37 | 23 |
| **HARVEY KESNER** |  | 145 | 87 |
| **HAYWOOD SECURITIES INC TR KIMBLE O MOONEY** | 161.0 | 145 | 87 |
| **HAYWOOD SECURITIES INC.** | 162.0 | 3899 | 2340 |
| **Haywood Securities Inc. ITF Anders Nerell** | 161.0 | 7217 | 4331 |
| **Haywood Securities Inc. ITF Asad Sheikh** | 161.0 | 2887 | 1733 |
| **Haywood Securities Inc. ITF Carsten Jobs** | 161.0 | 2100 | 1260 |
| **Haywood Securities Inc. ITF Erick Factor** | 161.0 | 5774 | 3465 |
| **Haywood Securities Inc. ITF Gerion Weber** | 161.0 | 1444 | 867 |
| **Haywood Securities Inc. ITF Jens Lion** | 161.0 | 1444 | 867 |
| **Haywood Securities Inc. ITF Lidia Glinskaya** | 161.0 | 4987 | 2993 |
| **Haywood Securities Inc. ITF Mark T McGinnis** | 161.0 | 2100 | 1260 |
| **Haywood Securities Inc. ITF Mazhar Sheikh** | 161.0 | 4331 | 2599 |
| **Haywood Securities Inc. ITF Merohiry Ontario Ltd.** | 163.0 | 2887 | 1733 |
| **Haywood Securities Inc. ITF Ryan Walsh** | 161.0 | 4331 | 2599 |
| **Haywood Securities Inc. ITF Sausilito Ltd.** | 164.0 | 4331 | 2599 |
| **Haywood Securities Inc. ITF Veronica Van Wollen** | 161.0 | 1444 | 867 |
| **Haywood Securities Inc. Malte Philipp Muenchert** | 161.0 | 1706 | 1024 |
| **Haywood Securities Inc. Thomas Vetter** | 161.0 | 3543 | 2126 |

---

---

| | | | |
|:---|:---|:---|:---|
| **HENRY SOENNEKER** |  | 29 | 18 |
| **HERBERT M BERNSTEIN &** |  | 73 | 44 |
| **HOLLY L SINGH** |  | 67 | 41 |
| **HOWARD G BRAVERMAN** |  | 55 | 33 |
| **HT HOLDINGS** | 165.0 | 261743 | 159664 |
| **HUBERT H WILLER III** |  | 85 | 51 |
| **HUMBERTO COLLAZO** |  | 145 | 87 |
| **IAN ALLAN COBB** |  | 105 | 63 |
| **IAN DONALD** |  | 1011 | 607 |
| **ILIA KATIRAEE** |  | 161 | 97 |
| **IN THE ROOM MEDIA INC.** | 166.0 | 20579 | 12348 |
| **IN THE ROOM MEDIA INC.** | 166.0 | 1948 | 1948 |
| **Interactive Brokers UK Ltd TR Juergen Kneifel** | 167.0 | 10104 | 6063 |
| **INVESTOR COMPANY ITF 101049658 SASKATCHEWAN LTD** | 168.0 | 145 | 87 |
| **Investor Company ITF A/C 1HOYBAA Dominique Hussey** | 169.0 | 10760 | 6456 |
| **Investor Company ITF Chris Stewart A/C 7X8539-E** | 169.0 | 3543 | 2126 |
| **Investor Company ITF Daryl Pollock A/C 22RLW1A** | 169.0 | 3543 | 2126 |
| **INVESTOR COMPANY ITF DONNA JUBIN** | 169.0 | 240 | 144 |
| **IRVIN GERLING** |  | 15 | 9 |
| **IVAN KMECKO** |  | 650 | 390 |
| **JACK R ALBRIGHT** |  | 37 | 23 |
| **JACK ROSS** |  | 1018 | 611 |
| **JACK SCHNEIDER** |  | 145 | 87 |
| **JACQUELINE YAMPOLSKY** |  | 7220 | 4332 |
| **JAMES BIZZIERI** |  | 258 | 155 |
| **JAMES DOUGLAS BENSON** |  | 1191 | 716 |
| **JAMES H CHANG** |  | 273 | 164 |

---

---

| | | | |
|:---|:---|:---|:---|
| **James L Chaput & Janice D Chaput** |  | 2345 | 1407 |
| **JAMES L WHITE &** |  | 54 | 33 |
| **JAMES L. CHAPUT AND JANICE D. CHAPUT** |  | 7220 | 4332 |
| **JAMES RHODE TR** | 171.0 | 116 | 70 |
| **JAMES ZUCCHERO** |  | 361 | 217 |
| **JAMIE BERNER** |  | 65 | 39 |
| **JAMIE GOLDSTEIN** |  | 6827 | 4097 |
| **JAMIE GOLDSTEIN** | 246.0 | 133441 | 133441 |
| **JAN MOIR** |  | 63 | 38 |
| **JANET K CROPPER** |  | 34 | 21 |
| **JARON BROWNE** |  | 33 | 20 |
| **JASON MOCH** |  | 145 | 87 |
| **JEFF CURRAN** |  | 145 | 87 |
| **Jens Stelzer** |  | 657 | 395 |
| **JERET BODE** |  | 434 | 261 |
| **JERRY JOOS** |  | 434 | 261 |
| **JERRY MINNI** |  | 1156 | 694 |
| **JIMMY RYAN** |  | 13 | 8 |
| **JOAN HALEY** |  | 80 | 48 |
| **Jochen Elsner** |  | 919 | 552 |
| **Joe Alvarez** |  | 165 | 99 |
| **JOE L ALVAREZ** |  | 253 | 152 |
| **JOEL PRUZANSKY** |  | 102 | 62 |
| **Johannes Anetsberger** |  | 657 | 395 |
| **JOHN BAT** |  | 578 | 347 |
| **JOHN CUMMINGS** |  | 10830 | 6498 |
| **JOHN DUKE BUTLER** |  | 340 | 204 |
| **JOHN HAY** |  | 73 | 44 |
| **JOHN MCNEILAGE** |  | 33 | 20 |
| **JOHN SINGERA** |  | 145 | 87 |
| **JOHNNIE & EDDIE MAE BARRON-SMITH** |  | 361 | 217 |
| **Jorg Kalble** |  | 1444 | 867 |
| **JOSEPH A CROPPER** |  | 37 | 23 |
| **JOSEPH S. HINCKLEY JR.** |  | 58 | 35 |
| **JOYCE C MUNNINGS** |  | 53 | 32 |
| **JUAN FIGUERAS** |  | 665 | 399 |
| **JUDY MCKENZIE** |  | 5 | 3 |
| **Julian Buck** |  | 788 | 473 |
| **Jurgen Alps** |  | 1444 | 867 |
| **KADENWOOD CAPITAL CORP** | 173.0 | 2888 | 1733 |
| **KADENWOOD DEVELOPMENT CORP.** | 174.0 | 21371 | 12823 |
| **KADENWOOD VENTURES CORP** | 175.0 | 8087 | 4853 |
| **KAREN WONG** |  | 34 | 21 |

---

---

| | | | |
|:---|:---|:---|:---|
| **KARL A. DOWNER** |  | 253 | 152 |
| **Karl Kiesl** |  | 2100 | 1260 |
| **KARSTEN KLUG** |  | 1079 | 648 |
| **KATHERINE CAISSIE** |  | 34 | 21 |
| **KATHY MCKEEVER** |  | 2166 | 1300 |
| **KEITH ANDREW BALL** |  | 1191 | 716 |
| **KEITH ELLIOTT STRIDE** |  | 9747 | 5849 |
| **KELLEEN R. TAYLOR** |  | 34656 | 20794 |
| **KEN TOWNSEND** |  | 947 | 569 |
| **Kenneth Kwok Wah Liu** |  | 7217 | 4331 |
| **KEVIN HUBER** |  | 299 | 180 |
| **KEVIN JACOBS** |  | 87 | 53 |
| **KEVIN MCBRIDE** |  | 361 | 217 |
| **KEVIN THOMPSON** |  | 434 | 261 |
| **KORAMO LIMITED** | 176.0 | 867 | 521 |
| **KYLE GULLICKSON** |  | 1444 | 867 |
| **LAFTR.MOV** |  | 1909 | 1909 |
| **LAMAR E LOVE** |  | 81 | 49 |
| **LARRY EDWARD CRAVEN** |  | 145 | 87 |
| **LARRY REID** |  | 722 | 434 |
| **LARRY TAYLOR** |  | 361 | 217 |
| **LARRY WATSON** |  | 777 | 467 |
| **Lars Schoenyan** |  | 2100 | 1260 |
| **Lars Stern** |  | 1444 | 867 |
| **LAURA H. BAILEY** |  | 145 | 87 |
| **LAURA WASILENKOFF** |  | 1444 | 867 |
| **LAURENTIAN BANK SECURITIES INC ITF 7SAAJE4 ANAT BENEDICT** | 177.0 | 323 | 194 |
| **Laurentian Bank Securities ITF Robert Wineberg A/C 2HATAE2** | 177.0 | 28868 | 17321 |
| **LAWRENCE SIEGEL** |  | 867 | 521 |
| **Leede Financial Inc. ITF Doug Hawkes** | 170.0 | 919 | 552 |
| **Leede Financial Inc. ITF Jack Ross** | 170.0 | 2887 | 1733 |
| **Leede Financial Inc. ITF Joe David Voisin** | 170.0 | 2100 | 1260 |
| **Leede Financial Inc. ITF Paige Slezak** | 170.0 | 3543 | 2126 |
| **Leede Financial Inc. ITF Russel Fuhrer** | 170.0 | 2100 | 1260 |
| **Leede Financial Inc. ITF Sanit Chanhao** | 170.0 | 42908 | 25745 |
| **LEEDE JONES GABLE INC.** | 178.0 | 1197 | 719 |
| **LEG HOLDINGS INC** | 179.0 | 44 | 27 |
| **LEIGHTON BOCKING** |  | 12852 | 7712 |
| **LELAND L BAKER JR TR LELAND L BAKER JR TRUST DATED 1-9-92** | 180.0 | 116 | 70 |
| **LES CASDEN** |  | 52 | 32 |
| **LESTER WINOGRADE** |  | 44 | 27 |
| **LEVEL 3 CAPITAL MANAGEMENT INC.** | 181.0 | 28302 | 16982 |
| **LINDA BARGSLEY LINDBURG** |  | 217 | 131 |

---

---

| | | | |
|:---|:---|:---|:---|
| **LISA K HASTINGS** |  | 58 | 35 |
| **LISA MORGAN** |  | 2311 | 1387 |
| **Lynx BV Germany Branch (Carsten Schulz)** | 182.0 | 2100 | 1260 |
| **Lynx BV Germany Branch (Klaus Schulz)** | 182.0 | 2100 | 1260 |
| **MADISON ADAM** |  | 434 | 261 |
| **Malte Viering** |  | 1444 | 867 |
| **Manfred Geiss** |  | 1444 | 867 |
| **Manuel Arlt** |  | 919 | 552 |
| **MARC DOLAN** |  | 67 | 41 |
| **MARCUS A M BELL** |  | 46 | 28 |
| **MARCUS WILLIAMS** |  | 145 | 87 |
| **Margit Jacobeit** |  | 657 | 395 |
| **MARIA GUTIERREZ-GALEANO** |  | 434 | 261 |
| **Marius Frassek** |  | 1444 | 867 |
| **Mark Hussmann** |  | 1444 | 867 |
| **MARK KUHN** |  | 180 | 109 |
| **MARK VANRY** |  | 9818 | 5892 |
| **Markus Krank** |  | 2100 | 1260 |
| **MARTIN DEANE CHEATHAM JR TR DEANE CHEATHAM LIVING TRUST** | 183.0 | 58 | 35 |
| **Martin Kuse** |  | 788 | 473 |
| **MARTIN NICHOLSON** |  | 2978 | 1787 |
| **Martin Scott** |  | 103 | 103 |
| **Martin von Majowski** |  | 657 | 395 |
| **MARY BRACKENHOFF** |  | 299 | 180 |
| **MARY CECELIA RITZ** |  | 43 | 26 |
| **MARY MARTHA EDWARDS** |  | 43 | 26 |
| **MATTHEW COBB** |  | 109 | 66 |
| **MATTHEW ECKERMANN** |  | 111 | 67 |
| **MATTHEW J DONOVAN** |  | 361 | 217 |
| **Matthias Blume** |  | 7217 | 4331 |
| **Matthias Bornitz** |  | 1575 | 945 |
| **Matthias Frenzel** |  | 2494 | 1497 |
| **Matthias Limberg** |  | 1181 | 709 |
| **Matthias Woock** |  | 2100 | 1260 |
| **MAUDO MASSARO** |  | 34 | 21 |
| **MAURICE RUST** |  | 37 | 23 |
| **Maximilian Ruth** |  | 1706 | 1024 |
| **MAXIMILIAN SALI** |  | 578 | 347 |
| **MCGILLIGAN BARRY INVESTMENTS LTD** | 184.0 | 643 | 386 |
| **MEDFORD ROOSEVELT COSNER JR & KATHLEEN ANN COSNER JT TEN** |  | 22 | 14 |
| **MEGA DEALER LLC** | 185.0 | 1156 | 694 |
| **MICHAEL CLIFFORD DUSSAULT** |  | 85 | 51 |
| **MICHAEL D KAYS** |  | 87 | 53 |
| **MICHAEL D TRIPP** |  | 803 | 482 |
| **MICHAEL F MUNNINGS** |  | 15 | 9 |
| **Michael Georgii** |  | 657 | 395 |

---

---

| | | | |
|:---|:---|:---|:---|
| **MICHAEL JOHN FIGURA** |  | 15 | 9 |
| **MICHAEL KERKHOF** |  | 289 | 174 |
| **MICHAEL KLINE** |  | 31548 | 18930 |
| **MICHAEL MAGA** |  | 22 | 14 |
| **MICHAEL MCMANUS** |  | 81 | 49 |
| **MICHAEL MILLS** |  | 434 | 261 |
| **MICHAEL MOORE** |  | 289 | 174 |
| **MICHAEL ROTHER** |  | 2202 | 1323 |
| **Michael Sailer** |  | 1050 | 630 |
| **MICHAEL THIBAULT** |  | 867 | 521 |
| **MICHAEL TOWNSEND** |  | 17786 | 10672 |
| **MICHAEL YAMPOLSKY** |  | 7220 | 4332 |
| **MICHAELYN SHELLEY-DAVID** |  | 44 | 27 |
| **MITCH MEADOWS** |  | 240 | 145 |
| **MRS VICTORIA E PATTERSON** |  | 145 | 87 |
| **Mustafa Yikilmaz** |  | 2100 | 1260 |
| **MYLES A SEMAN** |  | 58 | 35 |
| **National Bank Financial Inc ITF Jack Agrios A/C 05JUCGE** | 172.0 | 14434 | 8661 |
| **NATIONAL BANK FINANCIAL INC TR 1130065 BC LTD A/C 37KG72A** | 186.0 | 145 | 87 |
| **NATIONAL BANK FINANCIAL INC TR AL MURRAY A/C 38A4BWA** | 172.0 | 97 | 59 |
| **NATIONAL BANK FINANCIAL INC TR ALAN & ANITA KELLER A/C 38A5VFA** | 172.0 | 321 | 193 |
| **NATIONAL BANK FINANCIAL INC TR ALEXANDER HARPER A/C 38F4FWA** | 172.0 | 49 | 30 |
| **NATIONAL BANK FINANCIAL INC TR AURELA MELHADO A/C 37YK26A** | 172.0 | 64 | 39 |
| **NATIONAL BANK FINANCIAL INC TR BARRY LARSON A/C 2R9262E** | 172.0 | 5054 | 3033 |
| **NATIONAL BANK FINANCIAL INC TR BMN KEEN ENTERPRISES A/C 37MW31A** | 187.0 | 297 | 179 |
| **NATIONAL BANK FINANCIAL INC TR BRADLEY MCLEAN A/C 38ZDX6A** | 172.0 | 321 | 193 |
| **NATIONAL BANK FINANCIAL INC TR BRIAN KRUSE A/C 38A51QA** | 172.0 | 97 | 59 |
| **NATIONAL BANK FINANCIAL INC TR CELESTE VIDAL A/C 38A6WMA** | 172.0 | 49 | 30 |
| **NATIONAL BANK FINANCIAL INC TR CRAIG TAYLOR A/C 38FK7VA** | 172.0 | 52 | 32 |
| **NATIONAL BANK FINANCIAL INC TR DALE MILLER A/C 38Z9D2A** | 172.0 | 65 | 39 |
| **NATIONAL BANK FINANCIAL INC TR DAN DUVALL A/C 37FQA4A** | 172.0 | 129 | 78 |
| **NATIONAL BANK FINANCIAL INC TR DAVID ELLIOTT A/C 42XDCDA** | 172.0 | 145 | 87 |
| **NATIONAL BANK FINANCIAL INC TR DAVID HUXLEY A/C 38DNLQA** | 172.0 | 129 | 78 |
| **NATIONAL BANK FINANCIAL INC TR DOUG VENABLES A/C 4EH181E** | 172.0 | 650 | 390 |
| **NATIONAL BANK FINANCIAL INC TR ERIC PATTERSON A/C 37MJ4WE** | 172.0 | 145 | 87 |
| **NATIONAL BANK FINANCIAL INC TR EVE ABRAMS A/C 38F3BDA** | 172.0 | 193 | 116 |
| **NATIONAL BANK FINANCIAL INC TR G SCOTT PATERSON A/C 37YL19A** | 172.0 | 321 | 193 |
| **NATIONAL BANK FINANCIAL INC TR GEORGE ADAMS A/C 37JL18A** | 172.0 | 145 | 87 |
| **NATIONAL BANK FINANCIAL INC TR GLENN GRAY A/C 38ZQYNA** | 172.0 | 49 | 30 |
| **NATIONAL BANK FINANCIAL INC TR GORDON GRAHAM A/C 37MCF5A** | 172.0 | 48 | 29 |
| **NATIONAL BANK FINANCIAL INC TR JEFFREY YORK A/C 42XC8HA** | 172.0 | 333 | 200 |
| **NATIONAL BANK FINANCIAL INC TR JERET BODE A/C 4EE456E** | 172.0 | 48 | 29 |
| **NATIONAL BANK FINANCIAL INC TR JOHN J NANOS A/C 42XC06A** | 172.0 | 145 | 87 |
| **NATIONAL BANK FINANCIAL INC TR KATHLEEN MCKINNELL A/C 38CYDNA** | 172.0 | 129 | 78 |
| **NATIONAL BANK FINANCIAL INC TR KEVIN HAAKENSEN A/C 38EDFLE** | 172.0 | 65 | 39 |
| **NATIONAL BANK FINANCIAL INC TR KEVIN MCROBERTS A/C 38GFR3A** | 172.0 | 49 | 30 |
| **NATIONAL BANK FINANCIAL INC TR KEVIN THOMPSON A/C 4EE498A** | 172.0 | 52 | 32 |
| **NATIONAL BANK FINANCIAL INC TR KIRK SHAW A/C 37ML2RA** | 172.0 | 333 | 200 |
| **NATIONAL BANK FINANCIAL INC TR LINDA BOVER A/C 37HAT3A** | 172.0 | 64 | 39 |
| **NATIONAL BANK FINANCIAL INC TR LOIS WIENS A/C 4EH162A** | 172.0 | 650 | 390 |
| **NATIONAL BANK FINANCIAL INC TR MALCOLM BUKENBERGER A/C 37HAQYA** | 172.0 | 174 | 105 |

---

---

| | | | |
|:---|:---|:---|:---|
| **NATIONAL BANK FINANCIAL INC TR MARIA LEOCZKO A/C 38F2U2A** | 172.0 | 161 | 97 |
| **National Bank Financial Inc TR MARY TURNBULL A/C 6CPWB9A** | 172.0 | 64952 | 38972 |
| **NATIONAL BANK FINANCIAL INC TR NIKITA JAMES NANOS A/C 42XC07A** | 172.0 | 145 | 87 |
| **NATIONAL BANK FINANCIAL INC TR RANDY BOUDOT A/C 38CUJ8A** | 172.0 | 49 | 30 |
| **NATIONAL BANK FINANCIAL INC TR ROBERT & PATRICIA CUTTRISS A/C 38DWH7A** | 172.0 | 65 | 39 |
| **National Bank Financial Inc TR Robert Becker A/C 3C8VSFA** | 172.0 | 1444 | 867 |
| **NATIONAL BANK FINANCIAL INC TR ROBIN RAISTRICK A/C 42XDAFA** | 172.0 | 195 | 117 |
| **NATIONAL BANK FINANCIAL INC TR RODNEY KOCH A/C 4EH110E** | 172.0 | 48 | 29 |
| **NATIONAL BANK FINANCIAL INC TR RONALD MCDONOUGH A/C 38BC2HA** | 172.0 | 65 | 39 |
| **NATIONAL BANK FINANCIAL INC TR STEVE BRADBURY A/C 38CB9QA** | 172.0 | 129 | 78 |
| **NATIONAL BANK FINANCIAL INC TR STEVE NICKS A/C 38AB90A** | 172.0 | 65 | 39 |
| **National Bank Financial Inc TR Susan Clark & Daniel Noonan JTWROS** | 172.0 | 1444 | 867 |
| **NATIONAL BANK FINANCIAL INC TR THE HESHAM OSMAN FAMILY TRUST A/C 37MBCDA** | 188.0 | 203 | 122 |
| **NATIONAL BANK FINANCIAL INC TR THOMAS DAVIS & DEBORAH KEENLEYSIDE A/C 38BXAWA** | 172.0 | 65 | 39 |
| **NATIONAL BANK FINANCIAL INC TR TREVOR DILWORTH & BARBARA DILWORTH A/C 38C0Z8A** | 172.0 | 58 | 35 |
| **NATIONAL BANK FINANCIAL INC TR VICTOR & DONNA LOUCKS A/C 38A88WA** | 172.0 | 129 | 78 |
| **NATIONAL BANK FINANCIAL INC. ITF 6C56Y9E GENEVIEVE ENTERPRISE CORP (32010M)** | 189.0 | 321 | 193 |
| **National Bank Financial Inc. ITF Deirdre Alaine Jenkins** | 172.0 | 3609 | 2166 |
| **National Bank Financial Inc. ITF Sprott Capital Partners LP A/C 41SEH0A** | 190.0 | 167 | 101 |
| **National Bank Financial TR Joel Chevrefils Professional Corp.** | 191.0 | 2100 | 1260 |
| **National Bank ITF 769644 Alberta Ltd.** | 192.0 | 3543 | 2126 |
| **National Bank ITF Ari Toderovitz** | 172.0 | 3543 | 2126 |
| **National Bank ITF Bill Fox** | 172.0 | 14434 | 8661 |
| **National Bank ITF Dean Buist** | 172.0 | 1444 | 867 |
| **National Bank ITF Frank J. Mueller** | 172.0 | 3543 | 2126 |
| **National Bank ITF Henry Reichert** | 172.0 | 3543 | 2126 |
| **National Bank ITF Ilie Onulov** | 172.0 | 4331 | 2599 |
| **National Bank ITF Joe Stewart** | 172.0 | 3543 | 2126 |
| **National Bank ITF Linda Brown** | 172.0 | 3543 | 2126 |
| **National Bank ITF Timothy Walsh** | 172.0 | 14434 | 8661 |
| **National Bank ITF Zenith Appraisal & Land Consulting Ltd.** | 193.0 | 21651 | 12991 |
| **Nauras Hasan** |  | 2100 | 1260 |
| **NBF ITF 4EM006A Industrial Alliance Securities Inc. (89371M)** | 194.0 | 63 | 38 |
| **NELSON FAMILY LIVING TRUST DATED 9/13/20** |  | 722 | 434 |
| **NESBITT BURNS ITF CD PRODUCTIONS INC AC# 645-04057-14** | 195.0 | 1083 | 650 |
| **NESBITT BURNS ITF CRAIG BRENNAN AC# 645-03977-13** | 76.0 | 578 | 347 |
| **NESBITT BURNS ITF DONALD MCINNES AC# 645-04145-26** | 76.0 | 145 | 87 |
| **NESBITT BURNS ITF MARK E HEWETT AC# 645-03643-25** | 76.0 | 1156 | 694 |
| **NESBITT BURNS ITF MICHAEL TRIPP AC# 275-10051-21** | 76.0 | 963 | 578 |
| **NESBITT BURNS ITF MICHAEL TRIPP AC# 645-03939-28U** | 76.0 | 1156 | 694 |
| **NESBITT BURNS TR CHURCH STREET STEAKHOUSE AND PUB INC A/C 275-08954-23** | 196.0 | 347 | 209 |
| **NESBITT BURNS TR SEAMUS O'BYRNE A/C 275-09124-26** | 76.0 | 1444 | 867 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Niche Investor Services** | 197.0 | 48 | 29 |
| **NICHOLAS J. CASTORIA** |  | 867 | 521 |
| **NICOLE CLOUGH** |  | 7220 | 4332 |
| **NIROZ AL-MOZAHID** |  | 289 | 174 |
| **NOREEK DAVITIAN** |  | 145 | 87 |
| **NORTH EQUITIES CORP** | 198.0 | 2676 | 1606 |
| **NUNZIO GUERRIERO** |  | 174 | 105 |
| **Oran Rafael Dorel** |  | 10760 | 6456 |
| **PACER CAPITAL CORP** | 199.0 | 289 | 174 |
| **PAMELA S. WOLTERMAN** |  | 50539 | 30324 |
| **PANG-YUAN NICOLE CHANG** |  | 43 | 26 |
| **Paolo D'Rossi** |  | 974 | 585 |
| **Patrick Baumann** |  | 1444 | 867 |
| **Patrick Mildner** |  | 1050 | 630 |
| **PATRICK TERENCE MCALLISTER** |  | 65 | 39 |
| **PAUL HEAL** |  | 14738 | 8843 |
| **PAUL J. HEAL** |  | 3610 | 2166 |
| **PAUL LEGER** |  | 44 | 27 |
| **PAUL MACNEILL** |  | 130 | 78 |
| **PAUL QUILKEY** |  | 5487 | 3293 |
| **Paul Wachtel** |  | 788 | 473 |
| **PEISES CORP.** | 200.0 | 191832 | 191442 |
| **PETER A. FEIFEL PROFESSIONAL CORPORATION** | 201.0 | 7535 | 4522 |
| **PETER CONNOLLY** |  | 299 | 180 |
| **Peter Schuessler** |  | 657 | 395 |
| **PETER SMITH** |  | 390 | 234 |
| **Petr Cerny** |  | 2100 | 1260 |
| **PHILIP KUZYK** |  | 1444 | 867 |
| **Philipp Malleier** |  | 1575 | 945 |
| **Philipp Weidner** |  | 1050 | 630 |
| **Philipp Welle** |  | 919 | 552 |
| **PLACEMENTS ALAIN LEMAY INC** | 202.0 | 14440 | 8664 |
| **PLAYGROUND MEDIA INC.** | 203.0 | 1733 | 1041 |
| **PRADEEP K VOHORA** |  | 73 | 44 |
| **Rachel A. Miller** | 246.0 | 205000  | 164000 |
| **Ralf Iwan** |  | 2887 | 1733 |
| **Ralf Soukup** |  | 1050 | 630 |
| **Ralf Wagner** |  | 7217 | 4331 |
| **RATHERBY INVESTMENTS LLC** | 204.0 | 262 | 158 |
| **RAYMOND CHRISTIAN** |  | 1805 | 1083 |
| **RBC Dominion Securities Inc. ITF Daniel Kokan A/C 463-62746-17** | 205.0 | 5249 | 3150 |
| **RBC INVESTOR SERVICES TRUST TR A/C 176027007** | 206.0 | 2571 | 1543 |
| **REIDAR ANDERSON** |  | 87 | 53 |
| **Reiner Seitz** |  | 1050 | 630 |
| **RESEARCH CAPITAL CORP TR DARYL JAMBRICH AC 31AK66A** | 207.0 | 73 | 44 |
| **Research Capital Corp. ITF Michael Sadhra** | 207.0 | 2887 | 1733 |
| **Reto Glaus** |  | 1444 | 867 |
| **REX WOLTERMAN** |  | 867 | 521 |
| **RICHARD ALAN KALISCH** |  | 128 | 77 |
| **RICHARD JACKSON** |  | 67 | 41 |
| **RICHARD KURTZ** |  | 45181 | 27109 |
| **RICHARD MARIEN** |  | 58 | 35 |
| **RICHARD SAMOLEWICZ &** |  | 73 | 44 |
| **RICHARD STRETTON** |  | 376 | 226 |
| **Rico Potzscher** |  | 657 | 395 |

---

---

| | | | |
|:---|:---|:---|:---|
| **ROBERT BAST** |  | 885 | 531 |
| **Robert Berger** |  | 2100 | 1260 |
| **ROBERT DOWLING** |  | 660 | 397 |
| **ROBERT FENTY** |  | 1426 | 856 |
| **ROBERT GREENHOW** |  | 425 | 255 |
| **ROBERT HALPIN** |  | 361 | 217 |
| **ROBERT IRVIN PEDIGO** |  | 182 | 110 |
| **ROBERT J POLVERE** |  | 73 | 44 |
| **ROBERT KIRSTIUK** |  | 867 | 521 |
| **ROBERT SOLKNER** |  | 2916 | 1751 |
| **ROBYN JENNER** |  | 34 | 21 |
| **RODNEY WOLTERMAN** |  | 35948 | 21570 |
| **Roland Raddatz** |  | 2100 | 1260 |
| **RONALD KOHLER** |  | 2600 | 1560 |
| **RONALD KOLMAN &** |  | 650 | 390 |
| **ROSS WESTBROOK** |  | 6461 | 3878 |
| **ROYTOR & CO** | 208.0 | 2086 | 1252 |
| **RSD CAPITAL CORP.** | 209.0 | 2383 | 1430 |
| **RUBEN G SOTO** |  | 471 | 283 |
| **Ruben Soto** |  | 3518 | 2111 |
| **RUSTY SCHMIDT** |  | 542 | 326 |
| **SAFAK SUBASI** |  | 145 | 87 |
| **Samuel Vogrin** |  | 2100 | 1260 |
| **SANDRA FERRARI** |  | 44 | 27 |
| **SARWAT ANSARI** |  | 8736 | 5242 |
| **SCOTIA CAPITAL INC TR LIL TONMYR** | 210.0 | 145 | 87 |
| **SCOTIA CAPITAL INC. ITF ALAIN D BOURASSA PROFESSIONAL CORP.** | 211.0 | 304 | 183 |
| **Scotia Capital Inc. ITF Christine A. Cassidy 467-36607-28** | 210.0 | 5774 | 3465 |
| **Scotia Capital Inc. ITF Dean Martin** | 210.0 | 1444 | 867 |
| **Scotia Capital Inc. ITF Tristan M. Sawtell 444-92952-21** | 210.0 | 7217 | 4331 |
| **Scotia Capital Inc. ITF Warren Shing Ngai Tsoi 467-41904-28** | 210.0 | 1444 | 867 |
| **Scotia Capital Inc. TR LORENA GAYMES A/C 825-41886-11** | 210.0 | 1444 | 867 |
| **Scotia Capital ITF Denis E. Walker 467-43604-27** | 210.0 | 4331 | 2599 |
| **SCOTT BOUGHEY** |  | 6926 | 4156 |
| **Seamus Byrne** |  | 4331 | 2599 |
| **Sebastian Evers** |  | 2887 | 1733 |
| **Sebastian Schwab** |  | 1444 | 867 |
| **Sebastian Strohmayer** |  | 1706 | 1024 |
| **SERGEY GADAYEV** |  | 102 | 62 |
| **SETH KALYAN** |  | 289 | 174 |
| **SEVEN SEVEN SEVEN HOLDINGS LTD** | 212.0 | 400 | 240 |
| **SHARON SAVOIE** |  | 34 | 21 |
| **SHEILA LOVE** |  | 9 | 6 |
| **SHINICHI HIRABAYASHI** |  | 217 | 131 |
| **SHIRLEY CHEN** |  | 217 | 131 |
| **SICHENZIA ROSS FERENCE CARMEL** | 213.0 | 90000 | 90000 |
| **SIDDHARTHA SENROY** |  | 18050 | 10831 |
| **SIENAG HOLDINGS LLC** | 214.0 | 145 | 87 |
| **Simon Gaschler** |  | 1838 | 1103 |
| **SINEAD DOLAN** |  | 67 | 41 |
| **SKYE CORPORATE HOLDINGS, INC.** | 215.0 | 2527 | 1517 |
| **SKYVIEW CORP** | 216.0 | 218119 | 139597 |
| **SOCKY MAILA** |  | 33 | 20 |
| **SPECTRE CAPITAL CORP.** | 217.0 | 28880 | 17328 |
| **SPECTRE INVESTMENTS INC.** | 218.0 | 10830 | 6498 |
| **STANLEY S MALIN** |  | 102 | 62 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Stefan Arnst** |  | 4331 | 2599 |
| **Stefan Gottschalk** |  | 1444 | 867 |
| **Stefan Lesenberg** |  | 2887 | 1733 |
| **Stefan Nigischer** |  | 1050 | 630 |
| **Stefanie Pfefferle** |  | 2887 | 1733 |
| **STEPHEN BARNES** |  | 289 | 174 |
| **STEPHEN GILLIS** |  | 34 | 21 |
| **Stephen Saterbo** |  | 7066 | 4240 |
| **Steve Payne** |  | 235 | 141 |
| **STEVEN PAUL SZARKA** |  | 145 | 87 |
| **STEVEN PAYNE** |  | 361 | 217 |
| **STEVEN STEWART** |  | 304 | 183 |
| **STEVEN W. & DIANE M. LEE** |  | 181 | 109 |
| **STOCKHOUSE PUBLISHING LTD.** | 219.0 | 954 | 573 |
| **STUART ROSS** |  | 867 | 521 |
| **Sukhbinder Dhami** |  | 4331 | 2599 |
| **SUNEETH PATWARI** |  | 44 | 27 |
| **SUSAN HEATHCOTE** |  | 2311 | 1387 |
| **Susie Low** | 220.0 | 1444 | 867 |
| **Sven Hanisch** |  | 2100 | 1260 |
| **TD AMERITRADE TR GLEN G FRANK A/C 492677001** | 221.0 | 128 | 77 |
| **TED COOPERSMITH** |  | 73 | 44 |
| **TED CROFTS** |  | 335 | 202 |
| **Terra Capital Emerging Companies Fund Pty Ltd** | 222.0 | 72169 | 43302 |
| **THE IRA CLUB F/B/O PATRICK H. RYAN, JR. IRA 2000092** | 223.0 | 57759 | 34656 |
| **Theodor Strein Soehne Holding GmbH** | 224.0 | 4331 | 2599 |
| **THOMAS A REINHART** |  | 58 | 35 |
| **THOMAS GIOSEFFI** |  | 284 | 171 |
| **THOMAS HINRICHS** |  | 29 | 18 |
| **Thomas Huber** |  | 1050 | 630 |
| **THOMAS JAMES FRANCIOSA** |  | 85 | 51 |
| **Thomas Reuther** |  | 657 | 395 |
| **Thomas Stacher** |  | 4331 | 2599 |
| **THOMAS TROFE** |  | 44 | 27 |
| **TIMOTHY BESAW** |  | 1191 | 716 |
| **Title3** |  | 2485 | 2485 |
| **TOMMY BAILEY & JOYCE BAILEY JT TEN** |  | 15 | 9 |
| **TORO PACIFIC MANAGEMENT INC** | 225.0 | 2239 | 1344 |
| **TRACY DOMINIC VIGIL IRA** |  | 11910 | 7146 |
| **TRAILER PARK BOYS INCORPORATED** | 226.0 | 14440 | 8665 |
| **TRAVIS ZIPPE** |  | 562 | 447 |
| **TREVOR TAYLOR** |  | 318 | 191 |
| **TYE CHADWICKE CARTER** |  | 145 | 87 |
| **TYRONE CLARK** |  | 76 | 46 |
| **Ulrich Leluschko** |  | 2231 | 1339 |

---

---

| | | | |
|:---|:---|:---|:---|
| **VALERIO MASSARO** |  | 34 | 21 |
| **VANCE G. DUNN** |  | 73 | 44 |
| **Ventum FINANCIAL CORP ITF 1135541 ALBERTA LTD** | 227.0 | 289 | 174 |
| **Ventum FINANCIAL CORP ITF NEIL TANNER** | 228.0 | 48 | 29 |
| **Ventum FINANCIAL CORP ITF THE ESTATE OF KELLY DEE MOROZ** | 228.0 | 289 | 174 |
| **Ventum FINANCIAL CORP TR YOEL ALTMAN** | 228.0 | 145 | 87 |
| **Ventum Financial Corp.** | 229.0 | 786 | 472 |
| **Ventum Financial Corp. IT Chris Mayerson** | 228.0 | 36085 | 21651 |
| **Ventum Financial Corp. ITF 383210 Alberta Ltd.** | 228.0 | 7217 | 4331 |
| **Ventum Financial Corp. ITF BeepsCo Ltd.** | 230.0 | 7217 | 4331 |
| **Ventum Financial Corp. ITF Brent Eshleman** | 228.0 | 3543 | 2126 |
| **Ventum Financial Corp. ITF Bronze Resources Ltd.** | 231.0 | 4987 | 2993 |
| **Ventum Financial Corp. ITF Broughdale Holdings Inc.** | 232.0 | 2887 | 1733 |
| **Ventum Financial Corp. ITF Bryan Angus** | 228.0 | 8661 | 5197 |
| **Ventum Financial Corp. ITF Bryan Henry** | 228.0 | 7217 | 4331 |
| **Ventum Financial Corp. ITF Candice Stephey** | 228.0 | 3543 | 2126 |
| **Ventum Financial Corp. ITF Capital Event Management** | 233.0 | 8661 | 5197 |
| **Ventum Financial Corp. ITF Chris Roth** | 228.0 | 2887 | 1733 |
| **Ventum Financial Corp. ITF Concept Capital Management Ltd.** | 234.0 | 7217 | 4331 |
| **Ventum Financial Corp. ITF Danny Quattrociocchi** | 228.0 | 3543 | 2126 |
| **Ventum Financial Corp. ITF David Jarvis** | 228.0 | 1444 | 867 |
| **Ventum Financial Corp. ITF David Peabody** | 228.0 | 11023 | 6614 |
| **Ventum Financial Corp. ITF Dona Klaiber** | 228.0 | 1444 | 867 |
| **Ventum Financial Corp. ITF Elizabeth Walters** | 228.0 | 3543 | 2126 |
| **Ventum Financial Corp. ITF Estate of Natalija Bajin** | 235.0 | 7217 | 4331 |
| **Ventum Financial Corp. ITF Gabriel Ko** | 228.0 | 1444 | 867 |
| **Ventum Financial Corp. ITF Gary Anderson** | 228.0 | 2887 | 1733 |
| **Ventum Financial Corp. ITF Grant Klaiber** | 228.0 | 2887 | 1733 |
| **Ventum Financial Corp. ITF James Shone** | 228.0 | 2100 | 1260 |
| **Ventum Financial Corp. ITF James Stewart** | 228.0 | 304 | 183 |
| **Ventum Financial Corp. ITF Joerg Schweizer** | 228.0 | 14434 | 8661 |
| **Ventum Financial Corp. ITF John Anderson** | 228.0 | 2887 | 1733 |
| **Ventum Financial Corp. ITF Li Zhu** | 228.0 | 3543 | 2126 |
| **Ventum Financial Corp. ITF Margaret Barron** | 228.0 | 3543 | 2126 |
| **Ventum Financial Corp. ITF Mark Macri** | 228.0 | 1444 | 867 |
| **Ventum Financial Corp. ITF Michael Senior** | 228.0 | 1444 | 867 |
| **Ventum Financial Corp. ITF Nedo Santarossa** | 228.0 | 5774 | 3465 |
| **Ventum Financial Corp. ITF Negar Adam** | 228.0 | 3543 | 2126 |

---

---

| | | | |
|:---|:---|:---|:---|
| **Ventum Financial Corp. ITF Peter Martini** | 228.0 | 14434.0 | 8661 |
| **Ventum Financial Corp. ITF Renee Garnett** | 228.0 | 2887.0 | 1733 |
| **Ventum Financial Corp. ITF Robert Sisti** | 228.0 | 3543.0 | 2126 |
| **Ventum Financial Corp. ITF Stephen Moore** | 228.0 | 7217.0 | 4331 |
| **Ventum Financial Corp. ITF Tanveer Ali** | 228.0 | 7217.0 | 4331 |
| **Ventum Financial Corp. ITF Terry Sklavenitis** | 228.0 | 2887.0 | 1733 |
| **Ventum Financial Corp. ITF Theodore Sklavenitis** | 228.0 | 1444.0 | 867 |
| **Ventum Financial Corp. ITF Weldwood Inc.** | 236.0 | 21651.0 | 12991 |
| **Ventum Financial Corp. TR 576112 B.C. Ltd.** | 237.0 | 7217.0 | 4331 |
| **Ventum Financial Corp. TR Bull Markets Media GmbH** | 238.0 | 7217.0 | 4331 |
| **Ventum Financial ITF 1824895 Alberta Ltd.** | 239.0 | 28868.0 | 17321 |
| **Ventum Financial ITF James Stewart** | 228.0 | 14434.0 | 8661 |
| **VINCENT A. TRIMBALI JR.** |  | 542.0 | 326 |
| **VIRGINIA JARAMILLO** |  | 181.0 | 109 |
| **VLADIMIR KUZIN** |  | 2888.0 | 1733 |
| **VLADISLAV YAMPOLSKY** | 246.0 | 115696.0 | 69419 |
| **WALTER JR. SCHWERDTFEGER** |  | 181.0 | 109 |
| **WALTER SCHWERDTFEGER** |  | 181.0 | 109 |
| **WATER STREET ASSETS INC.** | 240.0 | 7164.0 | 4299 |
| **WESTLAKE CONSULTING, LLC** | 241.0 | 130.0 | 78 |
| **WILLIAM BARBER** |  | 867.0 | 521 |
| **WILLIAM LEVIN** |  | 777.0 | 467 |
| **WILLIAM RAY BOREHAM TR W RAY AND MICHELINE BOREHAM LIVING TRUST** | 242.0 | 87.0 | 53 |
| **WILMOUTH H BAKER** |  | 29.0 | 18 |
| **Winfried Buerger** |  | 1444.0 | 867 |
| **WKN LLC** | 243.0 | 1444.0 | 867 |
| **Wolfgang Urmann** |  | 1706.0 | 1024 |
| **YOUNG STRATEGIES LTD** | 244.0 | 1011.0 | 607 |
| **ZAYN KALYAN** |  | 20579.0 | 12348 |
| **ZERO GRAVITY CAPITAL CORP.** | 245.0 | 578.0 | 347 |
| **Leonite Fund I, LP** | 246.0 |  | 4062500 |
| **KIPS BAY SELECT LP** | 247.0 |  | 2437500 |
| **Helena Global Investment Opportunities 1 Ltd.** | 248.0 |  | 1625000 |
| **FirstFire Global Opportunities Fund, LLC** | 249.0 |  | 1625000 |
| **Evergreen Capital Management LLC** | 250.0 |  | 1625000 |
| **3i LP (3i Management LLC, as General Partner)** | 251.0 |  | 1625000 |

---

Footnotes

---

| | |
|:---|:---|
| **FOOTNOTE NO** | **FOOTNOTES** |
| 1 | Diana Klejne is the principal of 1056365 BC LTD and has voting control and investment discretion over the securities reported herein. |
| 2 | Judy Kalyan is the principal of 1177883 BC LTD and has voting control and investment discretion over the securities reported herein. |
| 3 | Kyle Lennie is the principal of 514751 NB INC and has voting control and investment discretion over the securities reported herein. |
| 4 | Craig Taylor is the principal of 576112 BC LTD and has voting control and investment discretion over the securities reported herein. |
| 5 | Kyle Lennie is the principal of 680286 NB INC and has voting control and investment discretion over the securities reported herein. |
| 6 | Joseph Michael is the principal of 7A J.A.M. CORPORATION and has voting control and investment discretion over the securities reported herein. |
| 7 | Gary Kelly is the principal of ADVISIR VENTURES LTD. and has voting control and investment discretion over the securities reported herein. |
| 8 | R.L.S. Nook is the principal of AKCCE INC and has voting control and investment discretion over the securities reported herein. |
| 9 | Negar Adam is the principal of ALL SEASONS CONSULTING INC and has voting control and investment discretion over the securities reported herein. |
| 10 | Dan Cannon is the principal of ARTILLERY ONE INC and has voting control and investment discretion over the securities reported herein. |
| 11 | Carie Cessarone is the principal of ATHENA VENTURES INC. and has voting control and investment discretion over the securities reported herein. |
| 12 | These shares are held by Aviso Wealth in trust for the shareholder. |
| 13 | Matthew Banister is the principal of BANISTER & MILLER, PLLC and has voting control and investment discretion over the securities reported herein. |
| 14 | Madeline Collins-Martin is the principal of BHB Group Partners LLC and has voting control and investment discretion over the securities reported herein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 15 | Craig Loucks is the principal of BIG SKY PRIVATE EQUITY LLC and has voting control and investment discretion over the securities reported herein. |
| 16 | Jeff Tindale is the principal of BIRKEN CAPITAL PARTNERS LTD. and has voting control and investment discretion over the securities reported herein. |
| 17 | These shares are held by BMO NESBITT BURNS INC in trust for Rijen Inc. Michael Wilson has voting control & investment discretion over the securities reported herein. |
| 18 | These shares are held by BMO NESBITT BURNS INC in trust for Blair Roma |
| 19 | These shares are held by BMO NESBITT BURNS INC in trust for John Young |
| 20 | These shares are held by BMO NESBITT BURNS INC in trust for Brenda Young |
| 21 | These shares are held by BMO NESBITT BURNS INC in trust for Patricia & Doug Trecartin |
| 22 | These shares are held by BMO NESBITT BURNS INC in trust for Gary Pollock |
| 23 | These shares are held by BMO NESBITT BURNS INC in trust for Saverio Holdings Ltd. Rocco Saverio is the principal having voting control and investment discretion over the securities reported herein. |
| 24 | These shares are held by BMO NESBITT BURNS INC in trust for Douglas or Barbara Anderson |
| 25 | These shares are held by BMO NESBITT BURNS INC in trust for Ian Kelly |
| 26 | These shares are held by BMO NESBITT BURNS INC in trust for Cathy Coyle |
| 27 | These shares are held by BMO NESBITT BURNS INC in trust for Coyle Trust Holdings. Keary Coyle is the President and has authority and discretion over the securities reported herein |
| 28 | These shares are held by BMO NESBITT BURNS INC in trust for Bohdon Holdings Inc. Gordon Lahanky has voting control & investment discretion over the securities reported herein |
| 29 | These shares are held by BMO NESBITT BURNS INC in trust for 648557 NB Inc. Joseph Taylor is President and has voting control & investment discretion over the securities reported herein |
| 30 | These shares are held by BMO NESBITT BURNS INC in trust for Blair Roma |
| 31 | These shares are held by BMO NESBITT BURNS INC in trust for Bruce Sweeney |
| 32 | These shares are held by BMO NESBITT BURNS INC in trust for Jeffrey Pearson |
| 33 | These shares are held by BMO NESBITT BURNS INC in trust for Jarrette Bannister |
| 34 | These shares are held by BMO NESBITT BURNS INC in trust for Johnny Longphee |
| 35 | These shares are held by BMO NESBITT BURNS INC in trust for Cassidy Capital Corp. Jeffrey Cassidy has discretion and authority over these shares |
| 36 | These shares are held by BMO NESBITT BURNS INC in trust for Gordon Lahanky |
| 37 | These shares are held by BMO NESBITT BURNS INC in trust for David Deline |
| 38 | These shares are held by BMO NESBITT BURNS INC in trust for Benjamin Strang |
| 39 | These shares are held by BMO NESBITT BURNS INC in trust for Claude Babineau |
| 40 | These shares are held by BMO NESBITT BURNS INC in trust for Maurice Arsenault |

---

---

| | |
|:---|:---|
| 41 | These shares are held by BMO NESBITT BURNS INC in trust for Allan Burgoyne |
| 42 | These shares are held by BMO NESBITT BURNS INC in trust for Jerrod Burgoyne |
| 43 | These shares are held by BMO NESBITT BURNS INC in trust for Liam Dolan |
| 44 | These shares are held by BMO NESBITT BURNS INC in trust for Craig Burgoyne |
| 45 | These shares are held by BMO NESBITT BURNS INC in trust for RDDS Holdilngs Ltd. Robert. Strang has voting control & investment discretion over the securities reported herein |
| 46 | These shares are held by BMO NESBITT BURNS INC in trust for Pierre Andre Beaulieu |
| 47 | These shares are held by BMO NESBITT BURNS INC in trust for Newpatch Holdings Inc. Bryan MacDonald has voting control & investment discretion over the securities reported herein |
| 48 | These shares are held by BMO NESBITT BURNS INC in trust for Robert and/or Stephanie Downey |
| 49 | These shares are held by BMO NESBITT BURNS INC in trust for D.J. Strang Holdings. D. Strang has voting control & investment discretion over the securities reported herein |
| 50 | These shares are held by BMO NESBITT BURNS INC in trust for 688184 NB Ltd. Heidi Eaton is the President and has voting control and authority over the securities reported herein |
| 51 | These shares are held by BMO NESBITT BURNS INC in trust for William Leroy |
| 52 | These shares are held by BMO NESBITT BURNS INC in trust for Sussex Holdings, the President of which is Ian Hunt, who has voting control and investment discretion over the securities reported herein |
| 53 | These shares are held by BMO NESBITT BURNS INC in trust for J.N. Lafford Realty Inc. John Lafford has investment discretion and authority over the securities reported herein. |
| 54 | These shares are held by BMO NESBITT BURNS INC in trust for Paul Champagne |
| 55 | These shares are held by BMO NESBITT BURNS INC in trust for Keith Maddison |
| 56 | These shares are held by BMO NESBITT BURNS INC in trust for Harold Thurrott. |
| 57 | These shares are held by BMO NESBITT BURNS INC in trust for Leigh Eaton |
| 58 | These shares are held by BMO NESBITT BURNS INC in trust for Daryl Ritchie |
| 59 | These shares are held by BMO NESBITT BURNS INC in trust for Jean Heisler |
| 60 | These shares are held by BMO NESBITT BURNS INC in trust for Chris Downey |
| 61 | These shares are held by BMO NESBITT BURNS INC in trust for Suzanne Leroy |
| 62 | These shares are held by BMO NESBITT BURNS INC in trust for Harold Butler |
| 63 | These shares are held by BMO NESBITT BURNS INC in trust for William Hanley |
| 64 | These shares are held by BMO NESBITT BURNS INC in trust for 603607 NB Ltd., of which Mr. Thurott has voting control and investment discretion over the securites reported herein |
| 65 | These shares are held by BMO NESBITT BURNS INC in trust for Devon Babineau |
| 66 | These shares are held by BMO NESBITT BURNS INC in trust for George Georgoudis |
| 67 | These shares are held by BMO NESBITT BURNS INC in trust for Scott O'Neal |
| 68 | These shares are held by BMO NESBITT BURNS INC in trust for 509495 NB Ltd. Paul Poirier has investment discretion and authority over the securities reported herein. |
| 69 | These shares are held by BMO NESBITT BURNS INC in trust for 644201 NB Inc. Patrice Landry has voting control & investment discretion over the securities reported herein |
| 70 | These shares are held by BMO NESBITT BURNS INC in trust for 668932 NB Inc. Luke Hickey has voting control & investment discretion over the securities reported herein. |
| 71 | These shares are held by BMO NESBITT BURNS INC in trust for Gestion Michel Jacob Inc. Michel Jacob has investment discretion and authority over the securities reported herein. |
| 72 | These shares are held by BMO NESBITT BURNS INC in trust for Colin Thornton |
| 73 | Matthew LeRoy is the principal of 608266 NB Ltd., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for 608266 NB Ltd.. |
| 74 | Ryan Kennedy is the principal of 636579 NB Inc., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for 636579 NB Inc.. |
| 75 | Joseph Taylor is the principal of 648557 NB Inc., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trsut for 648557 NB Inc. |
| 76 | These shares are held by BMO NESBITT BURNS INC in trust for the shareholder. |
| 77 | Gordon Lahanky is the principal of Bohdon Holdings Inc., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Bohdon Holdings Inc.. |
| 78 | Catherine Coyle is the principal of Catherine Coyle Trust Holdings Inc., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Catherine Coyle Trust Holdings Inc.. |
| 79 | Wayne Chamberlain is the principal of Covalent Enterprises Ltd., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Covalent Enterprises Ltd.. |
| 80 | Catherine Coyle is the principal of Coyle Trust Holdings Inc., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Coyle Trust Holdings Inc.. |

---

---

| | |
|:---|:---|
| 81 | Daniel Gormley is the principal of Danahelo Holdings Ltd., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Danahelo Holdings Ltd.. |
| 82 | Doug Simpson is the principal of Doug Simpson Investments Ltd., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Doug Simpson Investments Ltd.. |
| 83 | D.E. Craig is the principal of Dr. D.E. Craig Professional Corporation, and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Dr. D.E. Craig Professional Corporation. |
| 84 | Jeff Sheppard is the principal of Dr. Jeff Sheppard Professional Corporation, and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns |
| 85 | Piere Andre Beaulieu is the principal of Dr. Pierre Andre Beaulieu Prof. Corp., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Dr. Pierre Andre Beaulieu Prof. Corp.. |
| 86 | Greg Walton is the principal of Greg Walton Investments Limited, and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Greg Walton Investments Limited. |
| 87 | Luke Moffett is the principal of James Avery Grace Corp., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for James Avery Grace Corp.. |
| 88 | John Murray is the principal of John L. Murray Financial Services Ltd., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for John L. Murray Financial Services Ltd.. |
| 89 | Luke Moffett is the principal of Nilock Capital Corp., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Nilock Capital Corp.. |
| 90 | Patrick Julian is President of Peach Investments Ltd. and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust Peach Investments Ltd. |
| 91 | Richard Strang is the principal of RDDS Holdings Ltd., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for RDDS Holdings Ltd.. |
| 92 | Richard Strang is the principal of Strang's Produce Inc., and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Strang's Produce Inc.. |
| 93 | Val Streeter has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for The Streeter Family Trust. |
| 94 | These shares are held by BMO NESBITT BURNS INC in trust for the shareholder. |
| 95 | Greg Walton is the principal of Greg Walton Investments Limited, and has voting control and investment discretion over the securities reported herein which are held by BMO Nesbitt Burns in trust for Greg Walton Investments Limited. |
| 96 | Doyce Boesch is the principal of BOESCH & COMPANY and has voting control and investment discretion over the securities reported herein. |
| 97 | These shares are held by PI Financial Corp. in trust for the shareholder. |
| 98 | David Ponn is the principal of CAMM GLOBAL INC and has voting control and investment discretion over the securities reported herein. |
| 99 | These shares are held by CANACCORD GENUITY CORP in trust for the shareholder. |
| 100 | Dan Daviau is the principal of CANACCORD GENUITY CORP and has voting control and investment discretion over the securities reported herein. |
| 101 | Sean McCoshen is the principal of 7198362 Man Pldg., and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 102 | Andrew Lord is President of ADPL Ventures Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for ADPL Ventures Inc. |
| 103 | Jeff Green is the principal of 682501 Alberta Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. |
| 104 | Graham Saunders is the principal of Bearcliff Trading Corp. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Bearcliff Trading Corp. |
| 105 | Brian Kowall is the principal of Brian Kowall Holdings Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Brian Kowall Holdings Ltd. |
| 106 | B. Scott is President of Columbia St. Holdings and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Columbia St. Holdings. |
| 107 | D. Baker is President of D. Baker Capital Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Crop. In trust for D. Baker Capital Inc. |
| 108 | Jeffrey Scott is President of Darringer Enterprise and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Darringer Enterprise. |
| 109 | Michael Rodger is the principal of DIG MEDIA INC. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for DIG MEDIA INC. |
| 110 | Don Parkin is President of DLCS Holdings Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for DLCS Holdings Ltd. |
| 111 | David Sword is President of Fisher Pond Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Fisher Pond Inc. |
| 112 | Gordon Height is President of G & L Height Holdings Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for G & L Height Holdings Ltd. |
| 113 | Gordon Beach is President of G.A. Beach Consultants Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for G.A. Beach Consultants Ltd. |
| 114 | Doug Hoyes is President of GCPD Ontario Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for GCPD Ontario Inc. |
| 115 | James Batten is President of Gift2Gift Corp. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Gift2Gift Corp. |

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| | |
|:---|:---|
| 116 | Michael Halvorson is President of Halcorp Capital Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Halcorp Capital Ltd. |
| 117 | These shares are held by CIBC Wood Gundy in trust for the shareholder |
| 118 | Jonathan Cheng is President of JNC Holdings Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for JNC Holdings Inc. |
| 119 | John McLeod is principal of John C. McLeod Law Corp. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for John C. McLeod Law Corp. |
| 120 | Chad Oakes is President of Little Puck Entertainment Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Little Puck Entertainment Inc. |
| 121 | Richard Funk is President of Lorick Holdings Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Lorick Holdings Ltd. |
| 122 | Joel Chevrefils is principal of Joel Chevrefils Professional Corp. and has voting control and investment discretion of the securities reported herein and held by National Bank |
| 123 | Peter Brown is President of Maclachlan Investments Corp. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Maclachlan Investments Corp. |
| 124 | Kelly Pladson is President of Nia Capital Corp. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Nia Capital Corp. |
| 125 | Diana Huber is Settlement Officer of Orca Capital GmbH and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Orca Capital GmbH. |
| 126 | C. Puetz is the Trustee of Puetz Family Trust and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Puetz Family Trust. |
| 127 | Dwayne Lashyn is President of Quantico Capital Corp. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Quantico Capital Corp. |
| 128 | Richard Michaels is President of Ram Plantium Pty Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canacord Genuity Corp. in trust for Ram Plantium Pty Ltd. |
| 129 | R. Reed is President of Raymond Reed Enterprises Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Raymond Reed Enterprises Ltd. |
| 130 | Richard P. Borden is the principal of Richard P. Borden Professional Corporation and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Richard P. Borden Professional Corporation. |
| 131 | Robert Mills is principal of the Robert Mills Alter Ego Trust No. 1 and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Robert Mills Alter Ego Trust No. 1. |
| 132 | Robert Kirkham is the Principal of Rupert 2019 Settlement and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for the Principal of Rupert 2019 Settlement. |
| 133 | Henri Pigeon is Principal of The Henri & Dorothy Pigeon Joint Partner Trust 2010 and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for The Henri & Dorothy Pigeon Joint Partner Trust 2010. |
| 134 | Graham Saunders is Principal of The Saunders Family Trust and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for The Saunders Family Trust. |
| 135 | Peter Vuong is the principal of Vanguard Marketing and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. |
| 136 | D. Malm is President of Violetta Holdings Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for Violetta Holdings Ltd. |
| 137 | T. Curmming is a principal of VJMH Holdings Inc. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. in trust for VJMH Holdings Inc. |
| 138 | Barkatali Lalani is the principal of Water Street Assets Inc., has voting control and investment discretion over the securities reported herein which are held by CANACCORD GENUITY CORP in trust for Water Street Assets Inc.. |
| 139 | Michael Townsend is the principal of CANNON BRIDGE CAPITAL CORP. and has voting control and investment discretion over the securities reported herein. |
| 140 | Kevin Sampson is the principal of CDS & CO. |
| 141 | These shares are held by CI Investment Services Inc. in trust for the shareholder. |
| 142 | Daniel Faller has voting control and investment disretion of the securities reported herein |
| 143 | Daniel McNellis has voting control and investment discrertion of the securities held herein |
| 144 | David Godber has voting control and investment disretion of the securities reported herein |
| 145 | Peter Goldstein is the principal of Exchange Listing and has voting control and investment discretion over the securities reported herein that are held by Peter Goldstein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 146 | Jeff Green is the principal of 682501 Alberta Ltd. and has voting control and investment discretion over the securities reported herein which are held by Canaccord Genuity Corp. |
| 147 | These shares are held by Fidelity Clearing Canada in trust for the shareholder. |
| 148 | Nicole Marchand is the principal of 2587557 ONTARIO INC., and has voting control and investment discretion over the securities reported herein which are held by FIDELITY CLEARING CANADA ULC in trust for 2587557 ONTARIO INC. |
| 149 | Alistair Maxwell is the principal of Beacon Securities Ltd. , and has voting control and investment discretion over the securities reported herein which are held by Fidelity Clearing Canada in trust for Beacon Securities Ltd. . |
| 150 | These shares are held by GMP Securities LP in trust for the shareholder. |

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| 151 | Genevieve Roch-Decter is the principal of GRIT CAPITAL ADVISORY INC., and has voting control and investment discretion over the securities reported herein which are held by FIDELITY CLEARING CANADA ULC in trust for GRIT CAPITAL ADVISORY INC. |
| 152 | Steven Marshall is the principal of HYBRID FINANCIAL LTD., and has voting control and investment discretion over the securities reported herein which are held by FIDELITY CLEARING CANADA ULC in trust for HYBRID FINANCIAL LTD. |
| 153 | John Millicheap is the principal of WEST POINT FISHING LTD., and has voting control and investment discretion over the securities reported herein which are held by FIDELITY CLEARING CANADA ULC in trust for WEST POINT FISHING LTD. |
| 154 | Michael Albanese is the principal of FOLKLORE ENTERTAINMENT LLC and has voting control and investment discretion over the securities reported herein. |
| 155 | Jonathan Living is the principal of FOUNTAINHEAD MERCHANT BANCORP INC. and has voting control and investment discretion over the securities reported herein. |
| 156 | Genevieve Roch-Decter is the principal of GENEVIEVE ENTERPRISE CORP and has voting control and investment discretion over the securities reported herein. |
| 157 | Diana Mark is the principal of GREYSTONE CORPORATE SERVICES INC. and has voting control and investment discretion over the securities reported herein. |
| 158 | Bob Siskind is the principal of Alkin Corporation and has voting control and investment discretion over the securities reported herein which are held by CIBC Wood Gundy Co. in trust for Alkin Corporation. |
| 159 | Fred Kangarloo is President of Kangarloo Consulting Inc. and has voting control and investment discretion over the securities reported herein which are held by CIBC Wood Gundy Co. in trust for Kangarloo Consulting Inc. |
| 160 | Steven Samolewicz is the principal of H.T. MERIDIAN LLC, and has voting control and investment discretion over the securities reported herein |
| 161 | These shares are held by Haywood Securities Inc. in trust for the shareholder. |
| 162 | Alan Berge is the principal of HAYWOOD SECURITIES INC. and has voting control and investment discretion over the securities reported herein. |
| 163 | John Weise is President of Merohiroy Ontario Ltd. and has voting control and investment discretion over the securities reported herein which are held by Haywood Securities Inc. in trust for Merohiroy Ontario Ltd. |
| 164 | James Longmore is President of Sausalito Ltd. and has voting control and investment discretion over the securities reported herein which are held by Haywood Securities Inc. in trust for Sausalito Ltd. |
| 165 | Abdul R is the principal of HT Holdings and has voting control and investment discretion over the securities reported herein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 166 | Tomek Antoniak is the President of In the Room Media and has voting control and investment discretion over the securities reported herein. |
| 167 | These shares are held by Interactive Brokers UK Ltd. in trust for the shareholder. |
| 168 | Donna Jubin is the principal of 101049658 SASKATCHEWAN LTD, and has voting control and investment discretion over the securities reported herein. |
| 169 | These shares are held by Investor Company Inc. in trust for the shareholder. |
| 170 | These shares are held by Leede Financial Inc. in trust for the shareholder. |
| 171 | James Rhode has voting control and investment discretion over securities held by Rhode Family Trust. |
| 172 | These shares are held by National Bank Financial Inc. in trust for the shareholder. |
| 173 | Michael Townsend is the principal of KADENWOOD CAPITAL CORP and has voting control and investment discretion over the securities reported herein. |
| 174 | Michael Townsend is the principal of KADENWOOD DEVELOPMENT CORP. and has voting control and investment discretion over the securities reported herein. |
| 175 | Michael Townsend is the principal of KADENWOOD VENTURES CORP and has voting control and investment discretion over the securities reported herein. |
| 176 | Demetrios Synzinos is the principal of KORAMO LIMITED and has voting control and investment discretion over the securities reported herein. |
| 177 | These shares are held by Laurentian Bank Securities Inc. in trust for the shareholder. |
| 178 | Jim Dale is the principal of Leede Jones Gable Inc. and has voting control and investment discretion over the securities reported herein. |
| 179 | Paul Leger is the principal of LEG HOLDINGS INC and has voting control and investment discretion over the securities reported herein. |
| 180 | Leland Baker has voting control and investment discretion over the securities reported herein |
| 181 | Damien Lowry is the principal of LEVEL 3 CAPITAL MANAGEMENT INC. and has voting control and investment discretion over the securities reported herein. |
| 182 | These shares are held by Lynx BV Germany Branch in trust for the shareholder. |
| 183 | Deane Cheatham has voting control and investment discretion of the securities reported herein |
| 184 | Barry McGilligan is the principal of MCGILLIGAN BARRY INVESTMENTS LTD and has voting control and investment discretion over the securities reported herein. |
| 185 | George Velarde is the principal of MEGA DEALER LLC and has voting control and investment discretion over the securities reported herein. |
| 186 | These shares are held by National Bank Financial Inc. in trust for 1130065 BC. Lars Taylor is a director and has voting control and investment discrtion over the securities reported herein |
| 187 | Bill Keen is the principal of BMN KEEN ENTERPRISES , and has voting control and investment discretion over the securities reported herein which are held by National Bank Financial Inc. in trust for BMN KEEN ENTERPRISES. |

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| 188 | These shares are held by National Bank Financial Inc. in trust for the shareholder. Hesham Osman has voting control and investment discrtion over the securities reported herein. |
| 189 | Genevieve Roch-Decter is the principal of GENEVIEVE ENTERPRISE CORP (32010M), and has voting control and investment discretion over the securities reported herein which are held by National Bank Financial Inc. in trust for GENEVIEVE ENTERPRISE CORP (32010M). |
| 190 | Peter Grosskopf is the principal of Sprott Capital Partners and has voting control and investment discretion over the securities reported herein which are held by National Bank Financial Inc. in trust for Sprott Capital Partners. |
| 191 | Joel Chevrefils is principal of Joel Chevrefils Professional Corp. and has voting control and investment discretion of the securities reported herein and held by National Bank Financial Inc. in trust for Joel Chevrefils Professional Corp. |
| 192 | Lyle Alpine is the principal of 76944 Alberta Ltd. and has voting control and investment discretion over the securities reported herein which are held by National Bank in trust for 76944 Alberta Ltd. |
| 193 | David Wood is President of Zenth Appraisal & Land Consulting and has voting control and investment discretion over the securities reported herein which are held by National Bank in trust for Zenth Appraisal & Land Consulting. |
| 194 | Denis Ricard is the principal of Industrial Alliance Securities Inc. and has voting control and investment discretion over the securities reported herein which are held by Nesbitt Burns in trust for Industrial Alliance Securities Inc. |
| 195 | Cara Tarbaj is the principal of CD PRODUCTIONS INC, and has voting control and investment discretion over the securities reported herein which are held by Nesbitt Burns in trust for CD PRODUCTIONS INC. |
| 196 | Chris Grannan is the principal of CHURCH STREET STEAKHOUSE AND PUB INC, and has voting control and investment discretion over the securities reported herein which are held by Nesbitt Burns in trust for CHURCH STREET STEAKHOUSE AND PUB INC. |
| 197 | David Kean is the principal of Niche Investor Services and has voting control and investment discretion over the securities reported herein. |
| 198 | Jason Coles is the principal of NORTH EQUITIES CORP and has voting control and investment discretion over the securities reported herein. |
| 199 | Taylor Gavinchuck is the principal of PACER CAPITAL CORP and has voting control and investment discretion over the securities reported herein. |
| 200 | Robyn Knox is the principal of PEISES CORP. and has voting control and investment discretion over the securities reported herein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 201 | Peter Feifel is the principal of PETER A FEIFEL PROFESSIONAL CORPORATION and has voting control and investment discretion over the securities reported herein. |
| 202 | Alain Lemay is the principal of PLACEMENTS ALAIN LEMAY INC and has voting control and investment discretion over the securities reported herein. |
| 203 | Robert Turner is the principal of PLAYGROUND MEDIA INC and has voting control and investment discretion over the securities reported herein. |
| 204 | Rosalind Cross is the principal of RATHERBY INVESTMENTS LLC and has voting control and investment discretion over the securities reported herein. |
| 205 | These shares are held by RBC Dominion Securities Inc. in trust for the shareholder. |
| 206 | These shares are held by RBC Investor Services on behalf of 176027007 (LDIC Inc.), the principal of which is Michael Decter, who has voting control and investment discretion over the securities reported herein |
| 207 | These shares are held by RESEARCH CAPITAL CORP. in trust for the shareholder. |
| 208 | Brett Thorne is the principal of ROYTOR & CO. and has voting control and investment discretion over the securities reported herein which are held by ROYTOR & CO. |
| 209 | Nav Dhaliwahl is the principal of RSD CAPITAL CORP. and has voting control and investment discretion over the securities reported herein. |
| 210 | These shares are held by Scotia Capital Inc. in trust for the shareholder. |
| 211 | Alain D. Bourassa is the principal of BOURASSA PROFESSIONAL CORP., and has voting control and investment discretion over the securities reported herein which are held by Scotia Capital Inc. in trust for BOURASSA PROFESSIONAL CORP. |
| 212 | John Longphee is the principal of SEVEN SEVEN SEVEN HOLDINGS LTD and has voting control and investment discretion over the securities reported herein. |
| 213 | Ross Carmel is the principal of SICHENZIA ROSS FERENCE CARMEL and has voting control and investment discretion over the securities reported herein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 214 | Kelli Nguyen is the principal of SIENAG HOLDINGS LLC and has voting control and investment discretion over the securities reported herein. |
| 215 | Chris Hunt is the principal of SKYE CORPORATE HOLDINGS, INC. and has voting control and investment discretion over the securities reported herein. |
| 216 | Naseer F is the principal of Skyview Corp. and has voting control and investment discretion over the securities reported herein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 217 | Geoff Balderson is the principal of SPECTRE CAPITAL CORP. and has voting control and investment discretion over the securities reported herein. |
| 218 | Michael Townsend is the principal of SPECTRE INVESTMENTS INC. and has voting control and investment discretion over the securities reported herein. |
| 219 | Jag Sanger is the principal of STOCKHOUSE PUBLISHING LTD. and has voting control and investment discretion over the securities reported herein. |
| 220 | These shares are held by Roytor & Co. in trust for the shareholder. |

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| 221 | These shares are held by TD Ameritrade in trust for the shareholder. |
| 222 | Chris Natevski is a Principal of Terra Capital and has voting control and investment discretion over the securities reported herein. Shareholder's ownership amounts to greater than 1% of total shares outstanding. |
| 223 | Patrick H. Ryan is the principal of THE IRA CLUB F/B/O PATRICK H. RYAN, JR. and has voting control and investment discretion over the securities reported herein. |
| 224 | Theodore Strein is the principal of Theodore Streine Soehne Holding GmbH and has voting control and investment discretion over the securities reported herein. |
| 225 | Leonard Clough is the principal of TORO PACIFIC MANAGEMENT INC and has voting control and investment discretion over the securities reported herein. |
| 226 | Mike Smith is the principal of TRAILER PARK BOYS INCORPORATED and has voting control and investment discretion over the securities reported herein. |
| 227 | These shares are held by Ventum Financial Corp in trust for 1135541 Alberta. Jeff Hines is the President of 1135541 Alberta and has voting control and investment discretion over the securities reported herein. |
| 228 | These shares are held by Ventum Financial Corp. in trust for the shareholder. |
| 229 | Richard Butterworth is COO & CFO of Ventum Financial Corp. |
| 230 | Bob Siskind is the principal of Alkin Corporation and has voting control and investment discretion over the securities reported herein which are held by CIBC Wood Gundy |
| 231 | Brad Aelicks is President of Bronze Resources Ltd. and has voting control and investment discretion over the securities reported herein which are held by Ventum Financial Corp in trust for Bronze Resources Ltd. |
| 232 | Justin Kales is the principal of Broughdale Holdings Inc. and has voting control and investment discretion over the securities reported herein which are held by Ventum Financial Corp. in trust for Broughdale Holdings Inc. |
| 233 | Neil Currie is a principal of Capital Event Management and has voting control and investment discretion over the securities reported herein which are held by Ventum Financial Corp. in trust for Capital Event Management. |
| 234 | Frank Hogel is the principal of Concept Capital Management Ltd., and has voting control and investment discretion over the securities reported herein which are held by Ventum Financial Corp. in trust for Concept Capital Management Ltd. |
| 235 | Alex Bajin is the principal of Estate of Natalija Bajin, and has voting control and investment discretion over the securities reported herein which are held by Ventum Financial Corp. in trust for Estate of Natalija Bajin. |
| 236 | Wendy Jarvis is President of Weldwood Inc. and has voting control and investment discretion over the securities reported herein which are held by Ventum Financial Corp. in trust for Weldwood Inc. |
| 237 | These shares are held by Ventum Financial in trust for 576112 BC Ltd. Craig Taylor is the Princiapal, who has voting control and investment discretion over the securities reported herein. |
| 238 | These shares are held by Ventum Financial in trust for Bull Markets Media GmbH. Andre Doerk is the Principal, who has voting control and investment discretion over the securities reported herein. |
| 239 | These shares are held by Ventum Financial in trust for Andrew Kohler Professional Corp., the Principal of which is Andrew Kohler, who has voting control and investment discretion over the securities reported herein |
| 240 | Barkatali Lalani is the principal of Water Street Assets Inc., has voting control and investment discretion over the securities reported herein which are held by CANACCORD GENUITY CORP in trust for Water Street Assets Inc.. |
| 241 | Andrew Donaldson is the principal of WESTLAKE CONSULTING, LLC and has voting control and investment discretion over the securities reported herein. |
| 242 | W. Ray Boreham has voting control and investment discretion over the securities reported herein |
| 243 | Walter Neil is the principal of WKN LLC and has voting control and investment discretion over the securities reported herein. |
| 244 | Bruce Young is the principal of YOUNG STRATEGIES LTD and has voting control and investment discretion over the securities reported herein. |
| 245 | Jeff Steinke is the principal of ZERO GRAVITY CAPITAL CORP. and has voting control and investment discretion over the securities reported herein. |
| 246 | <br> Avi Geller, the manager of Leonite Fund I, LP, holds voting and dispositive power over the shares of common stock held by Leonite Fund I, LP. The address of Leonite Fund I, LP is 600 E Crescent Ave suite 104 Upper Saddle River New Jersey 07458  |
| 247 | Voting and dispositive power for Kips Bay Select LP is held by Roman Rogol |
| 248 | Helena HoldCo Inc., incorporated under the laws of the Commonwealth of The Bahamas, solely owns Helena Global Investment Opportunities I Ltd. Mr. Jeremy Weech is the sole shareholder of Helena HoldCo Inc. and exercises voting and dispositive power of the securities held by Helena HoldCo Inc. The address of Helena HoldCo Inc is Suite 205A, Saffrey Square, Bank Lane & Bay Street, P.O. Box N-9934, Nassau, Bahamas. |
| 249 | <br> Eli Fireman Managing member, Firstfire Global Opportunities Fund LLC 1040 1ST AVE STE 90 NY NY 10022 <br>|
| 250 | Jeffrey Pazdro as the Manager of Evergreen Capital Management LLC as the natural person is who exercises voting and dispositive power over the securities that are beneficially owned. |
| 251 | <br> 3i Management LLC is the general partner of 3i, LP, and Maier Joshua Tarlow is the manager of 3i Management LLC. As such, Mr. Tarlow exercises sole voting and investment discretion over securities beneficially owned directly or indirectly by 3i, LP and 3i Management LLC. Mr. Tarlow disclaims beneficial ownership of the securities beneficially owned directly by 3i, LP and indirectly by 3i Management LLC. The business address of each of the aforementioned parties is 2 Wooster Street, 2nd Floor, New York, NY 10013. <br>|

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**DESCRIPTION OF SECURITIES**

**General**

Our authorized capital stock currently consists of 220,000,000 shares of common stock as of August -, 2025, par value $0.00001 per share and 5,000,000 shares of preferred stock.

The following description summarizes important terms of the classes of our capital stock following the filing of our articles of incorporation. This summary does not purport to be complete and is qualified in its entirety by the provisions of our articles of incorporation and our bylaws which have been filed as exhibits to the registration statement of which this prospectus is a part.

As of the date of this prospectus, there are 7,027,255 shares of common stock issued and outstanding. Upon funding of the private placement, 1,000,000 shares of Class A Convertible Preferred Stock and 800,000 shares of Class B Convertible Preferred Stock will be outstanding.

**Common Stock**

*Voting Rights.* The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders. Under our articles of incorporation and bylaws, any corporate action to be taken by vote of shareholders other than for election of directors shall be authorized by the affirmative vote of the majority of votes cast. Directors are elected by a plurality of votes. Shareholders do not have cumulative voting rights.

*Dividend Rights*. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.

*Liquidation Rights*. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock.

*Other Rights*. Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock.

**Restricted stock options**

Upon the closing of this offering, there will be up to 4,500,000 restricted stock units issuable at the discretion of the board of directors of the Company.

**Anti-Takeover Provisions**

**Certain Anti-takeover Provisions of Delaware Law, our Certificate of Incorporation and Bylaws**

As a Delaware corporation, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally has an anti-takeover effect for transactions not approved in advance by our Board. This may discourage takeover attempts that might result in payment of a premium over the market price for the shares of common stock held by stockholders. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that such stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of Functional Brands' voting stock.

Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

● before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; or

● upon consummation of the transaction which resulted in the stockholder becoming an interested outstanding, shares owned by:

● persons who are directors and also officers, and

● employee stock plans, in some instances; or

● at or after the time the stockholder became interested, the business combination was approved by the board of directors are authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

***Special meeting of stockholders***

Our bylaws provide that special meetings of our stockholders may be called by the Chairman of the Board, the Board, President of the Company, or by the Board upon written request by the holders of a majority of the voting stock of the Company.

  ****

***Removal of directors***

Subject to any limitations imposed by applicable law (and assuming the corporation is not subject to Section 2115 of the CGCL), the Board of Directors or any director may be removed from office at any time (i) with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to elect such director.

During such time or times that the corporation is subject to Section 2115(b) of the CGCL, the Board of Directors or any individual director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote on such removal; provided, however, that unless the entire Board is removed, no individual director may be removed when the votes cast against such director's removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of such director's most recent election were then being elected.

**Limitation of Liability and Indemnification of Directors and Officers**

Our bylaws provide that our directors and officers will be indemnified by us to the fullest extent authorized by Delaware law.

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.

We are not aware of any threatened litigation or proceeding that might result in a claim for such indemnification, except as disclosed below. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

***Cumulative Voting***

The holders of our common stock do not have cumulative voting rights in the election of our directors. The combination of the present ownership by a few shareholders of a significant portion of our issued and outstanding common stock and lack of cumulative voting makes it more difficult for other shareholders to replace our board of directors or for a third party to obtain control of our company by replacing its board of directors.

**Transfer Agent and Registrar**

We have appointed Endeavor Trust Corporation as the transfer agent for our common stock. Endeavor Trust Corporation is located at 702 - 777 Hornby Street, Vancouver, BC, V6Z 1S4.

**SHARES ELIGIBLE FOR FUTURE SALE**

There previously has not been a public market for shares of our common stock. Future sales of substantial amounts of shares of our common stock, including shares issued upon the conversion of convertible preferred stock, convertible notes, the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.

As of August 12, 2025 there are 7,027,255 shares of our common stock issued and outstanding.

Previously issued shares of common stock that were not registered hereby, as well as shares issuable upon the exercise of warrants and subject to employee stock options, are or will be upon issuance, "restricted securities," as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if such public resale is registered under the Securities Act or if the resale qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.

**Rule 144**

In general, a person who has beneficially owned restricted shares of our common stock for at least twelve months, or at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the ninety (90) days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:

● 1% of the number of shares of our common stock then outstanding; or

● 1% of the average weekly trading volume of our common stock during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale;

provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.

As of August 12, 2025, there are approximately 122,352 shares of the Company's common stock outstanding that are not being registered hereunder, but that have been held by non-affiliates for six months or more and may be subject to sale pursuant to Rule 144.

**Rule 701**

In general, Rule 701 allows a shareholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of ours during the immediately preceding 90 days to sell those shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares, however, are required to wait until ninety (90) days after the date of this prospectus before selling shares pursuant to Rule 701.

**Lock-Up Agreements**

We, all of our directors and officers and holders of 5% or more of our common stock have agreed, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our common stock or securities convertible into or exercisable or exchangeable for our common stock for a period of six months after the closing of this offering. See the *"Plan of Distribution*" section below for more information.

**MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR SECURITIES**

The following is a summary of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock that is being issued pursuant to this offering. This summary is limited to Non-U.S. Holders (as defined below) that hold our common stock as a capital asset (generally, property held for investment) for U.S. federal income tax purposes. This summary does not discuss all of the aspects of U.S. federal income and estate taxation that may be relevant to a Non-U.S. Holder in light of the Non-U.S. Holder's particular investment or other circumstances. Accordingly, all prospective Non-U.S. Holders should consult their own tax advisors with respect to the U.S. federal, state, local and non-U.S. tax consequences of the ownership and disposition of our common stock.

This summary is based on provisions of the Code, applicable U.S. Treasury regulations and administrative and judicial interpretations, all as in effect or in existence on the date of this prospectus. Subsequent developments in U.S. federal income or estate tax law, including changes in law or differing interpretations, which may be applied retroactively, could alter the U.S. federal income and estate tax consequences of owning and disposing of our common stock as described in this summary. There can be no assurance that the Internal Revenue Service, or IRS, will not take a contrary position with respect to one or more of the tax consequences described herein and we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal income or estate tax consequences of the ownership or disposition of our common stock.

As used in this summary, the term "Non-U.S. Holder" means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:

● an individual who is a citizen or resident of the United States;

● a corporation (or other entity treated as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

● an entity or arrangement treated as a partnership;

● an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

● a trust, if (1) a U.S. court is able to exercise primary supervision over the trust's administration and one or more "United States persons" (within the meaning of the Code) has the authority to control all of the trust's substantial decisions, or (2) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in such a partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Partnerships, and partners in partnerships, that hold our common stock should consult their own tax advisors as to the particular U.S. federal income and estate tax consequences of owning and disposing of our common stock that are applicable to them.

This summary does not consider any specific facts or circumstances that may apply to a Non-U.S. Holder and does not address any special tax rules that may apply to particular Non-U.S. Holders, such as:

● a Non-U.S. Holder that is a financial institution, insurance company, tax-exempt organization, pension plan, broker, dealer or trader in securities, dealer in currencies, U.S. expatriate, controlled foreign corporation or passive foreign investment company;

● a Non-U.S. Holder holding our common stock as part of a conversion, constructive sale, wash sale or other integrated transaction or a hedge, straddle or synthetic security;

● a Non-U.S. Holder that holds or receives our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; or

● a Non-U.S. Holder that at any time owns, directly, indirectly or constructively, 5% or more of our outstanding common stock.

In addition, this summary does not address any U.S. state or local, or non-U.S. or other tax consequences, or any U.S. federal income or estate tax consequences for beneficial owners of a Non-U.S. Holder, including shareholders of a controlled foreign corporation or passive foreign investment company that holds our common stock.

**Each Non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of owning and disposing of our common stock.**

**Distributions of Our Common Stock**

We do not currently expect to pay any cash dividends on our common stock. If we make distributions of cash or property (other than certain pro rata distributions of our common stock) with respect to our common stock, any such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax rules. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a nontaxable return of capital to the extent of the Non-U.S. Holder's adjusted tax basis in our common stock and will reduce (but not below zero) such Non-U.S. Holder's adjusted tax basis in our common stock. Any remaining excess will be treated as gain from a disposition of our common stock subject to the tax treatment described below in "*— Dispositions of Our Common Stock*."

Distributions on our common stock that are treated as dividends and that are effectively connected with a Non-U.S. Holder's conduct of a trade or business in the United States will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons. An exception may apply if the Non-U.S. Holder is eligible for, and properly claims, the benefit of an applicable income tax treaty and the dividends are not attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States. In such case, the Non-U.S. Holder may be eligible for a lower rate under an applicable income tax treaty between the United States and its jurisdiction of tax residence. Dividends that are effectively connected with a Non-U.S. Holder's conduct of a trade or business in the United States will not be subject to the U.S. withholding tax if the Non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8ECI (or other applicable form) in accordance with the applicable certification and disclosure requirements. A Non-U.S. Holder treated as a corporation for U.S. federal income tax purposes may also be subject to a "branch profits tax" at a 30% rate (unless the Non-U.S. Holder is eligible for a lower rate under an applicable income tax treaty) on the Non-U.S. Holder's earnings and profits (attributable to dividends on our common stock or otherwise) that are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States. The amount of taxable earnings and profits is generally reduced by amounts reinvested in the operations of the U.S. trade or business and increased by any decline in its equity.

The certifications described above must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. A Non-U.S. Holder may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS. Non-U.S. Holders should consult their own tax advisors regarding their eligibility for benefits under any relevant income tax treaty and the manner of claiming such benefits.

The foregoing discussion is subject to the discussions below under "*Backup Withholding and Information Reporting*" and "*FATCA Withholding*."

**Dispositions of Our Common Stock**

A Non-U.S. Holder generally will not be subject to U.S. federal income tax (including U.S. withholding tax) on gain recognized on any sale or other disposition of our common stock unless:

● the gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States); in such case, the gain would be subject to U.S. federal income tax on a net income basis at the regular graduated rates and in the manner applicable to United States persons (unless an applicable income tax treaty provides otherwise) and, if the Non-U.S. Holder is treated as a corporation for U.S. federal income tax purposes, the "branch profits tax" described above may also apply;

● the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements; in such case, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by certain U.S. source capital losses, generally will be subject to a flat 30% U.S. federal income tax, even if the Non-U.S. Holder is not treated as a resident of the United States under the Code; or

● we are or have been a "United States real property holding corporation" for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of disposition and (ii) the period that the Non-U.S. Holder held our common stock.

Generally, a corporation is a "United States real property holding corporation" if the fair market value of its "United States real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not currently, and we do not anticipate becoming in the future, a United States real property holding corporation. However, because the determination of whether we are a United States real property holding corporation is made from time to time and depends on the relative fair market values of our assets, there can be no assurance in this regard. If we were a United States real property holding corporation, the tax relating to disposition of stock in a United States real property holding corporation generally will not apply to a Non-U.S. Holder whose holdings, direct, indirect and constructive, constituted 5% or less of our common stock at all times during the applicable period, provided that our common stock are "regularly traded on an established securities market" (as provided in applicable U.S. Treasury regulations) at any time during the calendar year in which the disposition occurs. However, no assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above. Non-U.S. Holders should consult their own tax advisors regarding any possible adverse U.S. federal income tax consequences to them if we are, or were to become, a United States real property holding corporation.

The foregoing discussion is subject to the discussions below under "*Backup Withholding and Information Reporting*" and "*FATCA Withholding*."

**Federal Estate Tax**

Any shares of our common stock that are owned (or treated as owned) by an individual who is not a U.S. citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) at the time of death will be included in that individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to U.S. federal estate tax.

**Backup Withholding and Information Reporting**

Backup withholding (currently at a rate of 24%) may apply to dividends paid by U.S. corporations in some circumstances, but will not apply to payments of dividends on our common stock to a Non-U.S. Holder if the Non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the Non-U.S. Holder is not a United States person or is otherwise entitled to an exemption. However, the applicable withholding agent generally will be required to report to the IRS (and to such Non-U.S. Holder) payments of dividends on our common stock and the amount of U.S. federal income tax, if any, withheld from those payments. In accordance with applicable treaties or agreements, the IRS may provide copies of such information returns to the tax authorities in the country in which the Non-U.S. Holder resides.

The gross proceeds from sales or other dispositions of our common stock may be subject, in certain circumstances discussed below, to U.S. backup withholding and information reporting. If a Non-U.S. Holder sells or otherwise disposes of any of our common stock outside the United States through a non-U.S. office of a non-U.S. broker and the disposition proceeds are paid to the Non-U.S. Holder outside the United States, the U.S. backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not U.S. backup withholding, will apply to a payment of disposition proceeds, even if that payment is made outside the United States, if a Non-U.S. Holder sells our common stock through a non-U.S. office of a broker that is a United States person or has certain enumerated connections with the United States, unless the broker has documentary evidence in its files that the Non-U.S. Holder is not a United States person and certain other conditions are met or the Non-U.S. Holder otherwise qualifies for an exemption.

If a Non-U.S. Holder receives payments of the proceeds of a disposition of our common stock to or through a U.S. office of a broker, the payment will be subject to both U.S. backup withholding and information reporting unless the Non-U.S. Holder provides to the broker a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the Non-U.S. Holder is not a United States person, or the Non-U.S. Holder otherwise qualifies for an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be credited against the Non-U.S. Holder's U.S. federal income tax liability (which may result in the Non-U.S. Holder being entitled to a refund), provided that the required information is timely furnished to the IRS.

**FATCA Withholding**

The Foreign Account Tax Compliance Act and related Treasury guidance (commonly referred to as FATCA) impose U.S. federal withholding tax at a rate of 30% on payments to certain foreign entities of (i) U.S.-source dividends (including dividends paid on our common stock) and (ii) the gross proceeds from the sale or other disposition of property that produces U.S.-source dividends (including sales or other dispositions of our common stock). This withholding tax applies to a foreign entity, whether acting as a beneficial owner or an intermediary, unless such foreign entity complies with (i) certain information reporting requirements regarding its U.S. account holders and its U.S. owners and (ii) certain withholding obligations regarding certain payments to its account holders and certain other persons. Accordingly, the entity through which a Non-U.S. Holder holds its common stock will affect the determination of whether such withholding is required. While withholding under FATCA would have also applied to payments of gross proceeds from the sale or other disposition of our common stock on or after January 1, 2019, U.S. Treasury regulations proposed in December 2018 eliminate such withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed U.S. Treasury regulations until final U.S. Treasury regulations are issued. Non-U.S. Holders are encouraged to consult their tax advisors regarding FATCA.

**PLAN OF DISTRIBUTION**

The Registered Stockholders, and their pledgees, donees, transferees, assignees, or other successors in interest may sell their shares of common stock covered hereby pursuant to brokerage transactions on Nasdaq, or other public exchanges or registered alternative trading venues, at prevailing market prices at any time after the common stock are listed for trading. We are not party to any arrangement with any Registered Stockholder or any broker-dealer with respect to sales of shares of common stock by the Registered Stockholders, except we have engaged the Advisor with respect to certain other matters relating to the registration of our common stock and listing of our common stock, as further described below. As such, we do not anticipate receiving notice as to if and when any Registered Stockholder may, or may not, elect to sell their shares of common stock or the prices at which any such sales may occur, and there can be no assurance that any Registered Stockholders will sell any or all of their shares of common stock covered by this prospectus.

We will not receive any proceeds from the sale of shares of common stock by the Registered Stockholders. We will recognize costs related to this Direct Listing and our transition to a publicly-traded company consisting of professional fees and other expenses. We will expense these amounts in the period incurred and not deduct these costs from net proceeds to the issuer as they would be in an initial public offering.

On the day that our shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy and sell orders and will begin to continuously generate the indicative Current Reference Price on the basis of such accepted orders. The Current Reference Price is calculated each second and, during a 10-minute "Display Only" period, is disseminated, along with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following the "Display Only" period, a "Pre-Launch" period begins, during which the Advisor, in its capacity as our financial advisor, must notify Nasdaq that our shares are "ready to trade." Once the Advisor has notified Nasdaq that our shares of common stock are ready to trade, Nasdaq will confirm the Current Reference Price for our shares of common stock, in accordance with Nasdaq rules. If the Advisor then approves proceeding at the Current Reference Price, the applicable orders that have been entered will then be executed at such price and regular trading of our shares of common stock on Nasdaq will commence, subject to Nasdaq conducting validation checks in accordance with Nasdaq rules.

Under Nasdaq rules, the Current Reference Price means: (i) the single price at which the maximum number of orders to buy or sell can be matched; (ii) if there is more than one price at which the maximum number of orders to buy or sell can be matched, then it is the price that minimizes the imbalance between orders to buy or sell (i.e. minimizes the number of shares that would remain unmatched at such price); (iii) if more than one price exists under (ii), then it is the entered price (i.e. the specified price entered in an order by a customer to buy or sell) at which our shares of common stock will remain unmatched (i.e. will not be bought or sold); and (iv) if more than one price exists under (iii), a price determined by Nasdaq in consultation with the Advisor in its capacity as our financial advisor. In the event that more than one price exists under (iii), the Advisor will exercise any consultation rights only to the extent that it can do so consistent with the anti-manipulation provisions of the federal securities laws, including Regulation M, or applicable relief granted thereunder. The Advisor will conduct all of its activities in a manner that complies with Regulation M of the SEC and consistent with applicable FINRA rules.

In determining the Current Reference Price, Nasdaq's cross algorithms will match orders that have been entered into and accepted by Nasdaq's system. This occurs with respect to a potential Current Reference Price when orders to buy shares of common stock at an entered bid price that is greater than or equal to such potential Current Reference Price are matched with orders to sell a like number of shares of common stock at an entered asking price that is less than or equal to such potential Current Reference Price. To illustrate, as a hypothetical example of the calculation of the Current Reference Price, if Nasdaq's cross algorithms matched all accepted orders as described above, and two limit orders remained — a limit order to buy 500 shares of common stock at an entered bid price of $10.01 per share and a limit order to sell 200 shares of common stock at an entered asking price of $10.00 per share — the Current Reference Price would be selected as follows:

● Under clause (i), if the Current Reference Price is $10.00, then the maximum number of additional shares that can be matched is 200. If the Current Reference Price is $10.01, then the Maximum number of additional shares that can be matched is also 200, which means that the same maximum number of additional shares would be matched at the price of either $10.00 or $10.01.

● Because more than one price under clause (i) exists, under clause (ii), the Current Reference Price would be the price that minimizes the imbalance between orders to buy or sell (i.e., minimizes the number of shares that would remain unmatched at such price). Selecting either $10.00 or $10.01 as the Current Reference Price would create the same imbalance in the limit orders that cannot be matched, because at either price 300 shares would not be matched.

● Because more than one price under clause (ii) exists, under clause (iii), the Current Reference Price would be the entered price at which orders for shares of common stock at such entered price will remain unmatched. In such case, choosing $10.01 would cause 300 shares of the 500-share limit order with the entered price of $10.01 to remain unmatched, compared to choosing $10.00, where all 200 shares of the limit order with the entered price of $10.00 would be matched, and no shares at such entered price remain unmatched. Thus, Nasdaq would select $10.01 as the Current Reference Price, because orders for shares at such entered price will remain unmatched. The above example (including the prices) is provided solely by way of illustration.

The Advisor will determine when our shares of common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations of volume, timing and price. In particular, the Advisor will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. If the Advisor does not approve proceeding at the Current Reference Price (for example, due to the absence of adequate pre-opening buy and sell interest), the Advisor will request that Nasdaq delay the opening until such a time that sufficient price discovery has been made to ensure that a reasonable amount of volume crosses on the opening trade. Further, in the highly unlikely event that Nasdaq consults with the Advisor as described in clause (iv) of the definition of Current Reference Price, the Advisor would request that Nasdaq delay the opening to ensure a single opening price within clauses (i), (ii) or (iii) of the definition of the Current Reference Price. Under Nasdaq rules, in the event of such delay, prior to terminating such delay, there will be a 10-minute "Display Only" period during which market participants may enter quotes and orders in shares of our common stock in Nasdaq systems. In addition, beginning at 4:00 a.m., market participants may enter orders in shares of our common stock on Nasdaq. Such orders will be accepted and entered into the system. After the conclusion of the 10-minute "Display Only" period, our common stock will enter a "Pre-Launch" period of indeterminate duration. The "Pre-Launch" period will end and shares of our common stock will be released for trading by Nasdaq when certain conditions are met, including Nasdaq's receipt of notice from the Advisor that our shares of common stock are ready to trade, after which the Nasdaq system will calculate the Current Reference Price at that time and display it to the Advisor. If the Advisor then approves proceeding, the Nasdaq system will conduct certain validation checks. The Advisor, with concurrence of Nasdaq, may determine at any point during the delay process up through the conclusion of the "Pre-Launch" period to postpone and reschedule the Direct Listing. The Registered Stockholders will not be involved in Nasdaq's price-setting mechanism and will not coordinate or be in communication with the Advisor including with respect to any decision by the Advisor to delay or proceed with trading; the Advisor will be issued of our common stock in connection with and at the time of the Direct Listing; such shares are not registered further to this prospectus and the Advisor is not a Registered Stockholder. While we will not be involved in Nasdaq's price-setting mechanism, it is expected that we may coordinate or communicate with the Advisor with respect to any decision to delay or proceed with trading.

Similar to a Nasdaq-listed firm-commitment underwritten initial public offering, in connection with the listing of our shares of common stock, buyers and sellers who have subscribed will have access to Nasdaq's Order Imbalance Indicator, or the Net Order Imbalance Indicator, a widely available, subscription-based data feed, prior to submitting buy or sell orders. Nasdaq's electronic trading platform simulates auctions every second to calculate a Current Reference Price, the number of shares of common stock that can be paired off the Current Reference Price, the number of shares of common stock that would remain unexecuted at the Current Reference Price and whether a buy-side or sell-side imbalance exists, or whether there is no imbalance, to disseminate that information continuously to buyers and sellers via the Net Order Imbalance Indicator data feed.

However, because this is not an initial public offering being conducted on a firm-commitment underwritten basis, there will be no traditional book building process (that is, an organized process pursuant to which buy and sell interest is coordinated in advance to some prescribed level – the "book"). Moreover, prior to the opening trade, there will not be a price at which underwriters initially sold shares of common stock to the public, as there would be in a firm-commitment underwritten initial public offering. The lack of an initial public offering price could impact the range of buy and sell orders collected by Nasdaq from various broker-dealers. Consequently, the public price of our shares of common stock may be more volatile than in an initial public offering underwritten on a firm-commitment basis and could, upon being listed on Nasdaq, decline significantly and rapidly.

In addition, to list on Nasdaq, we are also required to have at least four registered and active market makers. We expect that the Advisor will act as a registered and active market maker and will engage other market makers. In addition to sales made pursuant to this prospectus, the shares of common stock covered by this prospectus may be sold by the Registered Stockholders in private transactions exempt from the registration requirements of the Securities Act. Under the securities laws of some states, shares of common stock may be sold in such states only through registered or licensed brokers or dealers.

A Registered Stockholder may from time to time transfer, distribute (including distributions in kind by Registered Stockholders that are investment funds), pledge, assign, or grant a security interest in some or all the shares of common stock owned by it and, if it defaults in the performance of its secured obligations, the transferees, distributees, pledgees, assignees, or secured parties may offer and sell the shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under applicable provisions of the Securities Act amending the list of the Registered Stockholders to include the transferee, distributee, pledgee, assignee, or other successors in interest as Registered Stockholders under this prospectus. The Registered Stockholders also may transfer the shares in other circumstances, in which case the transferees, distributes, pledgees, or other successors in interest will be the registered beneficial owners for purposes of this prospectus.

A Registered Stockholder that is an entity may elect to make an in-kind distribution of common stock to its members, partners, or stockholders pursuant to the registration statement of which this prospectus forms a part by delivering a prospectus.

If any of the Registered Stockholders utilize a broker-dealer in the sale of the shares of common stock being offered by this prospectus, such broker-dealer may receive commissions in the form of discounts, concessions or commissions from such Registered Stockholder or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal.

We have engaged the Advisor, Joseph Gunnar & Co. LLC, as our financial advisor to advise and assist us with respect to certain matters relating to the Direct Listing. The services expected to be performed by the Advisor will include providing advice and assistance with respect to defining objectives, analyzing, structuring and planning the Direct Listing and developing and assisting with our investor communication strategy in relation to the Direct Listing. As a broker dealer with full service investment banking and sales capabilities, and both institutional and retail distribution, Joseph Gunnar has agreed in its capacity as Advisor in connection with the Direct Listing to use its professional resources to support the company as a newly listed public company in identifying potential sources of open market buying and potential endorsement from investors who otherwise would not have had the opportunity to hear the equity story or meet the management team alternatively in a traditional IPO process. To accomplish this, the advisor will make a market in the Company's stock, conduct retail and institutional non-deal roadshows on an as agreed upon basis, and assist the company with strategic, corporate finance, and capital markets advice with the goal of further building the Company's shareholder base, increasing market awareness and exposure, communicating effectively with existing and prospective investors, and creating an orderly market for the trading of the company's shares in a sustainable manner with the goal of long term capital markets presence and success.

In connection with its engagement as our financial advisor, the Company has agreed to pay the Advisor a total fee equal to one percent (1%) of the total valuation of the Company (the "Advisory Fee"), as agreed upon by the Advisor and the Company, and as approved by Nasdaq, for the Direct Listing. Thirty percent of (30%) of the Advisory Fee shall be paid in cash upon consummation of the Direct Listing, the balance shall be paid in our common stock within five days thereafter with the number of shares payable being the value of the non-cash portion of the Advisory Fee divided by the volume weighted average price of our common stock for the initial two trading days of our common stock. None of such stock is being registered hereby and the Company and the Advisor have agreed that such stock shall be subject to a six-month lock-up.

The Advisor will not be engaged to otherwise facilitate or coordinate price discovery activities or the solicitation and/or sales of shares of our common stock in consultation with us, and will not be permitted to, and will not be instructed by us to, plan or actively participate in any investor education activities, except as described herein.

We previously engaged Joseph Gunnar & Co., LLC., as placement agent (the "Placement Agent", for a private placement of the Company's preferred stock with accredited investors and qualified institutional buyers. On July 22__, 2025, the Company entered into securities purchase agreements with six such investors. Such investors have agreed to purchase from the Company in the aggregate 1,000,000 shares of its Series A Convertible Preferred Stock (the "Series A Preferred") with a stated value of $10,000,000, together with 800,000 shares of Series B Convertible Preferred Stock, for an aggregate funding amount of $8,000,000. For so long as the Series A Preferred remains outstanding, it shall pay a cash dividend, monthly in arrears from the date of funding, at a rate of 5% per annum for months 1-6, 10% per annum for months 7-12, 15% per annum for months 13-18 and an additional 3% per month thereafter. The dividend may, at the investor's option, be paid in common stock at the then applicable conversion price.

Following consummation of the Direct Listing, the holders of the Series A Preferred may on the date that is forty-five (45) days after the consummation of the Direct Listing convert such preferred into common stock at a price per share equal to the lowest of (i) the price per share equal to a valuation of $56,000,000 (the "Valuation Cap"), (ii) 75% of the closing price of the common stock on the date of the Direct Listing, (iii) the closing price of the common stock on the day prior to any conversion and (iv) a 25% discount to the lowest five (5) day volume weighted average price of the common stock prior to any such conversion, subject to a conversion floor price of $4.00 per share. The holders may, however, begin converting Series A Preferred at any time in the event (x) the price of our common stock exceeds $8.00 per share and (y) the trading volume of our common stock exceeds 125,000 shares.

In addition, the purchasers of the Series A Preferred shall receive a bonus in the form of shares of our Series B Convertible Preferred Stock (the "Series B Preferred") .The Series B Preferred will be convertible into our common stock at any time at a conversion price equal to the lower of (i) the closing price of the stock on the day prior to conversion and (ii) the price per share of our common stock equal to the Valuation Cap.

For as long as the Series B Preferred is outstanding, if the Company raises additional capital the holders of Series B Preferred Stock may require the Company to use up to 25% of the proceeds from any financing to pay, in cash, a portion of any unconverted Series B Preferred. The Company shall offer this redemption opportunity to each holder of the Series B Preferred within one (1) business day from the closing of such financing, and such holder shall have one (1) business day to respond to the Company of its intention to redeem.

The shares of our common stock underlying the Series A Preferred and the Series B Preferred are being registered hereunder. The purchasers of the Series A Preferred and the Series B Preferred will not be subject to any lock-up arrangements with respect to such convertible preferred stock nor will they be subject to lock-up arrangements with respect to the common stock underlying such convertible preferred stock.

As compensation for the services provided by the Placement Agent, the Company has agreed to pay the Placement Agent on the date the placement is funded:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) A
 cash fee payable in U.S. dollars equal to eight percent (8.0%) of the gross proceeds received
 by the Company from investors in the private placement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) Non-redeemable
 warrants (the " <u>Placement Warrants</u> ") to purchase eighty thousand (80,000)
 shares of our common stock((the " <u>Warrant Shares</u> "). The Placement Warrants
 will be non-exercisable for six (6) months after the date of funding by the investors and
 thereafter will be exercisable until their expiration five (5) years after such date at a
 price per share of $8.00. The Placement Agent will be entitled to customary "piggyback"
 and a one-time demand registration rights and anti-dilution rights (for stock dividends and
 splits and recapitalizations) pursuant to FINRA Rule 5110. If so registered, the Placement
 Warrants and the underlying securities may not be transferred, assigned or hypothecated for
 a period of six (6) months following the date of effectiveness or commencement of sales of
 the public offering pursuant to FINRA Rule 5110(g)(1). The Placement Warrants may be exercised
 in whole or in part and, provide for "cashless exercise."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) Subject
 to compliance with FINRA Rule 5110(f)(2)(D, the Company also agreed to reimburse Joseph Gunnar
 for all of Joseph Gunnar's actual out-of-pocket accountable expenses upon receipt of
 reasonably acceptable evidence of such expenditures, including the reasonable fees of legal
 counsel of Joseph Gunnar and other out-of-pocket expenses up to a maximum of $50,000.

**LEGAL MATTERS**

The validity of the shares of common stock being offered hereby will be passed upon for us by Sichenzia Ross Ference Carmel LLP, New York, New York.

**INTERESTS OF NAMED EXPERTS AND COUNSEL**

Except as noted below, no expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration of the securities was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, voting trustee, director, officer, or employee.

Sichenzia Ross Ference Carmel LLP, counsel to the Company in connection with this initial registration statement, owns 90,000 shares of the Company's common stock. as partial payment for legal services rendered in connection with the registration of the common stock.

**EXPERTS**

The financial statements of our company included in this registration statement and have been audited by TAAD LLP an independent registered public accounting firm, as indicated in its report with respect thereto, and have been so included in reliance upon the report of such firm given on the authority of said firm as experts in accounting and auditing.

**WHERE YOU CAN FIND MORE INFORMATION**

We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the SEC relating to this offering. This prospectus does not contain all of the information in the registration statement and the exhibits included with the registration statement. For further information pertaining to us and the securities to be sold in this offering, you should refer to the registration statement and its exhibits, portions of which have been omitted as permitted by SEC rules and regulations. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC at http://www.sec.gov.

Upon the effectiveness of the registration statement, we will be subject to the informational requirements of the Exchange Act, and, in accordance with the Exchange Act, will file reports, proxy and information statements and other information with the SEC. Annual, quarterly and special reports, proxy and information statements and other information can be inspected and copied at the locations set forth above. We will also make these documents publicly available, free of charge, on our website at https://functionalbrandsinc.com/ as soon as reasonably practicable after filing such documents with the SEC. Information on, or accessible through, our website is not part of this prospectus.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| [**CONSOLIDATED BALANCE SHEETS (UNAUDITED)**](#f_002) | F-2 |
| [**CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**](#f_003) | F-3 |
| [**CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT (UNAUDITED)**](#f_004) | F-4 |
| [**CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)**](#f_005) | F-5 |
| [**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**](#f_006) | F-6 - F-31 |

---

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)**

 **CONSOLIDATED BALANCE SHEETS**

 **(UNAUDITED)** 

 ***(In U.S. Dollars, except share data or otherwise noted)***

 ****

---

| | | |
|:---|:---|:---|
|  | **June 30,** <br> **2025**  | **December 31, <br> 2024**  |
| **Assets** | | |
|  ***Current Assets:*** | | |
| &nbsp;&nbsp;&nbsp; Cash | $257683 | $211642 |
| &nbsp;&nbsp;&nbsp; Accounts receivable, net | 367587 | 303471 |
| &nbsp;&nbsp;&nbsp; Inventories, net | 1733353 | 1709458 |
| &nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | 68820 | 45112 |
| &nbsp;&nbsp;&nbsp; Deferred offering costs | 1128702 | 588641 |
|  ***Total current assets*** | **3556145** | **2858324** |
|  ***Noncurrent Assets:*** |  |  |
| &nbsp;&nbsp;&nbsp; Property and equipment, net | 38516 | 49564 |
| &nbsp;&nbsp;&nbsp; Right-of-use assets, net | 1837580 | 2000092 |
| &nbsp;&nbsp;&nbsp; Intangible assets, net | 1420476 | 1443541 |
| &nbsp;&nbsp;&nbsp; Goodwill | 818139 | 818139 |
| ***Total non-current assets*** <br>| **4114711** | **4311336** |
| **Total assets** | $**7670856** | $**7169660** |
| **Liabilities and Stockholder' Equity** |  |  |
|  ***Current Liabilities*** |  |  |
| &nbsp;&nbsp;&nbsp; Accounts payable & accrued liabilities | $2180005 | $1956165 |
| &nbsp;&nbsp;&nbsp; Line of credit | 16298 | 32235 |
| &nbsp;&nbsp;&nbsp; Government loans, current | 3515 | 3436 |
| &nbsp;&nbsp;&nbsp; Lease liabilities, current | 352490 | 291213 |
| &nbsp;&nbsp;&nbsp; Other current liabilities | 34400 | 35332 |
| &nbsp;&nbsp;&nbsp; Payable for acquisition, current | 2227367 | 2342366 |
| &nbsp;&nbsp;&nbsp; Loans payable (related parties), current | 56254 | 370703 |
| &nbsp;&nbsp;&nbsp; Loans payable | 505200 | 171500 |
| &nbsp;&nbsp;&nbsp; ***Total current liabilities***  | **5375529** | **5202950** |
|  ***Non-current Liabilities*** |  |  |
| &nbsp;&nbsp;&nbsp; Lease liabilities, net of current | 1622744 | 1844819 |
| &nbsp;&nbsp;&nbsp; Government loans, net of current | 138680 | 140468 |
| &nbsp;&nbsp;&nbsp; Loan payable (related parties), net of current | 276739 |  |
| &nbsp;&nbsp;&nbsp; Convertible debenture | - | 100000 |
| ***Total non-current liabilities*** <br>| **2038163** | **2085287** |
| **Total liabilities** | **7413692** | $**7288237** |
| **Stockholders' equity (deficit)** |  |  |
| &nbsp;&nbsp;&nbsp; *Common stock, par value $0.00001, authorized 220,000,000 shares; 7,027,255 and 6,694,880 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively* | 70 | 67 |
| &nbsp;&nbsp;&nbsp; *Blank check preferred Stock, par value $0.001, authorized 1,000,000 shares; 0 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively**  |  |  |
| &nbsp;&nbsp;&nbsp; *Series A Preferred par value $0.00001, authorized 12,000 shares; 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively**  |  |  |
| &nbsp;&nbsp;&nbsp; *Series B Preferred par value $0.00001, authorized 10,000 shares; 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively**  |  |  |
| &nbsp;&nbsp;&nbsp; Additional paid-in capital | 8270862 | 7542286 |
| &nbsp;&nbsp;&nbsp; Accumulated deficit | (8013768) | (7660930) |
| **Total Stockholders' Equity (Deficit)** | **257164** | **(118577)** |
| **Total liabilities and holders' equity (deficit)** | $**7670856** | $**7169660** |

---

 ****

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

***(In U.S. Dollars, except share data or otherwise noted)***

 ****

---

| | | |
|:---|:---|:---|
|  | **For the Six Months Ended<br> June 30,**  | **For the Six Months Ended<br> June 30,**  |
|  | **2025** | **2024** |
| **Revenue, net of returns** | $3422789 | $3490446 |
| **Costs and expenses:** |  |  |
| **Cost of goods sold** | 1587928 | 1636792 |
| **Sales & marketing** | 343669 | 298217 |
| **General and administrative expenses** | 1678728 | 1430011 |
| **Operating income / (loss)** | **(187536)** | **125426** |
| **Interest expense** | (166106) | (119914) |
| **Interest income** | 804 | 963 |
| **Net income / (loss) for the periods** | $**(352838)** | $**6475** |
| **Net income (loss) per share of common stock attributable to common stockholders** |  |  |
| **Basic** | $**(0.05)** | $**-** |
| **Diluted** | $**(0.05)** | $**-** |
| **Weighted average shares used in computing net loss per share of common stock** |  |  |
| **Basic** | **6950923** | **6694493** |
| **Diluted** | **6950923** | **6904237** |

---

 ****

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT**

**(UNAUDITED)**

***(In U.S. Dollars, except share data or otherwise noted)***

 ****

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **No. of<br> Shares** | **Common<br> Stock** | **Preferred<br> Stock** | **APIC** | **Accumulated<br> Deficit** | **Total<br> Shareholders'<br> Equity** |
| December 31, 2023 | 6694493 | 67 |  | 7127386 | (7101574) | 25879 |
| Odd-lot rounding | 387 |  |  |  |  |  |
| Net income for the six months ended June 30, 2024 |  | **-** |  | **-** | 6475 | 6475 |
| **June 30, 2024** | **6694880** | **67** |  | $**7127386** | $**(7095099)** | $**32354** |

---

 ****

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **No. of<br> Shares** | **Common<br> Stock** | **Preferred<br> Stock** | **APIC** | **Accumulated<br> Deficit** | **Total<br> Shareholders'<br> Equity** |
| December 31, 2024 | 6694880 | 67 |  | 7542286 | (7660930) | (118577) |
| Stock based compensation | 180866 | 1 |  | 510354 |  | 510355 |
| Common stocked issued for convertible notes payable and accrued interest | 133441 | 1 |  | 122330 |  | 122331 |
| Common stock issued for financing expense | 18082 | 1 |  | 50629 |  | 50630 |
| Warrants issued for note extension |  | **-** |  | 45263 |  | 45263 |
| Net loss for the six months ended June 30, 2025 | - | - |  | - | (352838) | (352838) |
| **June 30, 2025** | **7027269** | **70** |  | **8270862** | **(8013768)** | **257164** |

---

 ****

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED STATEMENTS OF CASH FLOW**

**(UNAUDITED)**

***(In U.S. Dollars, except share data or otherwise noted)***

 ****

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| **Cash flows from operating activities:** |  |  |
| &nbsp;&nbsp;&nbsp; Net income / (loss) | $(352838) | $6475 |
| &nbsp;&nbsp;&nbsp; Reconcile net loss to cash provided by operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allowance for doubtful accounts receivable | (3796) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allowance for inventory obsolescence | 12895 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation of property & equipment | 11048 | 27967 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of right-of-use assets | 162512 | 150339 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based compensation | 510356 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financing expense on warrant issuance | 45263 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of intangible assets | 23065 | 11532 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuance of shares for financing expense | 50630 |  |
| &nbsp;&nbsp;&nbsp; Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable | (60320) | (89154) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | (36790) | 27114 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | 101292 | 16036 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable & Accrued liabilities | 346170 | 141435 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other current liabilities | (932) | (35227) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lease liabilities | (160798) | (140893) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due to / from related parties | **-** | (111780) |
| &nbsp;&nbsp;&nbsp; **Net cash provided by operating activities** | **647757** | **3844** |
| **Cash flows from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of property and equipment | - | 1881 |
| &nbsp;&nbsp;&nbsp; **Net provided by in investing activities:** | **-** | **1881** |
| **Cash flows from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payment for deferred offering costs | (540061) | (22075) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from long-term debt | 100000 | 280000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payments for payable for acquisition | (114999) | (145001) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from debt facilities | 73379 | 86662 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-term debt repayment | (29010) | (2197) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Line of credit repayment | (89316) | (129140) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Government debt repayment | (1709) | (1631) |
| &nbsp;&nbsp;&nbsp; **Net cash provided by (used in) financing activities** | **(601716)** | **66618** |
| &nbsp;&nbsp;&nbsp; Net increase in cash | 46041 | 72343 |
| &nbsp;&nbsp;&nbsp; Cash beginning of year | 211642 | 374435 |
| &nbsp;&nbsp;&nbsp; **Cash, period end** | $**257683** | $**446778** |
| **Supplemental disclosures of cash flow information** |  |  |
| &nbsp;&nbsp;&nbsp; Cash paid for interest | 166106 | 117644 |
| **Non-cash investing and financing activities** |  |  |
| &nbsp;&nbsp;&nbsp; Common stock issued for convertible note payable and accrued interest | 122331 |  |
| &nbsp;&nbsp;&nbsp; Related-party loan | 225000 | - |

---

 ****

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**1.** **ORGANIZATION AND NATURE OF OPERATIONS** 

Functional Brands Inc. (formerly HT Naturals Inc. - the "Company") was organized under the General Corporation Law in the State of Delaware on November 19, 2020. The Company's principal business is in the production, marketing, sales, and distribution of smokable hemp related products in certain states within the United States of America that permit such sales.

On March 22, 2023, the Company changed its name from HT Naturals Inc. to Functional Brands Inc. to better reflect its corporate identity.

On January 22, 2025, the Company effected a reverse stock split in its authorized common stock on a basis of 1-for-18.338622. The authorized capital stock of the Company remained the same at 220,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the reverse stock split. In addition, the Company authorized 1,000,000 shares of blank check preferred $0.001 par value.

As of June 30, 2025 and December 31, 2024, the Consolidated Financial Statements consist of the Company and its wholly owned subsidiary HTO Nevada Inc. (d/b/a Kirkman), which is a nutraceutical manufacturer and distributor based in the Pacific Northwest. All intercompany transactions and balances have been eliminated in consolidation.

**2.** **GOING CONCERN** 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2025 the Company had a net loss of $352,838, negative working capital of 1,819,384, and an accumulated deficit of $8,013,768. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability and attempt to secure additional equity and/or debt financing. There are no assurances that the Company will be successful in obtaining additional capital.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not include any adjustments that might arise from this uncertainty.

**3.** **BASIS OF PRESENTATION** 

 **Basis of preparation and principles of consolidation** 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The consolidated financial statements comprise the financial statements of the Company and only subsidiary, HTO Nevada Inc. Subsidiary consists of entity over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. To the extent that subsidiaries provide services that relate to the Company's activities, they are fully consolidated from the date control is transferred and are deconsolidated from the date control ceases. All intercompany balances and transactions have been eliminated.

The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies.

 *Functional Brands Inc. (formerly HT Naturals Inc.)*

 

Functional Brands Inc. (formerly HT Naturals Inc.) is the parent company.

 *HTO Nevada Inc. dba Kirkman*

 

The principal subsidiary is HTO Nevada Inc. dba Kirkman, which is solely owned by the Company.

As part of the restructuring efforts, ownership of HTO Nevada Inc. dba Kirkman was transferred from HTO Holdings Inc. to Functional Brands Inc. (formerly HT Naturals Inc.) on May 19, 2023, in exchange 4,362,378 common shares of the Company. This was retroactively recorded in 2019 as the acquisition was completed on July 3, 2019, with entities under common control.

&nbsp;&nbsp;&nbsp;&nbsp;**4.** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

The significant accounting policies used in the preparation of these consolidated financial statements are described below.

 **Cash**

Cash consists of cash in readily available checking accounts and deposits in transit. As of June 30, 2025, and December 31, 2024, cash balances were deposited at major and other financial institutions.

 **Trade and other receivables**

Accounts receivables are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company provides for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. On a periodic basis, management evaluates its accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote. As of June 30, 2025 allowance for doubtful accounts decreased by $3,976 resulting in a balance of $0, and as of December 31, 2024 it decreased by $32,941 resulting in a balance of $3,796.

**Inventories** 

Inventory consists of raw materials, work in process and finished goods. Inventory is measured at the lower of cost or net realizable value. Inventory costs include direct labor and certain overhead expenses such as in-bound shipping and handling costs incurred to bring the inventory to its present location and conditions. Cost is determined by using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. If the Company determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, it records a charge to impairment expenses.

**Property and equipment**

Property and equipment are stated at cost. Depreciation of property and equipment is recorded using the straight-line method over the assets' estimated useful lives. Computer equipment and capitalized software are depreciated over two to five years and furniture, and fixtures are depreciated over five years. Amortization of fixed assets under capital leases is included in depreciation expense.

The categories of capital assets are amortized on a straight-line basis as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Machinery
 & equipment 7
 years, straight-line

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Furniture
 & fixtures 7
 years, straight-line

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Computer
 equipment 5
 years, straight-line

The Company allocates the amount initially recognized in respect of a capital asset to its significant parts and amortizes separately each such part. Residual values, methods of amortization and useful lives of the capital assets are reviewed annually and adjusted if appropriate.

Gains and losses on disposals of capital assets are determined by comparing the proceeds with the carrying amount of the capital asset and are included in the consolidated statement of operations and comprehensive loss.

The assets' residual values, useful lives and methods of depreciation are reviewed at each fiscal year-end and adjusted prospectively if appropriate. An item of equipment is retired upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on sale or retirement of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the consolidated statement of operations in the year the asset is retired. Such assets are tested annually for impairment, or more frequently, if events or changes in circumstances indicate that they might be impaired.

**Intangible Assets**

Intangible assets are recorded at cost, less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization is provided on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any. Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.

The categories of the intangible assets are amortized on a straight-line basis as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Customer
 relationships 10
 years

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● cGMP
 certification Indefinite
 life

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Goodwill
 (including Assembled Workforce) Indefinite
 life

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Kirkman
 brand Indefinite
 life

Expenditures in the research phase and post-development maintenance costs are expensed as incurred.

**Goodwill**

Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling interests in the acquire, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill acquired in a business combination is not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed.

Goodwill is tested for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a component). We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Assets and liabilities are assigned to each reporting unit if they are employed by a reporting unit and are considered in the determination of the reporting unit fair value. We have one reporting unit with goodwill, which is the Kirkman business.

The Company's indefinite-lived intangible assets are tested for impairment at the consolidated level. In evaluating the recoverability of the Kirkman Brand name and CGMP License, we compare the fair value of the asset to it carrying amount to determine potential impairment. The Company's estimate of the fair value of the Kirkman Brand name is derived using the income approach, specifically the relief-from-royalty method and the fair value of the CGMP License is derived using the income approach.

The fair value determination of the reporting units and the indefinite-lived intangible asset is judgmental in nature and requires the use of significant estimates and assumptions that are sensitive to changes. Assumptions include estimation of the royalty rate, estimation of future revenue and projected margins, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and capital spending, and determination of discount rates. As a result, there can be no assurance that the estimates and assumptions made for purposes of quantitative goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of the reporting units may include such items as: (i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) decrease in future cash flows due to lower than expected sales, or (iv) fluctuations in foreign currency exchange rates that may negatively impact the Company's reported results of operations. Accordingly, if the current cash flow assumptions are not realized, we experience further increases in costs of capital, it is possible that an additional impairment charge may be recorded in the future, which could be material. The Company did not record an impairment loss during the six months ended June 30, 2025, and 2024.

**Right-of-use Assets and Lease Liabilities** 

The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated amortization and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, right-of-use assets are amortized on a straight-line basis over the shorter of its estimated useful life and the lease term.

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees, if applicable. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as occupancy expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

**Leases as lessee**

The Company determines if an arrangement is a lease at inception of an arrangement. Operating and finance lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company's right to use an underlying asset for the lease term, while lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company uses the internal incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of 12 months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease. The Company applies a portfolio approach to determine the discount rate for leases with similar characteristics.

For leases classified as operating, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus unamortized initial direct costs, plus/(minus) any unamortized prepaid/(accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For leases classified as finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company, or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. The Company expects to exercise the options to purchase the assets which are leased under finance leases. Accordingly, these assets are included in property and equipment, and depreciation thereon is recognized as depreciation expense. When the Company makes contractually required payments under finance leases, a portion is allocated to reduce the finance lease obligation, and a portion is recognized as interest expense.

**Stock-based compensation plans**

The Company has a stock-based compensation plan that is used to compensate the Board, officers, employees and consultants for services rendered.

The restricted share units ("RSUs") are measured by reference to the fair value of the Company's Common Share at the date on which they are granted. In situations where equity instruments are issued to non-employees and the fair value of goods or services received by the entity as consideration cannot be estimated reliably, they are measured at fair value of the equity instruments granted.

The costs of equity settled transactions are recognized as expenses, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant party becomes fully entitled to the award.

No expense is recognized for performance-based awards that do not vest. Expense for service-based award is recognized upon vesting. Where the terms of an equity settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.

Compensation expense is recognized for all share-based payments to employees and non-employees, including restricted stock units, in the statements of operation based on the fair value of the awards that are granted. As necessary, the Company's stock price at the date of grant was estimated using an acceptable valuation technique such as a recent round of fundraising or the probability-weighted expected return model. The fair value of RSUs is determined at the date of grant using the price per share offered at the most recent round of fundraising, the Reg CF campaign.

Compensation expense for restricted stock awards with performance-based vesting conditions is calculated based on the number of awards that are expected to vest during the performance period if it is probable that the performance metrics will be achieved. Generally, measured compensation cost, net of actual forfeitures, is recognized on a straight-line basis over the vesting period of the related share-based compensation award. The Company accounts for forfeitures of stock-based awards as they occur.

**Revenue recognition**

We account for revenue in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standard Codification Topic 606, "Revenue from Contracts with Customers". Revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management's evaluation). Outbound shipping charged to customers is recognized at the time the related merchandise revenues are recognized and are included in net revenues.

Per Company policy, any product that doesn't meet the customer's expectations can be returned within the first 30 days of delivery in exchange for another product or for a full refund. Any product sold through a distributor or retailer must be returned to the original purchase location for any return or exchange. For the quarter ended June 30, 2025 and 2024, the Company did not record any reserves on revenue.

**Earning / Loss per Share**

Basic net loss per common share is calculated by dividing the net loss distributed to the common class, by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, restricted stock units (RSUs) are considered to be potentially dilutive securities. As of June 30, 2025, there were 83,189 RSUs, of potentially common stock equivalents excluded from the diluted loss per share calculations as their effect is anti-dilutive. Since the Company has reported a net loss for the six months ended June 30, 2025, the diluted net loss per common share is the same as basic net loss per common share for this period.

The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share ("EPS") calculations for the six months ended June 30, 2025 and 2024.

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended<br> June 30,** | **Six Months Ended<br> June 30,** |
|  | **2025** | **2024** |
| **Numerator:** |  |  |
| &nbsp;&nbsp;&nbsp; Net income (loss) | $(352838) | $6475 |
| **Denominator:** |  |  |
| &nbsp;&nbsp;&nbsp; Weighted-average shares of common stock | 6950923 | 6694493 |
| &nbsp;&nbsp;&nbsp; Dilutive effect of RSUs |  | 81771 |
| &nbsp;&nbsp;&nbsp; Dilutive effect of Warrants |  |  |
| &nbsp;&nbsp;&nbsp; Dilutive effect of convertible instruments | - | 127973 |
| &nbsp;&nbsp;&nbsp; Diluted weighted average of common stock | 6950923 | 6904237 |
| **Net income (loss) per common share from:** |  |  |
| &nbsp;&nbsp;&nbsp; Basic | $**(0.05)** | $**0.00** |
| &nbsp;&nbsp;&nbsp; Diluted | $**(0.05)** | $**0.00** |

---

**Business Combinations**

Business combinations are accounted for using the acquisition method. The fair value of total purchase consideration is allocated to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill. All assets, liabilities and contingent liabilities acquired or assumed in a business combination are recorded at their fair values at the date of acquisition. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Estimates of fair value are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from those estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the statements of operations. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in the Company's statements of operations.

**Significant accounting estimates and judgments**

The most significant judgements made in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements include:

● Obsolescence of inventories

● Recoverability of the carrying value of long-lived assets including property & equipment and intangible assets

● Recoverability of carrying value of goodwill

● Discount rate used to calculate present value of future minimum lease payments for right-of-use asset and liabilities

● Recognition and measurement of provisions and contingencies

● Valuation of deferred income tax assets

*Inventories, net*

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. For the six months ended June 30, 2025 The allowance for inventory obsolescence increased by $12,895 resulting in a reserve of $77,722. For the year ended December 31, 2024 the inventory reserve was $64,827.

 ****

*Long-Lived Assets*

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 six months ended June 30, 2025, and 2024.

*Fair value of financial instruments*

The individual fair values attributed to the different components of a financing transaction, notably investment in equity securities, derivative financial instruments, convertible debt and loans, are determined using valuation techniques. The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine (a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

*Segment Reporting*

In November 2023, the FASB issued ASU 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,* which requires entities to report incremental information about significant segment expenses included in a segment's profit or loss measure as well as the title and position of the chief operating decision maker ("CODM"). The new standard also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The Company adopted ASU 2023-07 effective December 31, 2024 on a retrospective basis.

 

*Income taxes*

The Company must exercise judgment in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for expected tax audit issues based on the Company's current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision.

In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

**Risks and uncertainties**

The Company's business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include but are not limited to changes in US laws surrounding the sale of smokable CBG/CBD products, consumer demand, and COVID-19 issues more fully described below. These adverse conditions could affect the Company's consolidated financial condition and the results of its operations.

**5.** **CASH** 

Cash consists of liquid funds and deposits in transit.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Cash | $256187 | $206890 |
| Deposits in transit | 1496 | 4752 |
| **Total Cash** | $**257683** | $**211642** |

---

**6.** **ACCOUNTS RECEIVABLE, NET** 

Accounts receivable consists of trade receivables, net of allowance.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025**  | **December 31, <br> 2024** |
| Trade receivables | $367587 | $307267 |
| Allowance for doubtful accounts | - | (3796) |
| **Accounts receivable, net** | $367587 | $303471 |

---

This allowance is continually re-evaluated and adjusted as necessary.

**7.** **INVENTORIES, NET** 

Inventories consisted of raw materials (minerals – magnesium, Calcium, vitamins, botanical extracts, hemp, trim and flower – CBG and CBD), finished goods (capsules, tablets, powders, creams, cigs, gummies, tinctures, pre-rolls, and vapes) and packaging & supplies (bottles, labels, covers, filters, tipping paper and packaging materials).

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Raw materials | $465980 | $472296 |
| Packaging, supplies & other | 240290 | 231912 |
| Finished goods | 1104805 | 1070077 |
| Allowance for inventory obsolescence | (77722) | (64827) |
| **Total Inventories, net** | $**1733353** | $**1709458** |

---

The allowance for inventory obsolescence is continually re-evaluated and adjusted as necessary.

**8.** **PREPAIDS & OTHER CURRENT ASSETS** 

Balance consists of prepayments made to vendors and legal retainers.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31,<br> 2024** |
| Prepaids & deposits | $68713 | $45005 |
| Other current assets | 107 | 107 |
| **Total prepaids and other current assets** | $**68820** | $**45112** |

---

**9.** **DEFERRED OFFERING COSTS** 

Schedule below represent capitalization of deferred cost incurred for the preparation of Initial Public Offering ("IPO"):

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31,<br> 2024** |
| Legal services | $661682 | $364669 |
| Professional services | 467020 | 223972 |
| **Total Deferred cost** | $**1128702** | $**588641** |

---

**10.** **PROPERTY & EQUIPMENT** 

Property and equipment consist of the following:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Furniture & Fixtures | $3302 | $3302 |
| Computer Equipment | 30988 | 30988 |
| Machinery & Equipment | 730508 | 730508 |
| **Total property and equipment, gross** | **764798** | **764798** |
| Less: Accumulated depreciation | (726282) | (715234) |
| **Property and equipment, net** | $**38516** | $**49564** |

---

Depreciation expenses totaled $11,048 and $27,967 for the six months ended June 30, 2025 and 2024, respectively.

**11.** **RIGHT-OF-USE ASSETS & LEASE LIABILITY** 

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The following are the expected lease payments as of June 30, 2025. The lease is considered an "operating lease" and consequently lease payments are calculated on a straight-line basis, including the total amount of interest related.

The movement in the right-of-use assets is as follows:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| <u>Right of use assets:</u> |  |  |
| Right of use assets recognized as of January 1**<sup>st</sup>** | $2000092 | $2307027 |
| Additions |  |  |
| Amortization Expense | (162512) | (306935) |
| **Right of use assets, net** | $**1837580** | $**2000092** |

---

Lease amortization expense on the straight-line basis was $162,512 and $150,339 during the six months ended June 30, 2025 and 2024 respectively.

The movement in lease liability is as follows:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Lease liabilities recognized as of January 1**<sup>st</sup>** | $2136032 | $2397047 |
| Additions |  |  |
| Lease payments | (160798) | (261015) |
| **Lease liabilities at period end** | **1975234** | **2136032** |
| Less: current portion | (352490) | (291213) |
| **Long-term portion** | $**1622744** | $**1844819** |

---

The following table presents information about the future maturity of the lease liabilities under the Company's operating and financing leases as of June 30, 2025.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Maturity of Lease Liabilities** | **1.<br> Operating<br> Facility** | **2. Office<br> Equipment** | **3. Office<br> Equipment** | **Total<br> Amount** |
| **2025** | $237364 | $14425 | $534 | $252323 |
| **2026** | 488887 | 24984 | 890 | 514761 |
| **2027** | 503349 |  |  | 503349 |
| **2028 and beyond** | 1142785 | - | - | 1142785 |
| **Total future minimum lease payments** | **2372385** | **39409** | **1424** | **2413218** |
| **Less: Imputed interest** | (435758) | (2150) | (77) | (437984) |
| **Present value of lease liabilities** | $**1936627** | $**37259** | $**1347** | $**1975234** |
| **Remaining lease term (in years)** | 5.09 | 1.75 | 1.75 |  |

---

Right-of-use assets and lease liabilities comprise three leases.

LEASE 1 – OPERATING FACILITY

On January 1, 2023, the Company entered a 7-year and 2-months lease to lease approximately 24,400 square feet industrial building containing 9,095 square feet of office space and 9,663 square feet of production area. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 9.0% within the calculation.

The base monthly rent is $28,114 per month, with subsequent annual increases of 3%. Operating expense came to $11,447 per month for 2025 incurred by the lessee.

LEASES 2 & 3 – OFFICE EQUIPMENT

On September 30, 2021, the Company entered into a 5-year lease to lease office equipment that consists of four copiers for daily office use. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 9.0% within the calculation.

The base monthly payment amount is $2,357 per month, with subsequent annual increases of 6%. Operating expense came to $653 per month for 2025 incurred by the lessee.

On March 14, 2022, the Company also entered into a 4-year and 7-months lease agreement to lease a Paper Source Accessory for daily office use to complement the previous office equipment discussed above. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 9.0% within the calculation. The base monthly payment amount is $89 per month, with no subsequent annual increases.

**12.** **BUSINESS COMBINATION** 

On July 3, 2019, the Company entered into an asset purchase agreement (the "APA") with the Kirkman Group Inc. ("Kirkman") to acquire certain tangible and intangible assets for a purchase price of $5,000,000. The present value of the acquisition fair value of the deferred cash payment transferred for Kirkman was $4,329,317, which consisted of the following:

**Kirkman Group Inc.** 

---

| | |
|:---|:---|
| **Purchase consideration** | **Fair Value** |
| Cash | $1250000 |
| Deferred cash payment - $750,000 raise or 1<sup>st</sup> anniversary of closing  | 722388 |
| Deferred cash payment - $1,500,000 on 1<sup>st</sup> anniversary of closing | 1270649 |
| Deferred cash payment - $1,500,000 on 2<sup>nd</sup> anniversary of closing | 1086280 |
| Total consideration - $5,000,000 | $**4329317** |

---

 

The following table summarizes the finalized fair value of assets acquired, and liabilities assumed as of the date of the acquisition in 2019:

 **Kirkman Group Inc.**

---

| | |
|:---|:---|
| **Purchase consideration** | **Fair Value** |
| Net assets | $1513878 |
| Kirkman brand | 1226000 |
| cGMP certification | 310000 |
| Customer relationships | 461300 |
| Net assets acquired | 3511178 |
| Goodwill | 818139 |
| Total Consideration | $**4329317** |

---

The excess of purchase consideration over the fair value of net assets acquired was recorded as goodwill which is not deductible for tax purposes.

 *Payable for acquisition*

As of June 30, 2025 and December 31, 2024, the Company owed $2,227,367 and $2,342,366, respectively, in connection with the aforementioned APA, which is due in its entirety on August 30, 2025, subject to the Forbearance Agreement and Confession of Judgement, executed on July 9, 2025.

The Forbearance Agreement allows the seller to postpone the payment of principal balance without pursuing rights under the APA and the Confession of Judgement allowed the seller to enter a judgement against the Company in The Circuit Court of The State of Oregon for the County of Clackamas.

The execution of these documents will impact the Company if it fails to settle the balance owed by the due date, August 30, 2025. As a result, the seller has the right to foreclose on the business.

**13.** **INTANGIBLE ASSETS & GOODWILL** 

Balance consists of intangible assets acquired from acquisition of Kirkman in July 2019. The Kirkman brand and the cGMP certification were assigned an indefinite useful life, whereas the customer relationships were assigned a life span of 10 years.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Kirkman brand, net | $925700 | $925700 |
| cGMP certification | 310000 | 310000 |
| Customer relationships | 461300 | 461300 |
| **Total intangible assets, gross** | **1697000** | **1697000** |
| Less: Accumulated amortization: Customer relationships | (276524) | (253459) |
| **Intangible assets, net** | $**1420476** | $**1443541** |

---

There were no impairments to the intangible assets during the six months ended June 30, 2025 and 2024.

Balance consists of goodwill (including assembled workforce) acquired from acquisition of Kirkman in July 2019 which was assigned an indefinite useful life.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31,<br> 2024** |
| **Goodwill** | $**818139** | $**818139** |

---

There were no impairments to goodwill during the six months ended June 30, 2025 and 2024.

**14.** **ACCOUNTS PAYABLE & ACCRUED LIABILITIES** 

Balance consists of trade payables and accruals.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| **Trade payables** | $1410179 | $1103359 |
| **Accrued liabilities** | 684326 | 741106 |
| **Accrued compensation - shares earned but not issued** | 85500 | 111700 |
|  | $**2180005** | $**1956165** |

---

Accrued liabilities are comprised of accruals for consulting/advisory, professional and audit services and accrued interest loan payable.

**15.** **LINES OF CREDIT** 

During the year ended December 31, 2024 the Company entered into multiple agreements with a third party to finance invoices to satisfy multiple vendors of which the following agreements are to be repaid during the year ended December 31, 2025.

On January 20, 2023, the Company entered a line of credit agreement with a third-party whereby the Company received $300,000. The terms of the loan were for one year, with a 27% contract interest rate. On January 22, 2024, the loan was settled in full, at which point the security interest was released by the lender.

On July 14, 2023, the Company entered into an additional line of credit agreement with a third-party whereby the Company received $100,000. The terms of the loan were for 42 weeks, with a 5% contract interest rate. On July 7, 2024, the loan was settled in full, at which point the security interest was released by the lender.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Line of credit recognized as of January 1 | 32235 | $68315 |
| Proceeds from debt facilities | 73379 | 180662 |
| Payments on debt facilities | (89316) | (216742) |
| **Line of credit as of June 30** | **16298** | **32235** |
| **Less: current portion** | **(16298)** | **(32235)** |
| **Long-term portion** | $**-** | $**-** |

---

The Company has the following line of credit commitments as of June 30, 2025.

---

| | | | |
|:---|:---|:---|:---|
| **Agreement Date** | **Principal Amount** | **Finance Charge** | **End Date** |
| &nbsp;&nbsp; February 11, 2025 | $33002 | $2310 | &nbsp;&nbsp; July 12, 2025 |
| &nbsp;&nbsp; April 1, 2025 | $24432 | $2199 | &nbsp;&nbsp; September 29, 2025 |

---

**16.** **GOVERNMENT LOANS PAYABLE** 

On July 7, 2020, Kirkman applied and was granted thirty (30) year loan from the U.S. Small Business Administration for $150,000 with an interest of 3.75% per annum accrued daily, to alleviate financial burden caused due to COVID-19.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Government loans recognized as of January 1 | $143904 | $147168 |
| Proceeds from debt facilities |  |  |
| Payments on debt facilities | (1709) | (3264) |
| **Government loans at December 31** | **142195** | **143904** |
| Less: current portion | (3515) | (3436) |
| **Long-term portion** | $**138680** | $**140468** |

---

The Company has the following government loan commitments as of June 30, 2025.

---

| | |
|:---|:---|
|  | **Amount** |
| 2025 | $1727 |
| 2026 | 3595 |
| 2027 | 3702 |
| 2028 and beyond | 133171 |
| **Total** | $**142195** |

---

**17.** **OTHER CURRENT LIABILITIES** 

Balance consists of credit cards, employee benefits and sales tax payable.

---

| | | |
|:---|:---|:---|
|  | **June 30,<br> 2025** | **December 31, <br> 2024** |
| Credit cards | $25971 | $30786 |
| Sales tax | 1652 | 1422 |
| Other | 6777 | 3124 |
| **Total other current liabilities** | $**34400** | $**35332** |

---

**18.** **LOANS PAYABLE (RELATED PARTY)** 

On March 11, 2024, the Company executed a loan agreement with a related party in the amount of $130,000, with an annual interest rate of 20% and a due date of March 11, 2031.

On March 10, 2025, the Company executed a loan agreement with a related party in the amount of $225,000, with an annual interest rate of 18% and a due date of March 7, 2029.

---

| | | |
|:---|:---|:---|
|  | **June 30,** <br> **2025**  | **December 31, <br> 2024** |
| **Related parties loan as of January 1** | $370703 | $247634 |
| Loan agreement executed with related parties during the periods | 225000 | 130000 |
| Reclass to loan payable | (247634) |  |
| Payments to related parties | (15076) | (6931) |
| **Related parties as of period end** | **332993** | **370703** |
| **Less: current portion** | (56254) | (370703) |
| **Long-term portion** | $**276739** | $**-** |

---

&nbsp;&nbsp;&nbsp;&nbsp;**19.** **LOAN PAYABLE** 

In December 2023, the Company entered into a short-term debt facility with an officer and director of the parent company – Hemptown Organics Corp., whereby the Company received $247,634. The loan is non-interest-bearing and remains outstanding as of June 30, 2025. The officer and director resigned in January 2025, and therefore the loan was reclassed from related party to loans payable.

On June 18, 2024, the Company executed a loan agreement with a lender in the amount of $150,000. The payment terms are 12.5% Original Issue Discount ("OID"), initial principal amount consisting of a $150,000 loan plus $21,500 OID totaling $171,500. In addition, the loan required the Company to issue 37,500 warrants with anti-dilution protection as well as an equity interest in the amount of 2,045 shares of the Company's stock with reverse split protection through the Senior Exchange Listing

The loan is to mature the earlier of six months from execution, completion of a senior exchange listing of the Company or as mutually agreed, with an interest rate of the higher of 12% or WSJ Prime plus 4% guaranteed.

On December 11, 2024, the Company signed an amendment with the lender to extend the maturity date to February 28, 2025. In consideration for the extension of the maturity date, the Company agreed that the loan shall be paid in cash in full and shall not be converted into stock. In addition, the Company shall deliver 20,000 shares of the Company's common stock and a cash fee of $10,000.

On March 10, 2025, the Company signed an extension with a lender to extend the maturity date to May 15, 2025. In consideration for the extension of the maturity date, the Company agreed that the loan shall be paid in cash in full and shall not be converted into stock. In addition, the Company shall deliver a cash fee of $10,000. In addition, the Company issued the lender a total of 37,500 warrants at an exercise price of $8.50 per share. The warrants carry a term of 5 years, exercisable in whole or in part at any time or times during the exercise period – on or after the initial date of issuance and on or before the termination date. The warrants were assessed at a value of $23,138 based on the Black-Scholes pricing model. As of June 30, 2025, the Company recognized $23,138 in expenses related to the vesting of these warrants.

On April 29, 2025 the Company entered into a loan agreement with a third-party whereby the Company received $100,000. The term of the loan is for 1 year with a 22.95% finance charge.

On June 1, 2025, the Company signed an extension with a lender to extend the maturity date to August 15, 2025. In consideration for the extension of the maturity date, the Company agreed that the loan shall be paid in cash in full and shall not be converted into stock. In addition, the Company will owe an additional $10,000 cash fee on the maturity date. In addition, the Company issued the lender a total of 37,500 warrants at an exercise price of $8.50 per share. The warrants carry a term of 5 years, exercisable in whole or in part at any time or times during the exercise period – on or after the initial date of issuance and on or before the termination date. The warrants were assessed at a value of $22,125 based on the Black-Scholes pricing model. As of June 30, 2025, the Company recognized $45,263 in expenses related to the vesting of these warrants.

---

| | | |
|:---|:---|:---|
|  | **June 30,** <br> **2025**  | **December 31, <br> 2024** |
| **Loan payables as of January 1** | $171500 | $171500 |
| Loan agreement executed during the periods | 100000 |  |
| Reclass to loan payable | 247634 |  |
| Payments to related parties | (13934) | - |
| **Loan payable as of June 30** | **505200** | **171500** |
| **Less: current portion** |  |  |
| **Long-term portion** | $**505200** | $**171500** |

---

**20.** **CONVERTIBLE DEBENTURE** 

On October 7, 2022, the Company entered into Convertible Debenture Purchase Agreements pursuant to which the Company issued unsecured convertible promissory note ("Convertible Debenture"). The Company issued Convertible Debenture in the aggregate principal amount of $100,000 that was used to pay the expenses of the organization and reorganization and for other general corporate purposes. Interest accrued on the principal balance of the Convertible Debenture at 10.0% per annum totaled $2,338. The Convertible Debenture ranks on a parity with the Company's other existing debt and matured on December 31, 2022. The Convertible Debenture was to convert the outstanding principal and accrued interest into shares of the Company's common stock on maturity date at a price per share equal to $0.92 per share, however the maturity was delayed at the request of the debenture holder. As of December 31, 2024, the holder had still not converted the debenture.

On January 17, 2025, the holder of its Convertible Debenture converted an aggregate principal amount of $100,000 and accrued interest of $22,331 into 133,441 shares of common stock at a price equal to $0.91693 per share.

As of June 30, 2025, the Company has no outstanding debentures.

**21.** **RELATED PARTY TRANSACTIONS** 

**Executive contracts** 

We have entered into contractual agreements with our CEO and CFO.

*Employment Agreement – CEO* 

Effective as of March 11, 2025, the employment agreement has an original term of 12 months subject to automatic renewal unless terminated for cause. Effective upon achieving the Direct Listing, Mr. Gripentrog's annual salary will increase to $360,000. He is also entitled to an annual bonus up to 100% of his annual salary as determined by the Compensation Committee in its discretion. Mr. Gripentrog is also entitled to a performance-based equity awards based upon achieving the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Restricted Stock Units equal to $500,000
 which vest six (6) months after the completion of the Direct Listing and valued at the price
 of the stock upon the date of vesting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) The value of $500,000 worth of Company
 common stock upon closing of each acquisition post Direct Listing with such shares valued
 at the price of the Company's stock upon completion of the acquisition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) The value of $250,000 worth of Company
 common stock upon the Company achieving positive EBIDTA for the first time in any calendar
 year with such shares valued at the price of the Company's stock at the end of such
 calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) The value of $1,000,000 worth of Company
 common stock upon the Company achieving a positive EBIDTA of $5 million for the first time
 in any calendar year with such shares valued at the price of the Company's stock at
 the end of such calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) The value of $1,000,000 worth of Company
 common stock upon the Company achieving a first-time market valuation of $100 Million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The value of $2,500,000 worth of Company
 common stock upon the Company achieving a first-time market valuation of $250 Million.

*Employment Agreement – CFO*

Effective as of April 1, 2023, the employment agreement has an original term of 12 months subject to automatic renewal unless terminated for cause. The CFO will be issued 27,265 restricted stock units with an exercise price and vesting period to be determined after the initial public offering and 190,854 stock options with an exercise price and date of issuance to be determined by the Company's board of directors, with an expiration term of three years after termination of the employment agreement unless terminated for cause. The CFO is also entitled to a performance-based bonus payout as set forth in the chart below, after giving effect to the Reverse Stock Split:

---

| | |
|:---|:---|
| **Consolidated Revenue Target (USD)** | **Functional Brands Inc. Stock Payout (common shares)** |
| Below $10,000,000 | 27265 |
| $10000000 | 54530 |
| $15000000 | 81795 |
| $20000000 | 109059 |
| $25000000 | 136324 |
| $30000000 | 163589 |
| $35000000 | 190854 |
| $40000000 | 218119 |

---

&nbsp;&nbsp;&nbsp;&nbsp;**22.** **SHARE CAPITAL** 

**Authorized share capital**

*Common Shares*

Upon incorporation, the Company authorized 54,530 common shares with a par value of $0.001 per share were initially authorized for issuance. The Initial Share of the Company was allotted and issued to a former director of the Company as fully paid on November 19, 2020, the date of the organization. The issuance of the Initial Share was recorded in the central securities register of the Company and represents the only share initially issued. The Company purchased the Initial Share from a former director for the price of $0.01 and the Initial Shared formed part of the authorized but unissued share capital of the Company. The repurchase of the Incorporator's Share was recorded in the central securities register of the Company and the director confirms that no share certificate was issued or shall be issued in respect of the Initial Share.

On December 10, 2020, the Company altered its authorized share capital to 100,000,000 common shares with a par value of $0.00001 per share to be issued from its treasury.

On August 31, 2023, this was changed to 220,000,000 common shares with a par value of $0.00001 per share to be issued from its treasury.

On January 21, 2025, the Company effected a reverse stock split in its authorized common stock on a basis of 1-for-18.338622. The authorized capital stock of the Company remained the same at 220,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the reverse stock split. In addition, the Company authorized 1,000,000 shares of blank check preferred $0.001 par value.

All Common Shares are entitled to one vote in respect to each Common Share held at all meetings of shareholders of the Company.

 *Preferred Shares*

On January 22, 2025, the Company authorized 1,000,000 blank check preferred stock at a par value of $0.001 per share.

On July 18, 2025, the Company authorized 12,000 Series A Preferred stock and 10,000 Series B Preferred stock, at a par value of $0.00001 per share.

**Issued share capital**

*Common share issuances*

On December 10, 2020, the Company entered into a licensing agreement with Hemptown Organics Corp. (the "licensor") to use the Hemptown Naturals brand (the "asset") on a non-exclusive, non-transferable basis for a period of 4 years. In return, 2,181,189 common shares were issued to the licensor at $0.018339 per share with deemed proceeds of $40,000 as consideration.

On May 19, 2023, the Company entered into a Share Exchange Agreement (SEA) to acquire HTO Nevada Inc. dba Kirkman from a related party, Hemptown Organics Corp. and its wholly owned subsidiary, HTO Holdings Inc. As part this SEA, HTO Holdings Inc. exchanged 1,000 restricted shares of common stock, par value $0.0001 per share of HTO Nevada Inc. dba Kirkman, being all of the issued and outstanding capital stock of HTO Nevada Inc. dba Kirkman, for issuance of 4,362,378 restricted shares of common stock of Functional Brands Inc., $0.018339 par value per share to Hemptown Organics Crop., with deemed proceeds of $80,000 as consideration, such that, HTO Nevada Inc. dba Kirkman shall be wholly-owned subsidiary of Functional Brands Inc. This was retroactively recorded in 2019 as the acquisition was completed on July 3, 2019.

This SEA was in respect of the asset purchase agreement (the "APA") the Company entered into on July 3, 2019, with the Kirkman Group ("Kirkman") to acquire certain tangible and intangible assets.

*Regulation Crowdfunding (Reg CF) Campaign*

 

Under the Securities Act of 1933, the offer and sale of securities must be registered unless an exemption from registration is available. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides and exemption from registration for certain crowdfunding transactions. The Company is currently completing a Regulation Crowdfunding offering ("Offering") subject to the above regulations and had filed its Offering statement on Form C through the EDGAR system and with the Title3Funds.com as intermediary.

The Offering was for a maximum of $5,000,000 at a price of $25.67 per share with an offering deadline of December 31, 2022, which was extended to May 31, 2023. The securities purchased in this Offering will be subject to a number of restrictions including restrictions on resale for a period of one year. The use of the proceeds will be towards the fees associated with this Offering, further development of the Company's business – sales & marketing, and for general working capital purposes.

During the six months ended June 30, 2025, the Company did not issue any common shares stemming from the Reg CF campaign.

*Regulation D (Reg D) Campaign*

During the six months ended June 30, 2025, the Company did not issue any common shares stemming from the Reg D campaign.

**Stock based compensation**

 *Restricted Stock Units (RSUs) for services* 

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares RSUs** | **Share Capital** |
| RSUs issued for services rendered in prior years | 1216 | 3405 |
| RSUs issued for services rendered during the six months ended June 30, 2025 | 203 | 565 |
| **Total issuance for the six months ended June 30, 2025** | **1419** | **3970** |

---

For the six months ended June 30, 2025, the change in additional paid-in capital was $3,970 in respect of RSUs issued for services incurred during the period as well as the issuance of RSUs which were accrued but not yet issued from prior years.

 *Shares for Services*

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares** | **Share Capital** |
| Common stock issued for professional services | 4446 | $12410 |
| Common stock issued for consulting services | 86420 | 241975 |
| Common stock issued for legal services | 90000 | 252000 |
| **Total issuance for services for the six months ended June 30, 2025** | **180866** | $**506385** |

---

Stock based compensation is comprised of 1,419 RSUs and 180,852 common shares issued for services rendered during the six months ended June 30, 2025, resulting in a change in share capital of $510,355.

The price per share of $2.80 is based on a 409a valuation report prepared by a third-party appraisal, subsequently completed on May 14, 2025.

 **Shares for convertible note payable** 

---

| | | |
|:---|:---|:---|
|  | **Number of <br> shares**  | **Share Capital** |
| **Common stock issued for convertible notes payable** | **133441** | $**122331** |

---

On January 17, 2025, the holder of its Convertible Debenture converted an aggregate principal amount of $100,000 and accrued interest of $22,331 into 133,441 shares of common stock at a price equal to $0.91674 per share.

 **Shares for financing expense**

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares** | **Share Capital** |
| **Common stock issued for financing expense** | **18082** | $**50630** |

---

On June 25, 2025, the Company issued 18,082 shares of common stock to settle outstanding financing expense.

 **Issued warrants**

---

| | | | |
|:---|:---|:---|:---|
|  | **Number of warrants** | **Weighted-Average Exercise Price per Share** | **Weighted-Average Remaining Life** |
| **Outstanding at December 31, 2024** |  |  |  |
| Granted | 75000 | 8.5 | 4.68 |
| Canceled or expired |  |  |  |
| **Outstanding at June 30, 2025** | **75000** | $**8.5** | **4.68 years** |
| **Exercisable at June 30, 2025** | 75000 | $8.5 | 4.68 years |
| **Intrinsic value at June 30, 2025** |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |

---

On March 10, 2025, the Company issued a lender a total of 37,500 warrants at an exercise price of $8.50 per share. The warrants carry a term of 5 years, exercisable in whole or in part at any time or times during the exercise period – on or after the initial date of issuance and on or before the termination date. The options were valued at $23,138 using a Black-Scholes pricing model.

On June 1, 2025, the Company issued a lender a total of 37,500 warrants at an exercise price of $8.50 per share. The warrants carry a term of 5 years, exercisable in whole or in part at any time or times during the exercise period – on or after the initial date of issuance and on or before the termination date. The options were valued at $22,125 using a Black-Scholes pricing model.

During the six months ended June 30, 2025, the Company recorded $45,263 in expenses associated with the vesting of these stock warrants.

**23.** **SEGMENT REPORTING** 

The Company has two operating segments:

1) Kirkman, which sells a range of nutraceuticals, supplements and related products;

2) HT Naturals, which sells a range of hemp-based consumer products.

The Company has a corporate function, which is not an operating segment, and includes expenses related to corporate management and administration, including legal, audit, accounting, tax, SEC reporting, and investor/public relations, among other corporate expenses.

The Company follows ASC 280, Segment Reporting, as amended by ASU 2023-07, which requires entities to report financial and descriptive information about their reportable operating segments. ASC 280-10-50-1 states that an operating segment is a component of a public entity that:

● Engages in business activities from which it may earn revenues and incur expenses;

● Has operating results that are regularly reviewed by the Chief Operating Decision Maker (CODM), who is the Company's Chief Executive Officer, to make decisions about resource allocation and performance assessment; and

● Has discrete financial information available.

Under ASC 280-10-50-5, a public entity is required to report separately only those operating segments that meet certain quantitative thresholds. However, as specified in ASC 280-10-50-11, if a company's business activities are managed as a single operating segment and reviewed on a basis, the company may report as a single segment. The Company has determined that it operates as one reportable segment, as its CODM reviews the business as a whole rather than by distinct business components.

Management has evaluated the Hemp and Supplements operating segments under the qualitative aggregation criteria in ASC 280-10-50-11 and determined that:

● The segments have similar economic characteristics,

● They are similar in the nature of products and services, production processes, type of customers, distribution methods, and regulatory environment.

Accordingly, in accordance with ASC 280-10-50-11, the Hemp segment will be aggregated with the Supplements segment into a single reportable segment.

Furthermore, based on the quantitative thresholds in ASC 280-10-50-12 and management's assessment, only the Kirkman operating segment meets the criteria to be classified as a reportable segment. HT Naturals represents approximately 3% of consolidated revenue and does not meet any of the other quantitative thresholds for disclosure as a separate reportable segment.

Therefore, the Company has two operating segments that were aggregated to one reporting segment because the HT Natural segment is considered immaterial.

 **Measure of Segment Profit or Loss**

---

| | | |
|:---|:---|:---|
|  | **For the Six Months Ended<br> June 30,** | **For the Six Months Ended<br> June 30,** |
|  | **2025** | **2024** |
| **Revenue, net of returns** | $3422789 | $3490446 |
| **Costs and expenses:** |  |  |
| **Cost of goods sold** | 1587928 | 1636792 |
| **Sales & marketing** | 343669 | 298217 |
| **General and administrative expenses** | 1678728 | 1430011 |
| **Operating income / (loss)** | **(187536)** | **125426** |
| **Interest expense** | (166106) | (119914) |
| **Interest income** | 804 | 963 |
| **Net income / (loss) for the periods** | $**(352838)** | $**6475** |

---

 **Significant Segment Expenses**

The Company considers the following significant expenses in evaluating its performance:

● General & Administrative: including personnel costs, professional fees, and other overhead expenses.

● Sales & Marketing: includes personnel costs and other sales-related expenses.

● Cost of Goods Sold: represents labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer from the Company's facility.

Since the Company has only one reportable segment, no additional segment disclosures are required beyond entity-wide disclosures presented below.

 **Entity-Wide Disclosures**

 *Geographic Revenue Information*

For the six months ended June 30, 2025, and 2024, 92% of the Company's net sales were generated in North America.

 *Concentration*

For the six months ended June 30, 2025, sales from two customers represented 31% and 24% for a total of 55% of sales totaling $1,870,264. For the six months ended June 30, 2024, sales from two customers represented 30% and 27% for a total of 57% of sales totaling $1,981,105.

As of June 30, 2025, accounts receivable balance from one customer represented 78% of total accounts receivable totaling $286,948. As of December 31, 2024, accounts receivable balance from one customer represented 70% of total accounts receivable, totaling $211,756.

**24.** **REVENUES, NET** 

This table shows revenue by product type:

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
|  | **2025** | **2024** |
| Nutraceutical (supplements) | $3323156 | $3429920 |
| Hemp derived products | 99633 | 60526 |
|  | $**3422789** | $**3490446** |

---

**25.** **CONCENTRATION** 

For the six-month period ended June 30, 2025, sales from two customers represented 31% and 24% for a total of 55% of sales totaling $1,870,264. For the six-month period ended June 30, 2024, sales from two customers represented 30% and 27% for a total of 57% of sales totaling $1,981,105.

As of June 30, 2025, accounts receivable balance from one customer represented 78% of total accounts receivable totaling $286,948. As of December 31, 2024, accounts receivable balance from one customer represented 70% of total accounts receivable, totaling $211,756.

**26.** **COMMITMENTS AND CONTINGENCIES** 

The Company has an exclusive license agreement with the Trailer Park Boys Incorporated (TPB) to market & sell hemp derived products. This license came into effect on July 21, 2021, and will expire on December 31, 2025. Under the license agreement and subsequent amendments, the Company will pay Trailer Park Boys an amount equal to $725,000 and 14,440 shares of common stock of the Company.

As of June 30, 2025, the Company owed $150,000 payable as follows:

---

| | |
|:---|:---|
| **Date** | **Amount** |
| &nbsp;&nbsp;&nbsp; July 1, 2025 | $75000 |
| &nbsp;&nbsp;&nbsp; October 1, 2025 | 75000 |
| **Total** | $**150000** |

---

The royalty rates under this agreement are between 15% - 30% of the net sales of the company derived from sales related to the license. During the six months ended June 30, 2025, the Company made payments in the amount of $50,000, with total life-to-date payments amounting to $575,000. The license agreement may be terminated with reasonable cause upon six months written notice or for certain triggering events without recourse or an opportunity to cure.

**27.** **LEGAL PROCEEDINGS** 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. On May 25, 2021, True Health Medical Center, S.C. ("True Health") amended an existing complaint against Kirkman Group, Inc. ("Kirkman"), James Hall and David Humphries to assert claims against HTO Nevada, Inc. and HTO Holdings, Inc. (collectively, HTO Nevada, Inc. and HTO Holdings, Inc. are referred to as the "HTO Parties"). Kirkman is the seller of certain assets to the HTO Parties and is a separate legal entity. Affiliates of the HTO Parties were first named in the lawsuit on September 23, 2020. The case is pending in the Circuit Court for the Eighteenth Judicial Circuit, DuPage County, Illinois. Kirkman had terminated a royalty agreement prior to selling its assets to the HTO Parties but the royalty agreement has a provision that allows True Health to continue to receive royalties after the termination of the agreement. True Health claims that Kirkman underpaid the royalties due to True Health prior to the sale of assets to the HTO Parties. There is no dispute that Kirkman stopped paying royalties to True Health around the time it terminated the agreement and that the HTO Parties have never paid royalties to True Health. True Health contends that as the purchaser of certain Kirkman assets, the HTO Parties should be bound by the terms of the royalty agreement. There is no certain amount at this time in connection with the alleged in the damages claim against the HTO Parties. It is not possible to predict the outcome of this proceeding at this time. To date, the parties have engaged in some discovery including a limited number of depositions. True Health has filed a motion for summary judgment that addresses its claims against Kirkman but does not address any claim against the HTO Parties. The briefing is not yet complete on the summary judgment motion and a ruling is likely more than 60 days away. Regardless of how the court rules on summary judgment, there will be remaining claims in the case, and it is likely that additional discovery will be conducted. No trial date has been scheduled at this time. The parties have largely completed both fact and expert discovery. Kirkman Group has recently filed a motion for leave to amend its counterclaims against True Health. None of these proposed counterclaims are alleged against HTO Nevada. However, if the Court permits the amended counterclaims to be filed, it is possible that additional discovery will be needed on the amended counterclaims. It is also likely that True Health will move to dismiss some or all the amended counterclaims. Either additional discovery or motion practice would typically mean that the prospective trial date will not occur until a later date than would have been the case absent these additional steps in the litigation. As of today, the court has not set a trial date.

**28.** **SUBSEQUENT EVENTS** 

The Company follows the guidance in FASB ASC Topic 855, Subsequent Events ("ASC 855"), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth the following:

&nbsp;&nbsp;&nbsp;&nbsp;(i) The period after
 the balance sheet date during which management of a reporting entity evaluates events or
 transactions that may occur for potential recognition or disclosure in the consolidated financial
 statements

&nbsp;&nbsp;&nbsp;&nbsp;(ii) The circumstances
 under which an entity should recognize events or transactions occurring after the balance
 sheet date in its consolidated financial statements, and

&nbsp;&nbsp;&nbsp;&nbsp;(iii) The disclosures
 that an entity should make about events or transactions that occurred after the balance sheet
 date. Accordingly, the Company did not have any subsequent events that require disclosure
 other than the following.

 **Payable for acquisition** 

On July 9, 2025, the Company signed amendment to the Forbearance Agreement in respect of the principal owed in the amount of $2,227,366, extending the due date to August 30, 2025.

 **Preferred stock** 

On July 18, 2025, the Company authorized 12,000 Series A Preferred stock and 10,000 Series B Preferred stock, at a par value of $0.00001 per share.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**TABLE OF CONTENTS** 

---

| | |
|:---|:---|
| [**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID NO. 5854)**](#d_001) | F-33 |
| [**CONSOLIDATED BALANCE SHEET<u>S</u>**](#d_002) | F-34 |
| [**CONSOLIDATED STATEMENTS OF OPERATIONS**](#d_003) | F-35 |
| [**CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY**](#d_004) | F-36 |
| [**CONSOLIDATED STATEMENTS OF CASH FLOWS**](#d_005) | F-37 |
| [**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**](#d_006) | F-38 - F-67 |

---

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**INDEPENDENT AUDITORS' REPORT**

![](fin_001.jpg)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and<br> Stockholders of Functional Brands, Inc. (formerly HT Naturals Inc.)

**Opinion on the Consolidated Financial Statements**

We have audited the accompanying consolidated balance sheets of Functional Brands, Inc.(formerly HT Naturals Inc.) (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

**Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred net losses and has an accumulated deficit. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

![](fin_002.jpg)

We have served as the Company's auditor since 2024.

Diamond Bar, CA

March 27, 2025 except for Notes 4 and 24, as to which the date is August 12, 2025

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED BALANCE SHEETS**

***(In U.S. Dollars, except share data or otherwise noted)***

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Assets** | | |
| ***Current*** | | |
| &nbsp;&nbsp;&nbsp;Cash | $211642 | $374435 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 303471 | 170938 |
| &nbsp;&nbsp;&nbsp;Inventories, net | 1709458 | 1694020 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 45112 | 72441 |
| &nbsp;&nbsp;&nbsp;Deferred offering costs | 588641 | 231910 |
| ***Total current assets*** | **2858324** | **2543744** |
| ***Noncurrent*** |  |  |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 49564 | 96054 |
| &nbsp;&nbsp;&nbsp;Right-of-use assets, net | 2000092 | 2307027 |
| &nbsp;&nbsp;&nbsp;Intangible assets, net | 1443541 | 1489671 |
| &nbsp;&nbsp;&nbsp;Goodwill | 818139 | 818139 |
| ***Total non-current assets*** | **4311336** | **4710891** |
| **Total assets** | $**7169660** | $**7254635** |
| **Liabilities** |  |  |
| ***Current*** |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable & accrued liabilities | $1956165 | $1630399 |
| &nbsp;&nbsp;&nbsp;Line of credit | 32235 | 68315 |
| &nbsp;&nbsp;&nbsp;Government loans, current | 3436 | 3280 |
| &nbsp;&nbsp;&nbsp;Lease liabilities, current | 291213 | 261015 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | 35332 | 40825 |
| &nbsp;&nbsp;&nbsp;Payable for acquisition, current | 2342366 |  |
| &nbsp;&nbsp;&nbsp;Loan payable (related parties) | 370703 | 247634 |
| &nbsp;&nbsp;&nbsp;Loan payable | 171500 | - |
| ***Total current liabilities*** | **5202950** | **2251468** |
| ***Noncurrent*** |  |  |
| &nbsp;&nbsp;&nbsp;Lease liabilities, net of current | 1844819 | 2136032 |
| &nbsp;&nbsp;&nbsp;Payable for acquisition, non-current |  | 2597368 |
| &nbsp;&nbsp;&nbsp;Government loans, net of current | 140468 | 143888 |
| &nbsp;&nbsp;&nbsp;Convertible debenture | 100000 | 100000 |
| ***Total non-current liabilities*** | **2085287** | **4977288** |
| **Total liabilities** | $**7288237** | $**7228756** |
| **Shareholders' equity / (deficit)** |  |  |
| &nbsp;&nbsp;&nbsp;*Common stock, par value $0.00001, authorized 220,000,000 shares; 6,694,880and 6,694,493shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively* | 67 | 67 |
| &nbsp;&nbsp;&nbsp;*1,000,000 shares of blank check preferred $0.001 par value 0 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively* |  |  |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 7542286 | 7127386 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (7660930) | (7101574) |
| **Total Stockholders' Equity / (Deficit)** | **(118577)** | **25879** |
| **Total liabilities and shareholders' equity / (deficit)** | $**7169660** | $**7254635** |

---

The accompanying notes are an integral part of these consolidated financial statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED STATEMENTS OF OPERATIONS**

***(In U.S. Dollars, except share data or otherwise noted)***

 ****

---

| | | |
|:---|:---|:---|
|  | **For the Year Ended<br> December 31,** | **For the Year Ended<br> December 31,** |
|  | **2024** | **2023** |
| **Revenue, net of returns** | 6566455 | 6820499 |
| **Costs and expenses:** |  |  |
| **Cost of goods sold** | 2959609 | 3641648 |
| **Sales & marketing** | 576315 | 588772 |
| **General and administrative expenses** | 3259623 | 3672582 |
| **Operating loss** | **(229092)** | **(1082503)** |
| **Other income / (expenses)** |  |  |
| **Interest expense** | (331836) | (158591) |
| **Interest income** | 1572 | - |
| **Net loss for the year** | $**(559356)** | $**(1241094)** |
| **Net loss per share of common stock attributable to common stockholders** |  |  |
| **Basic and diluted** | $(0.08) | $(0.19) |
| **Weighted average shares used in computing net loss per share of common stock** |  |  |
| **Basic** | **6694493** | **6689547** |
| **Diluted** | **6694493** | **6691217** |

---

The accompanying notes are an integral part of these consolidated financial statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY / (DEFICIT)**

***(In U.S. Dollars, except share data or otherwise noted)***

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **No. of<br> Shares** | **Common<br> Stock** | **Preferred<br> Stock** | **APIC** | **Accumulated<br> Deficit** | **Total<br> Shareholders'<br> Equity / (Deficit)** |
| **December 31, 2022 (Restated)** | **6678415** | **67** |  | **4601340** | **(5860480)** | **(1259073)** |
| **Stock-based compensation** | 102 |  |  | 762825 |  | 762825 |
| **Shares issued as part of Reg CF campaign, net of refunds** | 354 |  |  | 9076 |  | 9076 |
| **Shares issued as part of Reg D** | 15622 |  |  | 106000 |  | 106000 |
| **Forgiveness of balances due to/from related parties** |  |  |  | 1648145 |  | 1648145 |
| **Net loss for the year ended December 31, 2023** | - | - |  | - | (1241094) | (1241094) |
| **December 31, 2023** | **6694493** | **67** |  | **7127386** | **(7101574)** | **25879** |
| **Stock-based compensation** |  |  |  | 414900 |  | 414900 |
| **Odd-lot rounding** | 387 |  |  |  |  |  |
| **Net loss for the year ended December 31, 2024** | - | - |  | - | (559356) | (559356) |
| **December 31, 2024** | **6694880** | **67** |  | $**7542286** | $**(7660930)** | $**(118577)** |

---

The accompanying notes are an integral part of these consolidated financial statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**CONSOLIDATED STATEMENTS OF CASH FLOW** 

***(In U.S. Dollars, except share data or otherwise noted)***

---

| | | |
|:---|:---|:---|
|  | **For The Year Ended<br> December 31, <br> 2024** | **For The Year Ended<br> December 31, <br> 2023** |
| **Cash flows from operating activities:** | | |
| &nbsp;&nbsp;&nbsp;Net loss | $(559356) | $(1241094) |
| &nbsp;&nbsp;&nbsp;Reconcile net loss to cash provided by operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for doubtful accounts receivable | (32491) | 36287 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for inventory obsolescence | (14206) | 79033 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation of property & equipment | 48371 | 105175 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of right-of-use assets | 306935 | 283197 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 414900 | 762825 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets | 46130 | 46130 |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (100042) | 31702 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (1231) | 346180 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 27329 | 74495 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable & Accrued liabilities | 132160 | 337976 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities | (5494) | (101519) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease liabilities | (261015) | (196470) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to/from related parties | - | (315748) |
| &nbsp;&nbsp;&nbsp;**Net cash provided by operating activities** | **1990** | **248169** |
| **Cash flows from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment | (1881) | (3500) |
| &nbsp;&nbsp;&nbsp;**Net cash used in investing activities** | **(1881)** | **(3500)** |
| **Cash flows from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment for deferred offering costs | (163125) | (211660) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from long-term debt | 301500 | 247634 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments for payable for acquisition | (255002) | (257632) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share issuance for cash from Reg CF |  | 9076 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share issuance for cash from Reg D |  | 106000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from debt facilities | 180662 | 400000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment loan repayment |  | (4125) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt repayment | (6931) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Line of credit repayment | (216742) | (359522) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government debt repayment | (3264) | (2832) |
| &nbsp;&nbsp;&nbsp;**Net cash used in financing activities** | **(162902)** | **(73061)** |
| &nbsp;&nbsp;&nbsp;Net increase (decrease) in cash | (162793) | 171608 |
| &nbsp;&nbsp;&nbsp;Cash beginning of year | 374435 | 202827 |
| &nbsp;&nbsp;&nbsp;**Cash, end of year** | **211642** | **374435** |
| **Supplemental disclosures of cash flow information** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest | 224428 | 158591 |
| **Non-cash investing and financing activities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Right-of-use and lease liability upon lease commencement | - | 2500613 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forgiveness of balances due to/from related parties | - | 1648145 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred offering costs | 193606 | - |

---

The accompanying notes are an integral part of these consolidated financial statements.

**FUNCTIONAL BRANDS INC. (formerly HT Naturals Inc.)** 

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**1.** **ORGANIZATION AND NATURE OF OPERATIONS** 

Functional Brands Inc. (formerly HT Naturals Inc. - the "Company") was organized under the General Corporation Law in the State of Delaware on November 19, 2020. The Company's principal business is in the production, marketing, sales, and distribution of smokable hemp related products in certain states within the United States of America that permit such sales.

On March 22, 2023, the Company changed its name from HT Naturals Inc. to Functional Brands Inc. to better reflect its corporate identity.

As of December 31, 2024, and 2023, the Consolidated Financial Statements consist of the Company and its wholly owned subsidiary HTO Nevada Inc. (d/b/a Kirkman), which is a nutraceutical manufacturer and distributor based in the Pacific Northwest. All intercompany transactions and balances have been eliminated in consolidation.

On January 22, 2025, the Company effected a reverse stock split in its authorized common stock on a basis of 1-for-18.338622. The authorized capital stock of the Company remained the same at 220,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the reverse stock split. In addition, the Company authorized 1,000,000 shares of blank check preferred $0.001 par value.

**2.** **GOING CONCERN** 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company had a net loss of $559,356 for the year ended December 31, 2024, and net loss in the amount of $1,241,094 for the year ended December 31, 2023. As of December 31, 2024, the Company has a shareholders' deficit and accumulated deficit of $118,577 and $7,660,930, respectively. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability and attempt to secure additional equity and/or debt financing. There are no assurances that the Company will be successful in obtaining additional capital.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not include any adjustments that might arise from this uncertainty.

**3.** **BASIS OF PRESENTATION** 

**Basis of preparation and principles of consolidation** 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The consolidated financial statements comprise the financial statements of the Company and only subsidiary, HTO Nevada Inc. Subsidiary consists of entity over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. To the extent that subsidiaries provide services that relate to the Company's activities, they are fully consolidated from the date control is transferred and are deconsolidated from the date control ceases. All intercompany balances and transactions have been eliminated.

The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies.

*Functional Brands Inc. (formerly HT Naturals Inc.)*

Functional Brands Inc. (formerly HT Naturals Inc.) is the parent company.

*HTO Nevada Inc. dba Kirkman*

 

The principal subsidiary is HTO Nevada Inc. dba Kirkman which is solely owned by the Company.

As part of the restructuring efforts, ownership of HTO Nevada Inc. dba Kirkman was transferred from HTO Holdings Inc. to Functional Brands Inc. (formerly HT Naturals Inc.) on May 19, 2023, in exchange 4,362,378 common shares of the Company. This was retroactively recorded in 2019 as the acquisition was completed on July 3, 2019, with entities under common control.

**4.** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

The significant accounting policies used in the preparation of these consolidated financial statements are described below.

**Cash** 

Cash consists of cash in readily available checking accounts and deposits in transit. As of December 31, 2024, and 2023, cash balances were deposited at a major financial institution. Cash balances are subject to minimal credit risk as the balances are with high credit quality financial institutions.

**Trade and other receivables**

Accounts receivables are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company provides for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. On a periodic basis, management evaluates its accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts amounted to $3,796 and $36,287, for the years ended December 31, 2024, and 2023, respectively.

**Inventories** 

Inventory consists of raw materials, work in process and finished goods. Inventory is measured at the lower of cost or net realizable value. Inventory costs include direct labor and certain overhead expenses such as in-bound shipping and handling costs incurred to bring the inventory to its present location and conditions. Cost is determined by using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. If the Company determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, it records a charge to impairment expenses.

**Property and equipment**

Property and equipment are stated at cost. Depreciation of property and equipment is recorded using the straight-line method over the assets' estimated useful lives. Computer equipment and capitalized software are depreciated over two to five years and furniture, and fixtures are depreciated over five years. Amortization of fixed assets under capital leases is included in depreciation expense.

The categories of capital assets are amortized on a straight-line basis as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Machinery
 & equipment 7 years, straight-line

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Furniture
 & fixtures 7 years, straight-line

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Computer
 equipment 5 years, straight-line

The Company allocates the amount initially recognized in respect of a capital asset to its significant parts and amortizes separately each such part. Residual values, methods of amortization and useful lives of the capital assets are reviewed annually and adjusted if appropriate.

Gains and losses on disposals of capital assets are determined by comparing the proceeds with the carrying amount of the capital asset and is included in the consolidated statement of operations and comprehensive loss.

The assets' residual values, useful lives and methods of depreciation are reviewed at each fiscal year-end and adjusted prospectively if appropriate. An item of equipment is retired upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on sale or retirement of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the consolidated statement of operations in the year the asset is retired. Such assets are tested annually for impairment, or more frequently, if events or changes in circumstances indicate that they might be impaired.

**Intangible Assets**

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization is provided on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any. Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.

The categories of the intangible assets are amortized on a straight-line basis as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Customer
 relationships 10 years

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● cGMP
 certification Indefinite life

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Goodwill
 (including Assembled Workforce) Indefinite life

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Kirkman
 brand Indefinite life

Expenditures in the research phase and post-development maintenance costs are expensed as incurred.

**Goodwill**

Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling interests in the acquire, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill acquired in a business combination is not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed.

Goodwill is tested for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a component). We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Assets and liabilities are assigned to each reporting units if they are employed by a reporting unit and are considered in the determination of the reporting unit fair value. We have one reporting unit with goodwill, which is the Kirkman business.

The Company's indefinite-lived intangible assets is tested for impairment at the consolidated level. In evaluating the recoverability of the Kirkman Brand name and CGMP License, we compare the fair value of the asset to its carrying amount to determine potential impairment. The Company's estimate of the fair value of the Kirkman Brand name is derived using the income approach, specifically the relief-from-royalty method and the fair value of the CGMP License is derived using the income approach.

The fair value determination of the reporting units and the indefinite-lived intangible asset is judgmental in nature and requires the use of significant estimates and assumptions that are sensitive to changes. Assumptions include estimation of the royalty rate, estimation of future revenue and projected margins, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and capital spending, and determination of discount rates. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of the reporting units may include such items as: (i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) decrease in future cash flows due to lower than expected sales, or (iv) fluctuations in foreign currency exchange rates that may negatively impact the Company's reported results of operations. Accordingly, if the current cash flow assumptions are not realized, we experience further increases in costs of capital, it is possible that an additional impairment charge may be recorded in the future, which could be material. The Company did not record an impairment loss during the years ended December 31, 2024, and December 31, 2023.

**Right-of-use Assets and Lease Liabilities** 

The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated amortization and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, right-of-use assets are amortized on a straight-line basis over the shorter of its estimated useful life and the lease term.

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees, if applicable. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as occupancy expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

**Leases as lessee**

The Company determines if an arrangement is a lease at inception of an arrangement. Operating and finance lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company's right to use an underlying asset for the lease term, while lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company uses the internal incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of 12 months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease. The Company applies a portfolio approach to determine the discount rate for leases with similar characteristics.

For leases classified as operating, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus unamortized initial direct costs, plus/(minus) any unamortized prepaid/(accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For leases classified as finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company, or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. The Company expects to exercise the options to purchase the assets which are leased under finance leases. Accordingly, these assets are included in property and equipment, and depreciation thereon is recognized as depreciation expense. When the Company makes contractually required payments under finance leases, a portion is allocated to reduce the finance lease obligation, and a portion is recognized as interest expense.

**Stock-based compensation plans**

The Company has a stock-based compensation plan that is used to compensate the Board, officers, employees and consultants for services rendered.

The restricted share units ("RSU's) are measured by reference to the fair value of the Company's Common Share at the date on which they are granted. In situations where equity instruments are issued to non-employees and the fair value of goods or services received by the entity as consideration cannot be estimated reliably, they are measured at fair value of the equity instruments granted.

The costs of equity settled transactions are recognized as expenses, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant party becomes fully entitled to the award.

No expense is recognized for performance-based awards that do not vest. Expense for service-based award is recognized upon vesting. Where the terms of an equity settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.

Compensation expense is recognized for all share-based payments to employees and non-employees, including restricted stock units, in the statements of operation based on the fair value of the awards that are granted. As necessary, the Company's stock price at the date of grant was estimated using an acceptable valuation technique such as a recent round of fundraising or the probability-weighted expected return model. The fair value of RSUs is determined at the date of grant using the price per share offered at the most recent round of fundraising, the Reg CF campaign.

Compensation expense for restricted stock awards with performance-based vesting conditions is calculated based on the number of awards that are expected to vest during the performance period if it is probable that the performance metrics will be achieved. Generally, measured compensation cost, net of actual forfeitures, is recognized on a straight-line basis over the vesting period of the related share-based compensation award. The Company accounts for forfeitures of stock-based awards as they occur.

**Revenue recognition**

We account for revenue in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standard Codification Topic 606, "Revenue from Contracts with Customers". Revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management's evaluation). Outbound shipping charged to customers is recognized at the time the related merchandise revenues are recognized and are included in net revenues.

Per Company policy, any product that doesn't meet the customer's expectations can be returned within the first 30 days of delivery in exchange for another product or for a full refund. Any product sold through a distributor or retailer must be returned to the original purchase location for any return or exchange. For the years ended December 31, 2024, and 2023, the Company has not recorded any reserves on revenue.

**Loss per Share**

Basic net loss per common share is calculated by dividing the net loss distributed to the common class, by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, restricted stock units (RSUs) are considered to be potentially dilutive securities. As of December 31, 2024, and 2023, there were 82,986 and 76,194 RSUs, respectively, of potential common stock equivalents excluded from the diluted loss per share calculations as their effect is anti-dilutive. Because the Company has reported a net loss for the years ended December 31, 2024, and 2023, diluted net loss per common share is the same as basic net loss per common share for such years.

**Business Combinations**

Business combinations are accounted for using the acquisition method. The fair value of total purchase consideration is allocated to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill. All assets, liabilities and contingent liabilities acquired or assumed in a business combination are recorded at their fair values at the date of acquisition. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Estimates of fair value are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from those estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the statements of operations. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in the Company's statements of operations.

**Significant accounting estimates and judgments**

The most significant judgements made in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements include:

● Obsolescence of inventories

● Recoverability of the carrying value of long-lived assets including property & equipment and intangible assets

● Recoverability of carrying value of goodwill

● Discount rate used to calculate present value of future minimum lease payments for right-of-use asset and liabilities

● Recognition and measurement of provisions and contingencies

● Valuation of deferred income tax assets

*Inventories, net*

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. The allowance for inventory obsolescence amounted to $64,827 and $79,033, for the years ended December 31, 2024 and 2023, respectively.

 ****

*Long-Lived Assets*

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 years ended December 31, 2024, and 2023.

*Fair value of financial instruments*

The individual fair values attributed to the different components of a financing transaction, notably investment in equity securities, derivative financial instruments, convertible debt and loans, are determined using valuation techniques. The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine (a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

*Segment Reporting*

 

In November 2023, the FASB issued ASU 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,* which requires entities to report incremental information about significant segment expenses included in a segment's profit or loss measure as well as the title and position of the chief operating decision maker ("CODM"). The new standard also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The Company adopted ASU 2023-07 effective December 31, 2024 on a retrospective basis.

*Income taxes*

The Company must exercise judgment in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for expected tax audit issues based on the Company's current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision.

In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

**Risks and uncertainties**

The Company's business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include but are not limited to changes in US laws surrounding the sale of smokable CBG/CBD products, consumer demand, and COVID-19 issues more fully described below. These adverse conditions could affect the Company's consolidated financial condition and the results of its operations.

**5.** **CASH** 

Cash consists of liquid funds and deposits in transit.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Cash** | $206890 | $364350 |
| **Deposits in transit** | 4752 | 10085 |
| **Total Cash** | $**211642** | $**374435** |

---

**6.** **ACCOUNTS RECEIVABLE, NET** 

Accounts receivable consist of trade receivables, net of allowance.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Trade receivables** | $307267 | $207225 |
| **Allowance for doubtful accounts** | (3796) | (36287) |
| **Accounts receivable, net** | $**303471** | $**170938** |

---

During the year ended December 31, 2024, the Company adjusted the allowance for doubtful accounts in the amount of $32,491 bringing the balance to $3,796, down from $36,287 for the year ended December 31, 2023. This allowance is continually re-evaluated and adjusted as necessary.

**7.** **INVENTORIES, NET** 

Inventories consisted of raw materials (minerals – magnesium, Calcium, vitamins, botanical extracts, hemp, trim and flower – CBG and CBD), finished goods (capsules, tablets, powders, creams, cigs, gummies, tinctures, pre-rolls, and vapes) and packaging & supplies (bottles, labels, covers, filters, tipping paper and packaging materials).

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Raw materials** | $472296 | $651513 |
| **Packaging, supplies & other** | 231912 | 240756 |
| **Finished goods** | 1070077 | 880784 |
| **Allowance for inventory obsolescence** | (64827) | (79033) |
| **Total Inventories, net** | $**1709458** | $**1694020** |

---

During the year ended December 31, 2024, the Company adjusted the allowance for obsolete raw materials and expired finished goods in the amount of $14,206 bringing the balance to $64,827, down from $79,033 for the year ended December 31, 2023. This obsolescence allowance is continually re-evaluated and adjusted as necessary.

**8.** **PREPAIDS & OTHER CURRENT ASSETS** 

Balance consists of prepayments made to vendors and legal retainers.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Prepaids & deposits** | $45005 | $45538 |
| **Other current assets** | 107 | 26903 |
| **Total prepaids and other current assets** | $**45112** | $**72441** |

---

**9.** **DEFERRED OFFERING COSTS** 

Schedule below represent capitalization of deferred cost incurred for the preparation of Initial Public Offering ("IPO"):

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Legal services** | 364669 | 171063 |
| **Professional services** | 223972 | 60847 |
| **Total IPO Cost** | $**588641** | $**231910** |

---

**10.** **PROPERTY & EQUIPMENT** 

Property and equipment consist of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Furniture & Fixtures** | 3302 | 3302 |
| **Computer Equipment** | 30988 | 30988 |
| **Machinery & Equipment** | 730508 | 728627 |
| **Total property and equipment, gross** | **764798** | **762917** |
| **Less: Accumulated depreciation** | (715234) | (666863) |
| **Property and equipment, net** | $**49564** | $**96054** |

---

Depreciation expenses totaled $48,371 and $105,175 for the years ended December 31, 2024, and 2023, respectively.

**11.** **RIGHT-OF-USE ASSETS & LEASE LIABILITY** 

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The following are the expected lease payments as of December 31, 2024. The lease is considered an "operating lease" and consequently lease payments are calculated on a straight-line basis, including the total amount of interest related.

Lease expense, on the straight-line basis was $510,521 and $528,871 during the years ended December 31, 2024, and 2023.

The movement in the right-of-use assets is as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Right of use assets:** | | |
| **Right of use assets recognized as of January 1<sup>st</sup>** | $2307027 | $89612 |
| **Additions** |  | 2500612 |
| **Amortization Expense** | (306935) | (283197) |
| **Right of use assets, net** | $**2000092** | $**2307027** |

---

The movement in lease liability is as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Lease liabilities recognized as of January 1<sup>st</sup>** | $2397047 | $92904 |
| **Additions** |  | 2500612 |
| **Lease payments** | (261015) | (196469) |
| **Lease liabilities at December 31** | **2136032** | **2397047** |
| **Less: current portion** | **(291213)** | **(261015)** |
| **Long-term portion** | $**1844819** | $**2136032** |

---

The following table presents information about the future maturity of the lease liabilities under the Company's operating and financing leases as of Dec 31, 2024.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Maturity of Lease Liabilities** | **1. Operating Facility** | **2. Office Equipment** | **3. Office Equipment** | **Total<br> Amount** |
| **2025** | $474729 | $28567 | $1068 | $504364 |
| **2026** | 488887 | 24985 | 890 | 514762 |
| **2027** | 503349 |  |  | 503349 |
| **2028 and beyond** | 1142784 | - | - | 1142784 |
| **Total future minimum lease payments** | **2609749** | **53552** | **1958** | **2665259** |
| **Less: Imputed interest** | (525037) | (4044) | (146) | (529227) |
| **Present value of lease liabilities** | $**2084712** | $**49508** | $**1812** | $**2136032** |
| **Remaining lease term (in years)** | 5.09 | 1.75 | 1.75 |  |

---

Right-of-use assets and lease liabilities comprise three leases.

LEASE 1 – OPERATING FACILITY

On January 1, 2023, the Company entered a 7-year and 2-month lease to lease approximately 24,400 square feet industrial building containing 9,095 square feet of office space and 9,663 square feet of production area. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 9.0% within the calculation.

The base monthly rent is $26,500 per month, with subsequent annual increases of 3%. Operating expense came to $10,774 per month for 2023 incurred by the lessee.

LEASES 2 & 3 – OFFICE EQUIPMENT

The Company entered into a 5-year lease to lease office equipment that consists of four copiers for daily office use commencing on September 30, 2021. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 9.0% within the calculation.

The base monthly payment amount is $1,979 per month, with subsequent annual increases of 6%. Operating expense came to $2,119 per month for 2023 borne by the lessee.

In addition, The Company also entered into a 4-year and 7-month lease agreement to lease a Paper Source Accessory for daily office use commencing on March 14, 2022, to complement the previous office equipment discussed. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 9.0% within the calculation. The base monthly payment amount is $89 per month, with no subsequent annual increases.

**12.** **BUSINESS COMBINATION** 

On July 3, 2019, the Company entered into an asset purchase agreement (the "APA") with the Kirkman Group Inc. ("Kirkman") to acquire certain tangible and intangible assets for a purchase price of $5,000,000. The present value of the acquisition fair value of the deferred cash payment transferred for Kirkman was $4,329,317, which consisted of the following:

**Kirkman Group Inc.**

---

| | |
|:---|:---|
| **Purchase consideration** | **Fair Value** |
| Cash | $1250000 |
| Deferred cash payment - $750,000 raise or 1st anniversary of closing | 722388 |
| Deferred cash payment - $1,500,000 on 1st anniversary of closing | 1270649 |
| Deferred cash payment - $1,500,000 on 2nd anniversary of closing | 1086280 |
| Total consideration - $5,000,000 | $**4329317** |

---

 

 

The following table summarizes the finalized fair value of assets acquired, and liabilities assumed as of the date of the acquisition in 2019:

**Kirkman Group Inc.**

---

| | |
|:---|:---|
| **Purchase consideration** | **Fair Value** |
| Net assets | $1513878 |
| Kirkman brand | 1226000 |
| cGMP certification | 310000 |
| Customer relationships | 461300 |
| Net assets acquired | 3511178 |
| Goodwill | 818139 |
| Total Consideration | $**4329317** |

---

The excess of purchase consideration over the fair value of net assets acquired was recorded as goodwill which is not deductible for tax purposes.

*Payable for acquisition*

As of December 31, 2024, and 2023, the Company owed $2,342,366 and $2,597,368, respectively, in connection with the aforementioned APA, which is due in its entirety on January 1, 2025, subject to the Forbearance Agreement and Confession of Judgement.

On September 24, 2024, the Company executed a Forbearance Agreement which allows the seller to postpone the payment of principal balance without pursuing rights under the APA.

On September 24, 2024, the Company executed a Confession of Judgement in respect of the principal owed in the amount of $2,417,366 which allowed the seller to enter a judgement against the Company in The Circuit Court of The State of Oregon for the County of Clackamas.

The execution of these documents will impact the Company if it fails to settle the balance owed by the due date, January 1, 2025. As a result, the seller has the right to foreclose on the business.

On March 5, 2025, the Company signed amendment to the Forbearance Agreement in respect of the principal owed in the amount of $2,297,366 which allowed the seller to enter a judgement against the Company in The Circuit Court of The State of Oregon for the County of Clackamas.

The execution of these documents will impact the Company if it fails to settle the balance owed by the due date, May 31, 2025. As a result, the seller has the right to foreclose on the business.

**13.** **INTANGIBLE ASSETS & GOODWILL** 

Balance consists of intangible assets acquired from acquisition of Kirkman in July 2019. The Kirkman brand and the c-GMP certification were assigned an indefinite useful life, whereas the customer relationships were assigned a life span of 10 years.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| Kirkman brand, net | $925700 | $925700 |
| cGMP certification | 310000 | 310000 |
| Customer relationships | 461300 | 461300 |
| **Total intangible assets, gross** | **1697000** | **1697000** |
| Less: Accumulated amortization: Customer relationships | (253459) | (207329) |
| **Intangible assets, net** | $**1443541** | $**1489671** |

---

There were no impairments to the intangible assets during the years ended December 31, 2024, and 2023.

Balance consists of goodwill (including assembled workforce) acquired from acquisition of Kirkman in July 2019 which was assigned an indefinite useful life.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| Goodwill | $**818139** | $**818139** |

---

There were no impairments to goodwill during the years ended December 31, 2024, and 2023.

**14.** **ACCOUNTS PAYABLE & ACCRUED LIABILITIES** 

Balance consists of trade payables and accruals.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31, <br> 2023** |
| **Trade payables** | $1103359 | $562519 |
| **Accrued liabilities** | 741106 | 796180 |
| **Accrued compensation - shares earned but not issued** | 111700 | 271700 |
|  | $**1956165** | $**1630399** |

---

Accrued liabilities are comprised of accruals consulting, advisory and audit services and accrued interest from convertible note and loan payable.

**15.** **LINES OF CREDIT** 

During the year ended December 31, 2024 the Company entered into multiple agreements with a third party to finance invoices to satisfy multiple vendors of which the following agreements are to be repaid during the year ended December 31, 2025.

On January 20, 2023, the Company entered a line of credit agreement with a third-party whereby the Company received $300,000. The terms of the loan were for one year, with a 27% contract interest rate. On January 22, 2024, the loan was settled in full, at which point the security interest was released by the lender.

On July 14, 2023, the Company entered into an additional line of credit agreement with a third-party whereby the Company received $100,000. The terms of the loan were for 42 weeks, with a 5% contract interest rate. On July 7, 2024, the loan was settled in full, at which point the security interest was released by the lender.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Line of credit recognized as of January 1** | $68315 | $27837 |
| **Proceeds from debt facilities** | 180662 | 400000 |
| **Payments on debt facilities** | (216742) | (359522) |
| **Line of credit at December 31** | **32235** | **68315** |
| **Less: current portion** | **(32235)** | **(68315)** |
| **Long-term portion** | $**-** | $**-** |

---

The Company has the following line of credit commitments as of December 31, 2024.

---

| | | | |
|:---|:---|:---|:---|
| **Agreement Date** | **Principal Amount** | **Finance Charge** | **End Date** |
| **July 18, 2024** | $25000 | $2750 | **January 14, 2025** |
| **July 18, 2024** | $11804 | $1298 | **January 16, 2025** |
| **October 3, 2024** | $7870 | $433 | **January 30, 2025** |
| **October 3, 2024** | $3199 | $176 | **February 9, 2025** |
| **October 17, 2024** | $46127 | $4151 | **April 17, 2025** |

---

Subsequent to year end line of credit commitments were paid off on schedule.

**16.** **GOVERNMENT LOANS PAYABLE** 

On July 7, 2020, Kirkman applied and was a granted thirty (30) year loan from the U.S. Small Business Administration for $150,000 with an interest of 3.75% per annum accrued daily, to alleviate financial burden caused due to COVID-19.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Government loans recognized as of January 1** | $147168 | $150000 |
| **Proceeds from debt facilities** |  |  |
| **Payments on debt facilities** | (3264) | (2832) |
| **Government loans at December 31** | **143904** | **147168** |
| **Less: current portion** | **(3436)** | **(3280)** |
| **Long-term portion** | $**140468** | $**143888** |

---

The Company has the following government loan commitments as of December 31, 2024.

---

| | |
|:---|:---|
|  | **Amount** |
| 2025 | $3436 |
| 2026 | 3595 |
| 2027 | 3702 |
| 2028 and beyond | 133171 |
| **Total** | $**143904** |

---

**17.** **OTHER CURRENT LIABILITIES** 

Balance consists of credit cards, employee benefits and sales tax payable.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Credit cards** | $30786 | $25787 |
| **Sales tax** | 1422 | 1242 |
| **Other** | 3124 | 13796 |
| **Total other current liabilities** | $**35332** | $**40825** |

---

**18.** **LOAN PAYABLE (RELATED PARTY)** 

In December 2023, the Company entered into a short-term debt facility with a related party, an officer and director of the parent company – Hemptown Organics Corp., whereby the Company received $247,634. The loan is non-interest-bearing and remains outstanding as at December 31, 2024.

On March 11, 2024, the Company executed a loan agreement with a related party in the amount of $130,000, with an annual interest rate of 20% to be paid off in 7 years.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Related parties loan as of January 1** | 247634 |  |
| **Proceeds from related parties** | 130000 | 247634 |
| **Payments to related parties** | (6931) | - |
| **Related parties at December 31** | **370703** | **247634** |

---

**19.** **LOAN PAYABLE** 

On June 18, 2024, the Company executed a loan agreement with a lender in the amount of $150,000. The payment terms are 12.5% OID, initial principal amount consisting of a $150,000 loan plus $21,500 OID totaling $171,500. In addition, the loan required the Company to issue 37,500 warrants with anti-dilution protection as well as an equity interest in the amount of 2,045 shares of the Company's stock with reverse split protection through the Senior Exchange Listing

Loan is to mature the earlier of six months from execution, completion of a senior exchange listing of the Company or as mutually agreed, with an interest rate of the higher of 12% or WSJ Prime plus 4% guaranteed.

On December 11, 2024, the Company signed an amendment with the lender to extend the maturity date to February 28, 2025. In consideration for the extension of the maturity date, the Company agreed that the loan shall be paid in cash in full and shall not be converted into stock. In addition, the Company shall deliver 1,091 shares of the Company's common stock and a cash fee of $10,000.

On March 10, 2025, the Company signed an extension with a lender to extend the maturity date to May 15, 2025. In consideration for the extension of the maturity date, the Company agreed that the loan shall be paid in cash in full and shall not be converted into stock. In addition, the Company shall deliver a cash fee of $10,000.

In addition, on March 10, 2025, the Company issued 37,500 Series C Common Stock Purchase Warrants.

**20.** **CONVERTIBLE DEBENTURE** 

On October 7, 2022, the Company entered into Convertible Debenture Purchase Agreements pursuant to which the Company issued unsecured convertible promissory note ("Convertible Debenture"). The Company issued Convertible Debenture in the aggregate principal amount of $100,000 that was used to pay the expenses of the organization and reorganization and for other general corporate purposes. Interest accrued on the principal balance of the Convertible Debenture at 10.0% per annum totaled $2,338. The Convertible Debenture ranks on a parity with the Company's other existing debt and matured on December 31, 2022. The Convertible Debenture was to convert the outstanding principal and accrued interest into shares of the Company's common stock on maturity date at a price per share equal to $0.92 per share, however the maturity was delayed at the request of the debenture holder. As of December 31, 2024, the holder had still not converted the debenture.

On January 17, 2025, the holder of its Convertible Debenture converted an aggregate principal amount of $100,000 and accrued interest of $22,356.16 into 133,441 shares of common stock at a price equal to $0.91693 per share.

**21.** **RELATED PARTY TRANSACTIONS** 

**Executive contracts** 

We have entered into contractual agreements with our CEO and CFO.

*Employment Agreement – CEO* 

Effective as of April 1, 2023, the employment agreement has an original term of 12 months subject to automatic renewal unless terminated for cause. The CEO will be issued 54,300 company restricted stock units with an exercise price and vesting period to be determined after the initial public offering. The CEO is also entitled to a performance-based bonus payout.

The bonus is based upon a combination of achieving the consolidated revenue targets as set forth in the chart below, after giving effect to the Reverse Stock Split:

---

| | |
|:---|:---|
| **Consolidated Revenue Target (USD)** | **Functional Brands Inc. Stock Payout (common shares)** |
| Below $10,000,000 | 54300 |
| $10000000 | 109059 |
| $15000000 | 163589 |
| $20000000 | 218119 |
| $25000000 | 272649 |
| $30000000 | 327178 |
| $35000000 | 381708 |
| $40000000 | 436238 |

---

*Employment Agreement – CFO*

Effective as of April 1, 2023, the employment agreement has an original term of 12 months subject to automatic renewal unless terminated for cause. The CFO will be issued 27,265 company restricted stock units with an exercise price and vesting period to be determined after the initial public offering and 190,854 stock options with an exercise price and date of issuance to be determined by the Company's board of directors, with an expiration term of three years after termination of the employment agreement unless terminated for cause. The CFO is also entitled to a performance-based bonus payout as set forth in the chart below, after giving effect to the Reverse Stock Split:

---

| | |
|:---|:---|
| **Consolidated Revenue Target (USD)** | **Functional Brands Inc. Stock Payout (common shares)** |
| Below $10,000,000 | 27265 |
| $10000000 | 54530 |
| $15000000 | 81795 |
| $20000000 | 109059 |
| $25000000 | 136324 |
| $30000000 | 163589 |
| $35000000 | 190854 |
| $40000000 | 218119 |

---

**22.** **DEFERRED TAXES** 

The provision for income taxes for the years ended December 31, 2024, and 2023 consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2024** | **2023** |
| **Current:** |  |  |
| **Federal** | $(117465) | $(259139) |
| **State** | (28340) | (64341) |
| **Permanent differences** | 6382 |  |
| **Temporary differences** | 219504 |  |
| **Change in Valuation Allowance** | (80081) | 323480 |
| **Income Tax Expense** | $- | $- |

---

The Company has the following net deferred tax asset (liability):

---

| | | |
|:---|:---|:---|
|  | **As of<br> December 31,<br> 2024** | **As of<br> December 31,<br> 2023** |
| **Net Operating Losses** | $1276931 | $1204862 |
| **Inventory Reserve** | 24442 | 20718 |
| **Accounts Receivable Provision for uncollectable** | 8517 | 9512 |
| **ROU Assets** | 35635 | 23598 |
| **Accrued Liabilities** | 159141 | 188330 |
| **Stock Compensation** | 363745 | 254983 |
| **Capitalized costs** | 26214 |  |
| **Book to Tax Depreciation – Property, Plant & Equipment** | (12747) | (25033) |
| **Book to tax amortization – Intangible Assets** | (160274) | (120646) |
| **Valuation Allowance** | (1721604) | (1556324) |
| **Net Deferred Tax Assets (liabilities)** | $- | $- |

---

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has net loss carry forwards of approximately $5,813,862 available to offset future taxable income. Tax returns for the years 2019 through 2024 remain open to review by both Federal and State Tax Authorities.

**23.** **SHARE CAPITAL** 

**Authorized share capital**

*Common Shares*

Upon incorporation, the Company authorized 54,530 common shares with a par value of $0.001 per share were initially authorized for issuance. The Initial Share of the Company was allotted and issued to a former director of the Company as fully paid on November 19, 2020, the date of the organization. The issuance of the Initial Share was recorded in the central securities register of the Company and represents the only share initially issued. The Company purchased the Initial Share from a former director for the price of $0.01 and the Initial Shared formed part of the authorized but unissued share capital of the Company. The repurchase of the Incorporator's Share was recorded in the central securities register of the Company and the director confirms that no share certificate was issued or shall be issued in respect of the Initial Share.

On December 10, 2020, the Company altered its authorized share capital to 100,000,000 common shares with a par value of $0.00001 per share to be issued from its treasury.

On August 31, 2023, this was changed to 220,000,000 common shares with a par value of $0.00001 per share to be issued from its treasury.

On January 21, 2025, the Company effected a reverse stock split in its authorized common stock on a basis of 1-for-18.338622. The authorized capital stock of the Company remained the same at 220,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the reverse stock split. In addition, the Company authorized 1,000,000 shares of blank check preferred $0.001 par value.

All Common Shares are entitled to one vote in respect to each Common Share held at all meetings of shareholders of the Company.

**Issued share capital**

*Common share issuances*

On December 10, 2020, the Company entered into a licensing agreement with Hemptown Organics Corp. (the "licensor") to use the Hemptown Naturals brand (the "asset") on a non-exclusive, non-transferable basis for a period of 4 years. In return, 2,181,189 common shares were issued to the licensor at $0.018339 per share with deemed proceeds of $40,000 as consideration.

On May 19, 2023, the Company entered into a Share Exchange Agreement (SEA) to acquire HTO Nevada Inc. dba Kirkman from a related party, Hemptown Organics Corp. and its wholly owned subsidiary, HTO Holdings Inc. As part this SEA, HTO Holdings Inc. exchanged 1,000 restricted shares of common stock, par value $0.0001 per share of HTO Nevada Inc. dba Kirkman, being all of the issued and outstanding capital stock of HTO Nevada Inc. dba Kirkman, for issuance of 4,362,378 restricted shares of common stock of Functional Brands Inc., $0.018339 par value per share to Hemptown Organics Crop., with deemed proceeds of $80,000 as consideration, such that, HTO Nevada Inc. dba Kirkman shall be wholly-owned subsidiary of Functional Brands Inc. This was retroactively recorded in 2019 as the acquisition was completed on July 3, 2019.

This SEA was in respect of the asset purchase agreement (the "APA") the Company entered into on July 3, 2019, with the Kirkman Group ("Kirkman") to acquire certain tangible and intangible assets.

*Regulation Crowdfunding (Reg CF) Campaign*

 

Under the Securities act of 1933, the offer and sale of securities must be registered unless an exemption from registration is available. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides and exemption from registration for certain crowdfunding transactions. The Company is currently completing a Regulation Crowdfunding offering ("Offering") subject to the above regulations and had filed its Offering statement on Form C through the EDGAR system and with the Title3Funds.com as intermediary.

The Offering is for up to a maximum of $5,000,000 at a price of $25.67 per share with an offering deadline of December 31, 2022, which was extended to May 31, 2023. The securities purchased in this Offering will be subject to a number of restrictions including restrictions on resale for a period of one year. The use of the proceeds will be towards the fees associated with this Offering, further development of the Company's business – sales & marketing, and for general working capital purposes.

During the year ended December 31, 2024, the Company did not issue any common shares stemming from the Reg CF campaign.

---

| | | | |
|:---|:---|:---|:---|
|  | **Number of<br> shares issued** | **Price per<br> Share** | **Amount** |
| May 2023 | 354 | $25.67 | $9087 |
| **Total issuance for the year** | **354** |  | $**9087** |

---

During the year ended December 31, 2023, the Company issued 354 common shares with net proceeds of $9,087 as part of Reg CF campaign in pre-IPO funding at a price of $25.67 per share.

*Regulation D (Reg D) Campaign*

During the year ended December 31, 2024, the Company did not issue any common shares stemming from the Reg CF campaign.

---

| | | | |
|:---|:---|:---|:---|
|  | **Number of<br> shares issued** | **Price per<br> share** | **Amount** |
| April 2023 | 14728 | $6.79 | $100000 |
| May 2023 | 884 | 6.79 | 6000 |
| **Total issuance for the year** | **15612** |  | $**106000** |

---

During the year ended December 31, 2023, the Company issued 15,612 shares with net proceeds of $106,000 as part of Reg D campaign in pre-IPO funding at a price of $6.79 per share.

**Stock based compensation**

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares RSUs** | **Net Amount** |
| **RSUs issued for services rendered in prior years** | 10583 | 271700 |
| **RSUs issued for services rendered during the year** | 5578 | 143200 |
| **Total issuance for the year** | **16161** | $**414900** |

---

 

For the year ended December 31, 2024, the change in additional paid-in capital was $414,900 stemming from RSUs for services incurred during the year as well as issuance of RSUs outstanding from prior years.

For the year ended December 31, 2023, the change in additional paid-in capital was $762,825 resulting for shares and RSUs for services incurred for the year.

 

*Restricted stock units (RSUs) for services* 

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares RSUs** | **Net Amount** |
| **January 2024** | 1294 | 33200 |
| **February 2024** | 1294 | 33200 |
| **March 2024** | 1294 | 33200 |
| **April 2024** | 1294 | 33200 |
| **May 2024** | 203 | 5200 |
| **Jun 2024** | 203 | 5200 |
| **July 2024** | 203 | 5200 |
| **August 2024** | 203 | 5200 |
| **September 2024** | 203 | 5200 |
| **October 2024** | 203 | 5200 |
| **November 2024** | 203 | 5200 |
| **December 2024** | 203 | 5200 |
| **Total issuance for the year** | **6800** | $**174400** |

---

 

 

During the year ended December 31, 2024, the Company incurred $174,400 in contracting services resulting from 6,800 of restricted stock units for consultants providing sales & marketing services at fair value of $25.67 per share.

---

| | | |
|:---|:---|:---|
|  | **Number of<br> shares RSUs** | **Amount** |
| January 2023 | 1800 | 46200 |
| February 2023 | 1800 | 46200 |
| March 2023 | 1800 | 46200 |
| April 2023 | 1800 | 46200 |
| May 2023 | 2345 | 60200 |
| Jun 2023 | 2345 | 60200 |
| July 2023 | 2384 | 61200 |
| August 2023 | 2384 | 61200 |
| September 2023 | 1294 | 33200 |
| October 2023 | 1294 | 33200 |
| November 2023 | 1294 | 33200 |
| December 2023 | 1294 | 33200 |
| **Total issuance for the year** | **21834** | $**560400** |

---

During the year ended December 31, 2023, the Company incurred $560,400 in contracting services resulting from 21,834 of restricted stock units for consultants providing sales & marketing services at fair value of $25.67 per share.

**24.** **SEGMENT REPORTING** 

The Company has two operating segments:

1) Kirkman: sells a range of nutraceuticals, supplements and related products;

2) HT Naturals: sells a range of hemp-based consumer products.

The Company has a corporate function, which is not an operating segment, and includes expenses related to corporate management and administration, including legal, audit, accounting, tax, SEC reporting, and investor/public relations, among other corporate expenses.

The Company follows ASC 280, Segment Reporting, as amended by ASU 2023-07, which requires entities to report financial and descriptive information about their reportable operating segments. ASC 280-10-50-1 states that an operating segment is a component of an entity that:

● Engages in business activities from which it may earn revenues and incur expenses;

● Has operating results that are regularly reviewed by the Chief Operating Decision Maker (CODM), who is the Company's Chief Executive Officer, to make decisions about resource allocation and performance assessment; and

● Has discrete financial information available.

Under ASC 280-10-50-5, entities are required to report separately only those operating segments that meet certain quantitative thresholds. However, as specified in ASC 280-10-50-11, if a company's business activities are managed as a single operating segment and reviewed on a basis, the company may report as a single segment. The Company has determined that it operates as one reportable segment, as its CODM reviews the business as a whole rather than by distinct business components.

Management has evaluated the Hemp and Supplements operating segments under the qualitative aggregation criteria in ASC 280-10-50-11 and determined that:

● The segments have similar economic characteristics,

● They are similar in the nature of products and services, production processes, type of customers, distribution methods, and regulatory environment.

Accordingly, in accordance with ASC 280-10-50-11, the Hemp segment will be aggregated with the Supplements segment into a single reportable segment.

Furthermore, based on the quantitative thresholds in ASC 280-10-50-12 and management's assessment, only the Kirkman operating segment meets the criteria to be classified as a reportable segment. HT Naturals represents approximately 2% of consolidated revenue and does not meet any of the other quantitative thresholds for disclosure as a separate reportable segment.

Therefore, the Company has two operating segments that were aggregated to one reporting segment because the HT Natural segment is considered immaterial.

 **Measure of Segment Profit or Loss**

---

| | | |
|:---|:---|:---|
|  | **For the Year Ended<br> December 31,** | **For the Year Ended<br> December 31,** |
|  | **2024** | **2023** |
| **Revenue, net of returns** | 6566455 | 6820499 |
| **Costs and expenses:** |  |  |
| **Cost of goods sold** | 2959609 | 3641648 |
| **Sales & marketing** | 576315 | 588772 |
| **General and administrative expenses** | 3259623 | 3672582 |
| **Operating loss** | **(229092)** | **(1082503)** |
| **Other income / (expenses)** |  |  |
| **Interest expense** | (331836) | (158591) |
| **Interest income** | 1572 | - |
| **Net loss for the year** | $**(559356)** | $**(1241094)** |

---

 **Significant Segment Expenses**

The Company considers the following significant expenses in evaluating its performance:

● General & Administrative: including personnel costs, professional fees, and other overhead expenses.

● Sales & Marketing: includes personnel costs and other sales-related expenses.

● Cost of Goods Sold: represents labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer from the Company's facility.

Since the Company has only one reportable segment, no additional segment disclosures are required beyond entity-wide disclosures presented below.

 **Entity-Wide Disclosures**

 *Geographic Revenue Information*

For the years ended December 31, 2024 and 2023, approximately 92% of the Company's net sales were generated in North America.

 *Concentration*

During the year ended December 31, 2024, sales from two customers represented 27% and 26% for a total of 54% of sales totaling $3,475,395. During the year ended December 31, 2023, sales from two customers represented 22% and 19% for a total of 41% of sales totaling $2,918,058.

As of December 31, 2024, accounts receivable balance from one customer represented 70% of total accounts receivable, totaling $211,756. As at December 31, 2023, accounts receivable balance from three customers represented 17%, 13%, and 11% for a total of 41% of accounts receivable totaling $68,928.

**25.** **REVENUES, NET** 

This table shows revenue by product type – Functional Brands (formerly HT Naturals) reflects hemp derived products whereas Kirkman reflects nutraceutical products.

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2024** | **December 31,<br> 2023** |
| **Kirkman** | $6437990 | $6435735 |
| **Functional Brands (formerly HT Naturals)** | 128465 | 384764 |
|  | $**6566455** | $**6820499** |

---

**26.** **CONCENTRATION** 

During the year ended December 31, 2024, sales from two customers represented 27%and 26% for a total of 54% of sales totaling $3,475,395. During the year ended December 31, 2023, sales from two customers represented 22% and 19% for a total of 41% of sales totaling $2,918,058.

As at December 31, 2024, accounts receivable balance from one customer represented 70% of total accounts receivable, totaling $211,756. As at December 31, 2023, accounts receivable balance from three customers represented 17%, 13%, and 11% for a total of 41% of accounts receivable totaling $68,928.

**27.** **COMMITMENTS AND CONTINGENCIES** 

The Company has an exclusive license agreement with the Trailer Park Boys Incorporated (TPB) to market & sell hemp derived products. This license came into effect on July 21, 2021, and will expire on December 31, 2025. Under the license agreement, the Company will pay Trailer Park Boys an amount equal to $700,000 with $50,000 advance against royalties payable upon execution of the agreement and $150,000 to be paid during the second year of the agreement. Additionally, the Trailer Park Boys are entitled to 1,000,000 shares of common stock of the Company.

The Company executed an amendment on September 25, 2024, to settle the balance owing by October 2025 as per the following schedule.

---

| | |
|:---|:---|
| **Date** | **Amount** |
| November 1, 2024 | $25000 |
| January 1, 2025 | 50000 |
| April 1, 2025 | 50000 |
| July 1, 2025 | 75000 |
| October 1, 2025 | 75000 |
| **Total** | **275000** |

---

In addition, the Company paid $25,000 upon execution of this amendment.

The royalty rates under this agreement are between 15% - 30% of the net sales of the company derived from sales related to the license. During the years ended December 31, 2024, and 2023, the Company made payments in the amount of $100,000 and $200,000, respectively, with total life-to-date payments amounting to $525,000. The license agreement may be terminated with reasonable cause upon six months' written notice or for certain triggering events without recourse or an opportunity to cure.

**28.** **LEGAL PROCEEDINGS** 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. On May 25, 2021, True Health Medical Center, S.C. ("True Health") amended an existing complaint against Kirkman Group, Inc. ("Kirkman"), James Hall and David Humphries to assert claims against HTO Nevada, Inc. and HTO Holdings, Inc. (collectively, HTO Nevada, Inc. and HTO Holdings, Inc. are referred to as the "HTO Parties"). Kirkman is the seller of certain assets to the HTO Parties and is a separate legal entity. Affiliates of the HTO Parties were first named in the lawsuit on September 23, 2020. The case is pending in the Circuit Court for the Eighteenth Judicial Circuit, DuPage County, Illinois. Kirkman had terminated a royalty agreement prior to selling its assets to the HTO Parties but the royalty agreement has a provision that allows True Health to continue to receive royalties after the termination of the agreement. True Health claims that Kirkman underpaid the royalties due to True Health prior to the sale of assets to the HTO Parties. There is no dispute that Kirkman stopped paying royalties to True Health around the time it terminated the agreement and that the HTO Parties have never paid royalties to True Health. True Health contends that as the purchaser of certain Kirkman assets, the HTO Parties should be bound by the terms of the royalty agreement. There is no certain amount at this time in connection with the alleged in the damages claim against the HTO Parties. It is not possible to predict the outcome of this proceeding at this time. To date, the parties have engaged in some discovery including a limited number of depositions. True Health has filed a motion for summary judgment that addresses its claims against Kirkman but does not address any claim against the HTO Parties. The briefing is not yet complete on the summary judgment motion and a ruling is likely more than 60 days away. Regardless of how the court rules on summary judgment, there will be remaining claims in the case, and it is likely that additional discovery will be conducted. No trial date has been scheduled at this time. The parties have largely completed both fact and expert discovery. Kirkman Group has recently filed a motion for leave to amend its counterclaims against True Health. None of these proposed counterclaims are alleged against HTO Nevada. However, if the Court permits the amended counterclaims to be filed, it is possible that additional discovery will be needed on the amended counterclaims. It is also likely that True Health will move to dismiss some or all the amended counterclaims. Either additional discovery or motion practice would typically mean that the prospective trial date will not occur until a later date than would have been the case absent these additional steps in the litigation. As of today, the court has not set a trial date.

**29.** **SUBSEQUENT EVENTS** 

The Company follows the guidance in FASB ASC Topic 855, Subsequent Events ("ASC 855"), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth the following:

&nbsp;&nbsp;&nbsp;&nbsp;(iv) The
 period after the balance sheet date during which management of a reporting entity evaluates
 events or transactions that may occur for potential recognition or disclosure in the consolidated
 financial statements

&nbsp;&nbsp;&nbsp;&nbsp;(v) The
 circumstances under which an entity should recognize events or transactions occurring after
 the balance sheet date in its consolidated financial statements, and

&nbsp;&nbsp;&nbsp;&nbsp;(vi) The
 disclosures that an entity should make about events or transactions that occurred after the
 balance sheet date. Accordingly, the Company did not have any subsequent events that require
 disclosure other than the following.

**Equity issuance**

*Share issuance*

On January 15, 2025, the Company issued shares pursuant to an Advisory Agreement with a consultant provider to support the IPO process. The scope of work includes strategic review, consulting services, IPO readiness & execution as well as capital market advisory. Pursuant to the Advisory Agreement, the Company sold 86,420 shares of common stock for $100 to the consultant.

On January 17, 2025, the Company issued 2,485 shares of common stock for services.

On January 17, 2025, the holder of its Convertible Debenture converted an aggregate principal amount of $100,000 and accrued interest of $22,356.16 into 133,441 shares of common stock at a price equal to $0.91693 per share.

*RSU issuance*

Subsequent to December 31, 2024, the Company issued a total of 1,419 RSUs and incurred an additional 281 RSUs which vest upon the completion of the Company's initial public offering.

**Short-term debt**

*Invoice Financing*

 

Subsequent to December 31, 2024, the Company executed a lending agreement to satisfy vendor debt, with the following terms.

---

| | | | |
|:---|:---|:---|:---|
| **Date** | **Amount<br> Financed** | **Finance<br> Charges** | **Repayment<br> Terms** |
| January 2, 2025 | $15945 | $1116 | 17 weeks |
| February 11, 2025 | $33002 | $2310 | 21 weeks |

---

**Related party transactions** 

On March 10, 2025, the Company executed a loan agreement with a related party in the amount of $225,000, with an annual interest rate of 18% to be paid off in 4 years.

**Loan payable**

On March 10, 2025, the Company signed an extension with a lender to extend the maturity date to May 15, 2025. In consideration for the extension of the maturity date, the Company agreed that the loan shall be paid in cash in full and shall not be converted into stock. In addition, the Company shall deliver a cash fee of $10,000.

In addition, on March 10, 2025, the Company issued 37,500 Series C Common Stock Purchase Warrants.

**Payable for acquisition**

On March 5, 2025, the Company signed amendment to the Forbearance Agreement in respect of the principal owed in the amount of $2,297,366, extending the due date to May 31, 2025.

**Functional Brands Inc.**

**PRELIMINARY PROSPECTUS**

&nbsp;&nbsp;&nbsp;&nbsp;, 2025

Until , 2025, 25 days after the date of this prospectus, all dealers that buy, sell or trade our securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as Underwriter and with respect to their unsold allotments or subscriptions.

**PART II**

**INFORMATION NOT REQUIRED IN THE PROSPECTUS**

**Item 13. Other Expenses of Issuance and Distribution**

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of common stock being registered. All amounts, other than the SEC registration fee, NASDAQ listing fee and FINRA filing fee, are estimates. We will pay all these expenses.

---

| | |
|:---|:---|
|  | **Amount** |
| SEC registration fee | $21903.95 |
| NASDAQ listing fee | 50000 |
| Accounting fees and expenses | 175000 |
| Legal fees and expenses | 505000 |
| Transfer agent fees and expenses | 20000 |
| Printing and related fees | 25000 |
| Miscellaneous | 10000 |
| **Total** | $806903.95 |

---

**Item 14. Indemnification of Directors and Officers**

Section 102 of the General Corporation Law of the State of Delaware (the "DGCL") permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our certificate of incorporation provides that none of our directors shall be personally liable to us or our shareholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee, agent of the corporation or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability.

Our Certificate of Incorporation and our Bylaws provide for indemnification of our directors and officers. Our Bylaws provide that we will indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a legal representative, director, officer or employee or agent of our company, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of our company, and with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent will not, without more, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

**Item 15. Recent Sales of Unregistered Securities**

During the past three years, we issued the following securities, which were not registered under the Securities Act.

The Company completed a Regulation Crowdfunding offering ("Offering") under Section 4(a)(6) which provided an exemption from registration for certain crowdfunding transactions. The company filed its Offering statement on Form C through the EDGAR system and with Title3Funds.com as intermediary. The offering was for up to a maximum of $5,000,000 at a price of $1.40 per share with an offering deadline of Dec 31, 2023. The securities purchased in such offering were subject to a number of restrictions including a restriction on resale for a period of one year.

*Share Issuances*

On January 15, 2025 the Company issued shares pursuant to an Advisory Agreement with a consultant provider to support the IPO process. The scope of work includes strategic review, consulting services, IPO readiness & execution as well as capital market advisory. Pursuant to the Advisory Agreement, the Company sold 86,240 shares of common stock for $100 to the consultant.

On January 17, 2025, the Company issued 2,485 shares of common stock for services.

On January 17, 2025 the holder of its Convertible Debenture converted an aggregate principal amount of $100,000 and accrued interest of $22,356.16 into 133,441 shares of common stock at a price equal to $0.92 per share.

Subsequent to September 30, 2024 the Company issued a total of 1,418 RSU's that vest upon the completion of the Company's initial public offering.

On July 22, 2025 the Company agreed upon the consummation of the Direct Listing to issue 1,800,000 shares of convertible preferred stock to 6 accredited investors in a private placement transaction. Such preferred stock is convertible into shares of common stock. Thirteen million shares of such common stock are being registered pursuant to this registration statement.

On May 29, 2025, the Company issued 90,000 shares of its common stock to Sichenzia Ross Ference Carmel LLP as partial compensation for legal services rendered.

**Item 16. Exhibits**

(a) Exhibits.

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 3.1\*\*\* | [Articles of Incorporation](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-1_function.htm) |
| 3.2\*\*\* | [Amended and Restated Articles of Incorporation](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-2_function.htm) |
| 3.3\*\*\* | [Bylaws of Functional Brands Inc.](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-3_function.htm) |
| 3.4\*\*\* | [Amendment Name Change](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-4_function.htm) |
| 3.5\*\*\* | [Cert of Amendment Increase Authorized Shares](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-5_function.htm) |
| 3.6\*\*\* | [Cert of Amendment Reverse Split and Increase of authorized](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-6_function.htm) |
| 3.7\*\*\* | [Consent Resolution – Reverse Split](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex3-7_function.htm) |
| 3.8\* | [Form of Certificate of Designation, Preferences and Rights of the Series A Convertible Preferred Share](ea025255301ex3-8_function.htm) |
| 3.9\* | [Form of Certificate of Designation, Preferences and Rights of the Series B Convertible Preferred Share](ea025255301ex3-9_function.htm) |
| 4.1\*\*\* | [Specimen Common Stock Certificate](http://www.sec.gov/Archives/edgar/data/1837254/000121390025013149/ea023094101ex4-2_functional.htm) |
| 4.2\* | [Form of Placement Agent's Warrant](ea025255301ex4-2_function.htm) |
| 5.1\*\*\* | [Opinion of Sichenzia Ross Ference Carmel LLP](https://www.sec.gov/Archives/edgar/data/1837254/000121390025049411/ea024336701ex5-1_fun.htm) |
| 10.1\*\*\* | [License Agreement, dated July 7, 2021, between Trailer Park Boys Incorporated and Hemptown Organics Corp.](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-1_function.htm) |
| 10.2\*\*\* | [Amendment to the License Agreement, dated August 16, 2023, between Trailer Park Boys Incorporated and Hemptown Organics Corp.](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-2_function.htm) |
| 10.3\*\*\* | [Agreement, dated January 20, 2023, between HS Wholesale and Hemptown Naturals, Inc.](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-3_function.htm) |
| 10.4\*\*\* | [Asset Purchase Agreement dated June 28, 2019](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-4_function.htm) |
| 10.5\*\*\* | [Amendment No. 1 to the Asset Purchase Agreement dated November 30, 2021](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-5_function.htm) |
| 10.6\*\*\* | [Amendment No. 2 to the Asset Purchase Agreement dated May 16, 2022](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-6_function.htm) |
| 10.7\*\*\* | [Trademark Assignment Agreement dated July 11, 2019](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-7_function.htm) |
| 10.8\*\*\* | [Domain Names Transfer Agreement dated July 11, 2019](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-8_function.htm) |
| 10.9\*\*\* | [Assignment of Intangible Assets dated July 11, 2019](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-9_function.htm) |
| 10.10\*\*\* | [First Amended Forbearance Agreement dated December 27, 2022](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-10_function.htm) |
| 10.11\*\* | Employment Agreement, effective March 11, 2025, between, Functional Brands Inc. and Eric Gripentrog |
| 10.12\*\*\* | [Employment Agreement, dated April 1, 2023, between HTO Holdings Inc., Functional Brands Inc. and Hemptown Organics Corp., and Tariq Rahim](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-12_function.htm) |
| 10.13\*\*\* | [ISO Certification - Purity Labs](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-13_function.htm) |
| 10.14\*\*\* | [Kirkman Certification validation from Purity](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-14_function.htm) |
| 10.15\*\*\* | [Testing Standards - The Forum](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-15_function.htm) |
| 10.16\*\*\* | [Schedule A to the Asset Purchase Agreement (Warranty Bill of Sale)](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-16_function.htm) |
| 10.17\*\*\* | [iHerb Inc agreement - Kirkman](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-17_function.htm) |
| 10.18\*\*\* | [Amendment to License Agreement with the Trailer Park Boys 9/25/2024](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-18_function.htm) |
| 10.19\*\*\* | [Fourth Amended Forbearance](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex10-19_function.htm) |
| 10.20\*\*\* | [Confession of Judgement](https://www.sec.gov/Archives/edgar/data/1837254/000121390025049411/ea024336701ex10-20_fun.htm) |
| 10.21\*\* | Sixth Amended Forbearance |
| 10.22\*\* | Seventh Amended Forbearance |
| 10.23\* | [Form of Securities Purchase Agreement](ea025255301ex10-23_function.htm) |
| 10.24\* | [Form of Lock up](ea025255301ex10-24_function.htm) |
| 10.25\* | [Marketing Services Agreement, dated July 23, 2025, between the Company and Outside The Box Capital Inc.](ea025255301ex10-25_function.htm) |
| 23.1\* | [Consent of TAAD LLP](ea025255301ex23-1_function.htm) |
| 23.2\*\*\* | [Consent of Sichenzia Ross Ference Carmel LLP (included in Exhibit 5.1)](http://www.sec.gov/Archives/edgar/data/1837254/000121390025049411/ea024336701ex5-1_fun.htm) |
| 99.1\*\*\* | [Audit Committee Charter](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-1_function.htm) |
| 99.2\*\*\* | [Compensation Committee Charter](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-2_function.htm) |
| 99.3\*\*\* | [Nominating and Corporate Governance Committee Charter](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-3_function.htm) |
| 99.4\*\*\* | [Consent of Girard Smith as Director Nominee](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-4_function.htm) |
| 99.5\*\*\* | [Consent of Blake Janover as Director Nominee](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-5_function.htm) |
| 99.6\*\*\* | [Consent of Lourdes Felix as Director Nominee](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-6_function.htm) |
| 99.7\*\*\* | [Executive Compensation Clawback Policy](http://www.sec.gov/Archives/edgar/data/1837254/000121390025007595/ea022831201ex99-7_function.htm) |
| 107\* | [Filing Fee Table](ea025255301ex-fee_function.htm) |

---

\*\*\* Previously filed. <br> \*\* To be filed by Amendment <br> \* Filed herewith

(b) Financial Statement Schedules.

All financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or in the notes thereto.

**Item 17. Undertakings**

(a) The
undersigned registrant hereby undertakes:

&nbsp;&nbsp;&nbsp;&nbsp;(1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

Provided, however, that paragraphs (a)(1)(i), (ii), and (iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act, that are incorporated by reference in the registration statement.

&nbsp;&nbsp;&nbsp;&nbsp;(2) That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to
be the initial *bona fide* offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.

&nbsp;&nbsp;&nbsp;&nbsp;(4) That,
for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.

&nbsp;&nbsp;&nbsp;&nbsp;(5) That,
for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such purchaser:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b) Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(c) For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.

(d) For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

**SIGNATURES**

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized on August 12, 2025.

---

| | |
|:---|:---|
| **Functional Brands Inc.** | **Functional Brands Inc.** |
| By: | /s/ Eric Gripentrog |
|  | Eric Gripentrog |
|  | Chief Executive Officer, and Director |

---

---

| | | |
|:---|:---|:---|
| **SIGNATURE** | **TITLE** | **DATE** |
| /s/ Eric Gripentrog | Chief Executive Officer and Director | August 12, 2025 |
| Eric Gripentrog | (Principal Executive Officer) |  |
| /s/ Tariq Rahim | Chief Financial Officer, and Director | August 12, 2025 |
| Tariq Rahim | (Principal Financial & Accounting Officer) |  |

---

## Exhibit 3.8

**Exhibit 3.8**

**CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS**

**OF**

**SERIES A CONVERTIBLE PREFERRED SHARES**

**OF**

**FUNCTIONAL BRANDS INC.**

**_______________**

The undersigned, being the Chief Executive Officer of Functional Brands Inc., a Delaware corporation (the "<u>Corporation</u>" or "<u>Company</u>"), in accordance with the provisions of the Delaware General Corporation Law, does hereby certify that, pursuant to the authority conferred upon the Board of Directors (the "<u>Board</u>") of the Corporation by the Certificate of Incorporation of the Corporation, as amended (the "<u>Certificate of Incorporation</u>"), the following resolutions creating a series of Series A Convertible Preferred Shares, was duly adopted on [__], 2025:

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board by provisions of the Certificate of Incorporation, there hereby is created out of the shares of preferred stock of the Corporation, par value $0.00001 per share, as authorized in the Certificate of Incorporation, a series of preferred stock of the Corporation, to be named "Series A Convertible Preferred Shares" consisting of [ ],000 shares (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization of the Series A Convertible Preferred Shares).

**TERMS OF PREFERRED SHARES**

<u>Section 1</u>. <u>Definitions</u>. For the purposes hereof, the following terms shall have the following meanings:

"<u>Adjustment Right</u>" means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 7(c)) of shares of Common Stock that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

"<u>Affiliate</u>" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

"<u>Approved Stock Plan</u>" means any employee benefit plan or agreement which has been approved by the Board prior to or subsequent to the Initial Issuance Date pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, consultant or director for services provided to the Company in their capacity as such.

"<u>Beneficial Ownership Limitation</u>" shall have the meaning set forth in Section 6(c).

"<u>Black Scholes Consideration Value</u>" means the value of the applicable Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the "OV" function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the "HVT" function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

"<u>Bloomberg</u>" means Bloomberg, L.P.

"<u>Business Day</u>" means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States of America or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

"<u>Certificate of Designations</u>" shall have the meaning set forth in Section 4.

"<u>Closing Sale Price</u>" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures herein. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.

"<u>Commission</u>" means the United States Securities and Exchange Commission.

"<u>Common Stock</u>" means the common stock of the Company, par value $0.00001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

"<u>Common Stock Equivalents</u>" means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

"<u>Conversion</u>" shall have the meaning set forth in Section 6(a).

"<u>Conversion Date</u>" shall have the meaning set forth in Section 6(a).

"<u>Conversion Floor Amount</u>" means an amount equal to the product of (A) the Floor Price, minus (B) the Conversion Price (calculated as if the Floor Price did not exist), multiplied by (C) the number of shares of Common Stock delivered (or to be delivered) to such Holder on the applicable Share Delivery Date with respect to such Conversion.

"<u>Conversion Floor Price Condition</u>" means that the Conversion Price would have been less than the Floor Price in the absence of a Floor Price.

"<u>Conversion Restriction Period</u>" shall have the meaning set forth in Section 6(a).

"<u>Conversion Shares</u>" means, collectively, the Common Stock issuable upon conversion of the Preferred Shares in accordance with the terms hereof.

"<u>Convertible Securities</u>" means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

"<u>Delaware Courts</u>" shall have the meaning set forth in Section 8(d).

"<u>Dividend Rate</u>" means, (i) for the first six (6) months following the Initial Issuance Date, five percent (5%) per annum, (ii) for the next six (6) months following the Initial Issuance Date, ten percent (10%) per annum, (iii) from the twelve (12) month anniversary of the Initial Issuance Date until the eighteen (18) month anniversary of the Initial Issuance Date, fifteen percent (15%) per annum and (iv) for every month following the eighteen (18) month anniversary of the Initial Issuance Date, an additional three percent (3%) per annum.

"<u>Equity Conditions</u>" means, with respect to an given date of determination: (i) on each day during the period beginning thirty calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the "<u>Equity Conditions Measuring Period</u>") and ending on and including such applicable date of determination all shares of Common Stock to be issued in connection with the event requiring this determination, as applicable, shall be registered for resale on a registration statement that has been declared effective by the Commission, or are eligible for sale pursuant to Rule 144 of the Securities Act of 1933, as amended, without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares); (ii) on each day during the Equity Conditions Measuring Period, the Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Preferred Shares) are listed or designated for quotation (as applicable) on a Trading Market and shall not have been suspended from trading on a Trading Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by a Trading Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Trading Market or (B) the Company falling below the minimum listing maintenance requirements of the Trading Market on which the Common Stock is then listed or designated for quotation, as applicable; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of the Preferred Shares on a timely basis as set forth in Section 6 hereof and all other shares of capital stock required to be delivered by the Company on a timely basis; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 6(c) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Trading Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause the shares of Common Stock issuable in connection with the event requiring such determination to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares, other issuance of securities with respect to the Preferred Shares), (viii) none of the Holders shall be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to this Certificate of Designation; (x) on the applicable date of determination a sufficient number of shares of Common Stock are available under the certificate of incorporation of the Company and reserved by the Company to be issued pursuant to this Certificate of Designations; or (xi) the shares of Common Stock issuable pursuant to the event requiring the satisfaction of the Equity Conditions are duly authorized and listed and eligible for trading without restriction on a Trading Market.

"<u>Equity Conditions Failure</u>" means that on any day during the period commencing twenty (20) Trading Days prior to such applicable date of determination, the Equity Conditions have not been satisfied (or waived in writing by the applicable Holder).

"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"<u>Excluded Securities</u>" means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees or consultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan, provided that the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Holders; (ii) shares of Common Stock issued upon the conversion or exercise, as applicable, of Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Initial Issuance Date, provided that the conversion price or exercise price, as applicable, of any such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Holders (such shares of Common Stock issuable pursuant to clause (i) above and this clause (ii), collectively, the "<u>Permitted Approved Stock Plan Issuances</u>"); and (iii) the Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares or otherwise pursuant to the terms of this Certificate of Designation; provided, that the terms of this Certificate of Designation are not amended, modified or changed on or after the Initial Issuance Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Initial Issuance Date).

"<u>Floor Price</u>" means $4.00, as adjusted for forward stock splits, stock dividends, recapitalizations and similar events.

"<u>Fundamental Transaction</u>" means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another subject entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of Regulation S-X) to one or more subject entities, or (iii) make, or allow one or more subject entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more subject entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all subject entities making or party to, or affiliated with any subject entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all subject entities making or party to, or Affiliated with any subject entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more subject entities whereby all such subject entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the subject entities making or party to, or Affiliated with any subject entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the subject entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any subject entity individually or the subject entities in the aggregate to be or become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such subject entities as of the date of this Certificate of Designations calculated as if any shares of Common Stock held by all such subject entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such subject entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

"<u>Holder</u>" shall have the meaning given such term in Section 3.

"<u>Liquidation</u>" shall have the meaning set forth in Section 5.

"<u>Notice of Conversion</u>" shall have the meaning set forth in Section 6(a).

**"**<u>Options</u>" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

"<u>Original Issue Date</u>" means the date of the first issuance of any Preferred Shares regardless of the number of transfers of any particular Preferred Shares and regardless of the number of certificates which may be issued to evidence such Preferred Shares.

"<u>Person</u>" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"<u>Preferred Shares</u>" shall have the meaning set forth in Section 2.

**"**<u>Principal Market</u>" means, as of any time of determination, the principal trading market, if any, in which the shares of Common Stock then trade.

"<u>Purchase Agreement</u>" means that certain securities purchase agreement, dated as of July 22, 2025, by and among the Company and the initial Holders.

"<u>Qualified Event</u>" means the direct listing of the Company's securities on a Trading Market.

"<u>Securities Act</u>" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"<u>Share Delivery Date</u>" shall have the meaning set forth in Section 6(c).

"<u>Stated Value</u>" shall have the meaning set forth in Section 2.

"<u>Subsidiary</u>" means any subsidiary of the Corporation.

"<u>Trading Day</u>" means a day on which the principal Trading Market is open for business.

"<u>Trading Market</u>" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

"<u>Transfer Agent</u>" means Endeavor Trust Corporation, or any successor transfer agent for the Common Stock.

"<u>VWAP</u>" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg through its "VAP" function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures set forth herein. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

<u>Section 2</u>. <u>Designation, Amount; Par Value</u>. The series of Preferred Shares shall be designated as Series A Convertible Preferred Shares (the "<u>Preferred Shares</u>") and the number of shares so designated shall be up to [ ],000 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization of the Preferred Shares). Each Preferred Share shall have a par value of $0.00001 per share and a stated value equal to $1,000, subject to adjustment as set forth herein (the "<u>Stated Value</u>").

<u>Section 3</u>. <u>Dividends</u>. From and after the first date of issuance of any Preferred Shares (the "<u>Initial Issuance Date</u>"), each holder of a Preferred Share (each, a "<u>Holder</u>" and collectively, the "<u>Holders</u>") shall be entitled to receive dividends ("<u>Dividends</u>"), which Dividends shall be computed on the basis of a 360-day year and the actual number of days elapsed in each month and shall be payable in arrears on the first Trading Day of each month (each, an "<u>Dividend Date</u>") with the first Dividend Date being the first Trading Day of the initial calendar month commencing after the Initial Issuance Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Dividends shall be payable on each Dividend Date in cash ("<u>Cash Dividends</u>") out of funds legally available therefor or, to each Holder, at each Holder's sole option, in registered shares of Common Stock ("<u>Dividend Shares</u>") so long as there has been no Equity Conditions Failure or, so long as there has been no Equity Conditions Failure, in a combination of Cash Dividends and Dividends Shares. The Company shall deliver a written notice (each, an "<u>Dividend Election Notice</u>") to each Holder of the Preferred Shares on or prior to the fifth (5<sup>th</sup>) Trading Day immediately prior to the applicable Dividend Date (the date such notice is delivered to all of the Holders, the "<u>Dividend Notice Date</u>") which notice (i) either (A) confirms that Dividends to be paid on such Dividend Date shall be paid entirely in Dividend Shares or (B) elects to pay Dividends as Cash Dividends or a combination of Cash Dividends and Dividend Shares and specifies the amount of Dividends that shall be paid as Cash Dividends and the amount of Dividends, if any, that shall be paid in Dividend Shares and (ii) certifies that there has been no Equity Conditions Failure. Notwithstanding anything herein to the contrary, if no Equity Conditions Failure has occurred as of the Dividend Notice Date but an Equity Conditions Failure occurs at any time prior to the Dividend Date, (A) the Company shall provide each Holder a subsequent notice to that effect and (B) unless such applicable Holder waives the Equity Conditions Failure, the Dividend shall be paid to such Holder in cash. Dividends to be paid on a Dividend Date in Dividend Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share) of Common Stock equal to the quotient of (1) the amount of Dividends payable on such Dividend Date less any Cash Dividends paid and (2) the Dividend Conversion Price in effect on the applicable Dividend Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) When any Dividend Shares are to be paid on a Dividend Date to a Holder, the Company shall (i) (A) provided that the Company's transfer agent (the "<u>Transfer Agent</u>") is participating in the Depository Trust Company ("<u>DTC</u>") Fast Automated Securities Transfer Program ("<u>FAST</u>"), credit such aggregate number of Dividend Shares to which such Holder shall be entitled to such Holder's or its designee's balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if the Transfer Agent is not participating in FAST, issue and deliver on the applicable Dividend Date, to the address set forth in the register maintained by the Company for such purpose or to such address as specified by such Holder in writing to the Company at least two (2) Business Days prior to the applicable Dividend Date, a certificate, registered in the name of such Holder or its designee, for the number of Dividend Shares to which such Holder shall be entitled and (ii) with respect to each Dividend Date, pay to such Holder, in cash by wire transfer of immediately available funds, the amount of any Cash Dividends.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Prior to the payment of Dividends on a Dividend Date, Dividends on the Preferred Shares shall accrue at the Dividend Rate and be payable by way of inclusion of the Dividends in the Conversion Amount on each Conversion Date.

<u>Section 4</u>. <u>Voting Rights</u>. Except as otherwise provided herein or as otherwise required by law, the Preferred Shares shall have no voting rights. However, as long as any Preferred Shares are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then-outstanding Preferred Shares, (a) alter or change adversely the powers, preferences or rights given to the Preferred Shares or alter or amend this Certificate of Designations, Preferences and Rights (the "<u>Certificate of Designations</u>"), (b) amend its Certificate of Incorporation or other charter documents in any manner that materially adversely affects any rights of the Holders, or (c) enter into any agreement with respect to any of the foregoing.

<u>Section 5</u>. <u>Liquidation</u>. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a "<u>Liquidation</u>"), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount on an as-converted basis equal to the amount received by holders of Common Stock. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.

<u>Section 6</u>. <u>Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Conversions at Option of Holder</u>. Each Preferred Share shall be convertible, at any time and from time to time from and after the forty-five (45) day anniversary of the Qualified Event (the "<u>Conversion Restriction Period</u>"), at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(c)) determined by dividing the Stated Value of such Preferred Shares by the Conversion Price (a "<u>Conversion</u>"), in whole or in part at any time and from time to time commencing on the date of this Certificate of Designations. Notwithstanding the foregoing, the Conversion Restriction Period shall end immediately when (i) the trading price of the Common Stock on the Trading Market on which the Common Stock is then listed exceeds $8.00 per share of Common Stock and (ii) the aggregate trading volume of the shares of Common Stock traded on the Trading Market on which the Common Stock is then listed exceeds 125,000. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as <u>Annex A</u> (a "<u>Notice of Conversion</u>"). Each Notice of Conversion shall specify the number of Preferred Shares to be converted, the number of Preferred Shares owned prior to the conversion at issue, the number of Preferred Shares owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by electronic mail or facsimile such Notice of Conversion to the Corporation (such date, the "<u>Conversion Date</u>"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. In the event of any dispute or discrepancy, the calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of Preferred Shares, a Holder shall not be required to surrender the certificate(s) representing the Preferred Shares to the Corporation unless all of the Preferred Shares represented thereby are so converted, in which case such Holder shall deliver the certificate representing such Preferred Shares promptly following the Conversion Date at issue. Preferred Shares converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued. The "Conversion Price" for the Preferred Shares shall be equal to the lower of (i) the price per share equal to a valuation of the Company of $56,000,000, (ii) 75% of the closing price of the Common Stock on the date of the Qualified Event, (iii) the closing price of the Common Stock on the Trading Day immediately preceding the Conversion Date, and (iv) 75% of the lowest VWAP during the five (5) Trading Day period immediately preceding a Conversion Date, each subject to adjustment herein and subject to the Floor Price (the "<u>Conversion Price</u>"). In the event of the Conversion Floor Price Condition, on the applicable Conversion Date the Stated Value of the remaining Preferred Shares of such Holder shall automatically increase, pro rata, by the applicable Conversion Floor Amount. In the event of a Conversion pursuant to this Section 6(a) of all, or any portion, of any Preferred Shares of a Holder, such Holder's damages would be uncertain and difficult to estimate because of the parties' inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder.

 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Mechanics of Conversion</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Delivery of Conversion Shares Upon Conversion</u>. Not later than the Trading Day after each Conversion Date (the "Share Delivery Date"), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of Conversion Shares being acquired upon the conversion of the Preferred Shares, which Conversion Shares shall be free of restrictive legends and trading restrictions and (B) a bank check in the amount of accrued and unpaid dividends. The Corporation shall deliver the Conversion Shares electronically through the Depository Trust Company or another established clearing corporation performing similar functions. On or before the 1st Trading Day following the date of receipt of a Notice of Conversion, with respect to a Conversion, if the applicable Conversion Price is less than the "conversion price" specified on such Notice of Conversion, the Holder may deliver an updated Notice of Conversion to the Company correcting the Conversion Price (and the aggregate Conversion Amount) as specified in such Notice of Conversion (provided, that if such updated Notice of Conversion is not delivered to the Company on or prior to 12:00 p.m. (local time in New York, NY) on the Trading Day immediately following the applicable Conversion Date, the applicable Share Delivery Date shall be extended by one (1) Trading Day).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Failure to Deliver Conversion Shares</u>. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Preferred Shares certificate delivered to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice. Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, or other remedies provided to Holder herein, the parties agree that if the Company causes the Common Shares issuable upon conversion of the Preferred Shares to not be delivered by the second (2nd) Trading Day following the Conversion Date, the Company shall pay to the Holder the greater of: (i) 2% of the value of the shares of Common Stock issuable upon the conversion of the Preferred Shares, or (ii) $3,000 per day, for each day beyond the Conversion Date that the Company fails to deliver such Common Stock, in addition to the product of the number of shares of Common Stock issuable upon the conversion of the Preferred Shares multiplied by the difference between the highest trade price and the lowest trade price of the Common Stock on the Trading Market on which the Common Stock is then listed or designated for quotation (as applicable) during the period beginning on the date that such conversion was submitted, and the date on which the Shares are delivered to Holder's Prime Broker and are available to be sold. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued. The Company agrees that the right to convert is a valuable right to the Holder, and as such, the Company will not take any actions to hamper, delay or prevent any Holder conversion of the Preferred Shares. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 6(b)(ii) are justified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Obligation Absolute</u>. The Corporation's obligation to issue and deliver the Conversion Shares upon conversion of Preferred Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; <u>provided</u>, <u>however</u>, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of its Preferred Shares, the Corporation may not refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Shares of such Holder shall have been sought and obtained. In the absence of such injunction, the Corporation shall issue Conversion Shares upon a properly noticed conversion. Nothing herein shall limit a Holder's right to pursue actual damages for the Corporation's failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Reservation of Shares Issuable Upon Conversion</u>. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock for the sole purpose of issuance upon conversion of the Preferred Shares as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Preferred Shares), not less than three times such aggregate number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then-outstanding Preferred Shares. The Corporation covenants that all Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Transfer Taxes and Expenses</u>. The issuance of Conversion Shares on conversion of this Preferred Shares shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, <u>provided</u> that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such Preferred Shares and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Beneficial Ownership Limitation</u>. The Corporation shall not effect any conversion of the Preferred Shares, and a Holder shall not have the right to convert any portion of the Preferred Shares, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder's Affiliates, and any Persons acting as a group together with such Holder or any of such Holder's Affiliates (such Persons, "<u>Attribution Parties</u>")) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Shares with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Preferred Shares beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Shares) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(c) applies, the determination of whether the Preferred Shares is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many Preferred Shares are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder's determination of whether the Preferred Shares may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many Preferred Shares are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(c), in determining the number of outstanding Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation's most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request (which may be via email) of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Shares, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The "<u>Beneficial Ownership Limitation</u>" shall be 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon conversion of Preferred Shares held by the applicable Holder. A Holder, upon notice to the Corporation, may decrease or increase the Beneficial Ownership Limitation provisions of this Section 6(c) applicable to its Preferred Shares, <u>provided</u> that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock upon conversion of this Preferred Shares held by the Holder and the provisions of this Section 6(c) shall continue to apply. Any such decrease or increase in the Beneficial Ownership Limitation will not be effective until the 61<sup>st</sup> day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Shares.

<u>Section 7</u>. <u>Certain Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Stock Dividends and Stock Splits</u>. If the Corporation, at any time while the Preferred Shares are outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in Common Stock on Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, the Preferred Shares), (ii) subdivides outstanding Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of Common Stock s, any shares of capital stock of the Corporation, the number of shares of Common Stock to be issued upon Conversion of the Preferred Shares, and the amount of assets to be paid to the Holders upon the liquidation, dissolution or winding up of the Corporation, shall be appropriately adjusted so that the Holders shall be treated by the Corporation equitably relative to all other holders of capital stock of the Corporation. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Pro Rata Distributions</u>. During such time as these Preferred Shares are outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "<u>Distribution</u>"), at any time after the issuance of these Preferred Shares, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of these Preferred Shares (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (<u>provided</u>, <u>however</u>, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Adjustment of Conversion Price upon Issuance of Common Stock</u>. Notwithstanding the foregoing, if and whenever on or after the Initial Issuance Date the Company grants, issues or sells (or enters into any agreement to grant, issue or sell, including pursuant to the ELOC (as defined in the Purchase Agreement)), or in accordance with this Section is deemed to have granted, issued or sold, any shares of Common Stock (including the granting, issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities granted, issued or sold or deemed to have been granted, issued or sold) for a consideration per share (the "<u>New Issuance Price</u>") less than a price equal to the Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Conversion Price then in effect is referred to herein as the "<u>Applicable Price</u>") (the foregoing a "<u>Dilutive Issuance</u>"), then, immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the New Issuance Price under this Section), the following shall be applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Issuance of Options</u>. If the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting, issuance or sale of such Option for such price per share. For purposes of this Section, the "lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration (including, without limitation, consideration consisting of cash, debt forgiveness, assets or any other property) received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated in clause (c) below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms thereof or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Issuance of Convertible Securities</u>. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section, the "lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated in clause (c) below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section, except as contemplated in clause (iii) below, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Change in Option Price or Rate of Conversion</u>. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 7(c) below), the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or sold. For purposes of this Section, if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Initial Issuance Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <u>Calculation of Consideration Received</u>. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the "<u>Primary Security</u>", and such Option and/or Convertible Security and/or Adjustment Right, the "<u>Secondary Securities</u>"), together comprising one integrated transaction (or one or more transactions if such issuances or sales or deemed issuances or sales of securities of the Company either (A) have at least one investor or purchaser in common, (B) are consummated in reasonable proximity to each other and/or (C) are consummated under the same plan of financing), the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued (or was deemed to be issued pursuant to Section 7(c)(ii)(a) or 7(c)(ii)(b) above, as applicable) in such integrated transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration Value of each such Option, if any, (II) the fair market value (as determined by the Holder in good faith) or the Black Scholes Consideration Value, as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Convertible Security, if any, in each case, as determined on a per share basis in accordance with this Section. If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Record Date</u>. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Most Favored Nation Provision</u>. Notwithstanding the foregoing, during such time as this Preferred Shares is outstanding, upon any issuance of (or announcement of intent to effect an issuance of) any security (including pursuant to the ELOC (as defined in the Purchase Agreement)), or amendment to (or announcement of intent to effect an amendment to) any security that was originally issued before the Initial Issuance Date, by the Company or any Subsidiary, with any term that the Holder reasonably believes is more favorable to the purchaser of such security than to the Holder of Preferred Shares, or with a term in favor of the purchaser of such security that the Holder reasonably believes was not similarly provided to the Holder, then (i) the Company shall notify Holders of such additional or more favorable term within three (3) business days of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder's option, shall become a part of the Certificate of Designations. The types of terms contained in another security that may be more favorable to the purchaser of such security include, but are not limited to, terms addressing conversion price, conversion price discounts and adjustments, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, commitment shares, warrant coverage, and warrant exercise price. If Holder elects to have the term become a part of the Certificate of Designations, then the Company shall immediately deliver acknowledgment of such adjustment in form and substance reasonably satisfactory to the Holder (the "<u>Acknowledgment</u>") within three (3) business days of Company's receipt of request from the Holder (the "<u>Adjustment Deadline</u>"), provided that Company's failure to timely provide the Acknowledgement shall not affect any automatic amendments contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <u>Rollover Rights</u>. So long as this Preferred Shares is outstanding, if the Company completes any single public offering or private placement of its equity, equity-linked or debt securities (each, a "<u>Future Transaction</u>"), the Holder may, in its sole discretion, elect to apply as purchase consideration for such Future Transaction: (i) all, or any portion, of the then outstanding principal amount of the Preferred Shares and any accrued but unpaid interest, including any amounts that would be added to the principal outstanding balance in the event that any redemption right or prepayment right is exercised by either the Holder or the Company, and (ii) any securities of the Company then held by the Holder, at their fair value (the "<u>Rollover Rights</u>"). The Company shall give written notice to Holder as soon as practicable, but in no event less than fifteen (15) days before the anticipated closing date of such Future Transaction. The Holder may exercise its Rollover Rights by providing the Company written notice of such exercise within five Business Days before the closing of the Future Transaction. In the event Holder exercises its Rollover Rights, then such elected portion with respect to (i) and (ii) above, shall automatically convert into the corresponding securities issued in such Future Transaction under the terms of such Future Transaction, such that the Purchaser will receive all securities (including, without limitation, any warrants) issuable pursuant to the Future Transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <u>Holder's Right of Adjusted Conversion Price</u>. In addition to and not in limitation of the other provisions of this Section, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (excluding any Excluded Securities) (any such securities, "Variable Price Securities") after the Initial Issuance Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting share splits, share combinations, and share dividends (each of the formulations for such variable price being herein referred to as, the "Variable Price"), the Company shall provide written notice thereof via electronic mail to each Holder on the date of such agreement and/or the issuance of such shares of Common Stock, Convertible Securities or Options, as applicable. From and after the date the Company enters into such agreement or issues any such Variable Price Securities, each Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Conversion Price upon conversion of the Preferred Shares by designating in the Conversion Notice delivered upon any conversion of Preferred Shares that solely for purposes of such conversion such Holder is relying on the Variable Price rather than the Conversion Price then in effect. A Holder's election to rely on a Variable Price for a particular conversion of Preferred Shares shall not obligate such Holder to rely on a Variable Price for any future conversions of Preferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <u>Calculations</u>. All calculations under this Section 7 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) <u>Fundamental Transaction</u>. The Company shall not enter into or be party to a Fundamental Transaction unless the successor entity assumes in writing all of the obligations of the Company under this Certificate of Designation pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the successor entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a stated value and dividend rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and reasonably satisfactory to the Required Holder. Upon the occurrence of any Fundamental Transaction, the successor entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation referring to the "Company" shall refer instead to the successor entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Certificate of Designation with the same effect as if such successor entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the successor entity shall deliver to each Holder confirmation that there shall be issued upon conversion or redemption of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or redemption of the Preferred Shares prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the successor entity which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designation), as adjusted in accordance with the provisions of this Certificate of Designation. Notwithstanding the foregoing, such Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 7(d) to permit the Fundamental Transaction without the assumption of the Preferred Shares. The provisions of this Section 7 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j) <u>Notice to the Holders</u>. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special, nonrecurring cash dividend on or a redemption of the shares of Common Stock, (C) the Corporation shall authorize the granting to all holders of the shares of Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the shares of Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the shares of Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Shares, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the shares of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, <u>provided</u> that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Preferred Shares (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 <u>Section 8</u>. <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Notices</u>. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 6400 SW Rosewood Street, Lake Oswego, Oregon 97035, Attention Chief Executive Officer, by electronic mail at eric.gripentrog@functionalbrands.com, or such other email address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by electronic mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the email address or address of such Holder appearing on the books of the Corporation, or if no such email address or address appears on the books of the Corporation, at the principal place of business of such Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via electronic mail at the email address provided for in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via electronic mail at the email address provided for in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Absolute Obligation</u>. Except as expressly provided herein, no provision of this Certificate of Designations shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and accrued dividends, as applicable, on the Preferred Shares at the time, place, and rate, and in the coin or currency, herein prescribed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Lost or Mutilated Preferred Shares Certificate</u>. If a Holder's Preferred Shares certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the Preferred Shares so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Governing Law</u>. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designations shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Certificate of Designations (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the State of Delaware (the "<u>Delaware Courts</u>"). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designations and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designations or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designations, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Waiver</u>. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designations shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designations or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designations on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designations on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <u>Severability</u>. If any provision of this Certificate of Designations is invalid, illegal or unenforceable, the balance of this Certificate of Designations shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <u>Next Business Day</u>. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <u>Headings</u>. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof.

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

RESOLVED, FURTHER, that the Chief Executive Officer, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designations in accordance with the foregoing resolution and the provisions of Delaware law.

IN WITNESS WHEREOF, the undersigned has executed this Certificate this [ ] day of [__], 2025.

By:   <br> Name: Eric Gripentrog <br> Title: Chief Executive Officer

**ANNEX A**

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert PREFERRED Shares)

The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Shares indicated below into common stock, par value $0.00001 per share (the "<u>Common Stock</u>"), of Functional Brands Inc., a Delaware corporation (the "<u>Corporation</u>"), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

Conversion calculations:

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| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date to Effect Conversion: _____________________________________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of Preferred Shares owned prior to Conversion: _______________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stated Value of Preferred Shares to be Converted: ________________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of shares of Common Stock to be Issued: ___________________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of Preferred Shares subsequent to Conversion: ________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address for Delivery: ______________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>or</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DWAC Instructions: |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker no: _________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Account no: ___________ |

---

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| |
|:---|
| [HOLDER] |
| By: |
| Name: |
| Title: |

---

## Exhibit 3.9

**Exhibit 3.9**

**CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS**

**OF**

**SERIES B PREFERRED SHARES**

**OF**

**FUNCTIONAL BRANDS INC.**

**_______________**

The undersigned, being the Chief Executive Officer of Functional Brands Inc., a Delaware corporation (the "<u>Corporation</u>" or "<u>Company</u>"), in accordance with the provisions of the Delaware General Corporation Law, does hereby certify that, pursuant to the authority conferred upon the Board of Directors (the "<u>Board</u>") of the Corporation by the Certificate of Incorporation of the Corporation, as amended (the "<u>Certificate of Incorporation</u>"), the following resolutions creating a series of Series B Preferred Shares, was duly adopted on [__], 2025:

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board by provisions of the Certificate of Incorporation, there hereby is created out of the shares of preferred stock of the Corporation, par value $0.00001 per share, as authorized in the Certificate of Incorporation, a series of preferred stock of the Corporation, to be named "Series B Preferred Shares" consisting of [__] shares (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization of the Series B Preferred Shares).

**TERMS OF PREFERRED SHARES**

<u>Section 1</u>. <u>Definitions</u>. For the purposes hereof, the following terms shall have the following meanings:

"<u>Adjustment Right</u>" means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 7(c)) of shares of Common Stock that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

"<u>Affiliate</u>" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

"<u>Approved Stock Plan</u>" means any employee benefit plan or agreement which has been approved by the Board prior to or subsequent to the Initial Issuance Date pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, consultant or director for services provided to the Company in their capacity as such.

"<u>Beneficial Ownership Limitation</u>" shall have the meaning set forth in Section 6(c).

"<u>Black Scholes Consideration Value</u>" means the value of the applicable Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the "OV" function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the "HVT" function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

"<u>Bloomberg</u>" means Bloomberg, L.P.

"<u>Business Day</u>" means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States of America or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

"<u>Certificate of Designations</u>" shall have the meaning set forth in Section 4.

"<u>Closing Sale Price</u>" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures herein. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.

"<u>Commission</u>" means the United States Securities and Exchange Commission.

"<u>Common Stock</u>" means the common stock of the Company, par value $0.00001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

"<u>Common Stock Equivalents</u>" means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

"<u>Conversion</u>" shall have the meaning set forth in Section 6(a).

"<u>Conversion Date</u>" shall have the meaning set forth in Section 6(a).

"<u>Conversion Restriction Period</u>" shall have the meaning set forth in Section 6(a).

"<u>Conversion Shares</u>" means, collectively, the Common Stock issuable upon conversion of the Preferred Shares in accordance with the terms hereof.

"<u>Convertible Securities</u>" means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

"<u>Delaware Courts</u>" shall have the meaning set forth in Section 8(d).

"<u>Dividend Rate</u>" means, (i) for the first six (6) months following the Initial Issuance Date, five percent (5%) per annum, (ii) for the next six (6) months following the Initial Issuance Date, ten percent (10%) per annum, (iii) from the twelve (12) month anniversary of the Initial Issuance Date until the eighteen (18) month anniversary of the Initial Issuance Date, fifteen percent (15%) per annum and (iv) for every month following the eighteen (18) month anniversary of the Initial Issuance Date, an additional three percent (3%) per annum.

"<u>Equity Conditions</u>" means, with respect to an given date of determination: (i) on each day during the period beginning thirty calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the "<u>Equity Conditions Measuring Period</u>") and ending on and including such applicable date of determination all shares of Common Stock to be issued in connection with the event requiring this determination, as applicable, shall be registered for resale on a registration statement that has been declared effective by the Commission, or are eligible for sale pursuant to Rule 144 of the Securities Act of 1933, as amended, without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares); (ii) on each day during the Equity Conditions Measuring Period, the Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Preferred Shares) are listed or designated for quotation (as applicable) on a Trading Market and shall not have been suspended from trading on a Trading Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by a Trading Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Trading Market or (B) the Company falling below the minimum listing maintenance requirements of the Trading Market on which the Common Stock is then listed or designated for quotation, as applicable; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of the Preferred Shares on a timely basis as set forth in Section 6 hereof and all other shares of capital stock required to be delivered by the Company on a timely basis; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 6(c) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Trading Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause the shares of Common Stock issuable in connection with the event requiring such determination to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares, other issuance of securities with respect to the Preferred Shares), (viii) none of the Holders shall be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to this Certificate of Designation; (x) on the applicable date of determination a sufficient number of shares of Common Stock are available under the certificate of incorporation of the Company and reserved by the Company to be issued pursuant to this Certificate of Designations; or (xi) the shares of Common Stock issuable pursuant to the event requiring the satisfaction of the Equity Conditions are duly authorized and listed and eligible for trading without restriction on a Trading Market.

"<u>Equity Conditions Failure</u>" means that on any day during the period commencing twenty (20) Trading Days prior to such applicable date of determination, the Equity Conditions have not been satisfied (or waived in writing by the applicable Holder).

"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"<u>Excluded Securities</u>" means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers, employees or consultants of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan, provided that the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Holders; (ii) shares of Common Stock issued upon the conversion or exercise, as applicable, of Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Initial Issuance Date, provided that the conversion price or exercise price, as applicable, of any such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Holders (such shares of Common Stock issuable pursuant to clause (i) above and this clause (ii), collectively, the "<u>Permitted Approved Stock Plan Issuances</u>"); and (iii) the Preferred Shares and the shares of Common Stock issuable upon conversion of the Preferred Shares or otherwise pursuant to the terms of this Certificate of Designation; provided, that the terms of this Certificate of Designation are not amended, modified or changed on or after the Initial Issuance Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Initial Issuance Date).

"<u>Fundamental Transaction</u>" means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another subject entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of Regulation S-X) to one or more subject entities, or (iii) make, or allow one or more subject entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more subject entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all subject entities making or party to, or affiliated with any subject entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all subject entities making or party to, or Affiliated with any subject entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more subject entities whereby all such subject entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the subject entities making or party to, or Affiliated with any subject entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the subject entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any subject entity individually or the subject entities in the aggregate to be or become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such subject entities as of the date of this Certificate of Designations calculated as if any shares of Common Stock held by all such subject entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such subject entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

"<u>Holder</u>" shall have the meaning given such term in Section 3.

"<u>Liquidation</u>" shall have the meaning set forth in Section 5.

"<u>Notice of Conversion</u>" shall have the meaning set forth in Section 6(a).

**"**<u>Options</u>" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

"<u>Original Issue Date</u>" means the date of the first issuance of any Preferred Shares regardless of the number of transfers of any particular Preferred Shares and regardless of the number of certificates which may be issued to evidence such Preferred Shares.

"<u>Person</u>" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"<u>Preferred Shares</u>" shall have the meaning set forth in Section 2.

**"**<u>Principal Market</u>" means, as of any time of determination, the principal trading market, if any, in which the shares of Common Stock then trade.

"<u>Purchase Agreement</u>" means that certain securities purchase agreement, dated as of July 22, 2025, by and among the Company and the initial Holders.

"<u>Qualified Event</u>" means the direct listing of the Company's securities on a Trading Market.

"<u>Securities Act</u>" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"<u>Share Delivery Date</u>" shall have the meaning set forth in Section 6(c).

"<u>Stated Value</u>" shall have the meaning set forth in Section 2.

"<u>Subsidiary</u>" means any subsidiary of the Corporation.

"<u>Trading Day</u>" means a day on which the principal Trading Market is open for business.

"<u>Trading Market</u>" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

"<u>Transfer Agent</u>" means Endeavor Trust Corporation, or any successor transfer agent for the Common Stock.

"<u>VWAP</u>" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg through its "VAP" function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures set forth herein. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

<u>Section 2</u>. <u>Designation, Amount; Par Value</u>. The series of Preferred Shares shall be designated as Series B Preferred Shares (the "<u>Preferred Shares</u>") and the number of shares so designated shall be up to [ ],000 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization of the Preferred Shares). Each Preferred Share shall have a par value of $0.00001 per share and a stated value equal to $1,000, subject to adjustment as set forth herein (the "<u>Stated Value</u>").

<u>Section 3</u>. <u>Dividends</u>. From and after the first date of issuance of any Preferred Shares (the "<u>Initial Issuance Date</u>"), each holder of a Preferred Share (each, a "<u>Holder</u>" and collectively, the "<u>Holders</u>") shall be entitled to receive dividends ("<u>Dividends</u>"), which Dividends shall be computed on the basis of a 360-day year and the actual number of days elapsed in each month and shall be payable in arrears on the first Trading Day of each month (each, an "<u>Dividend Date</u>") with the first Dividend Date being the first Trading Day of the initial calendar month commencing after the Initial Issuance Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Dividends shall be payable on each Dividend Date in cash ("<u>Cash Dividends</u>") out of funds legally available therefor or, to each Holder, at each Holder's sole option, in registered shares of Common Stock ("<u>Dividend Shares</u>") so long as there has been no Equity Conditions Failure or, so long as there has been no Equity Conditions Failure, in a combination of Cash Dividends and Dividends Shares. The Company shall deliver a written notice (each, an "<u>Dividend Election Notice</u>") to each Holder of the Preferred Shares on or prior to the fifth (5<sup>th</sup>) Trading Day immediately prior to the applicable Dividend Date (the date such notice is delivered to all of the Holders, the "<u>Dividend Notice Date</u>") which notice (i) either (A) confirms that Dividends to be paid on such Dividend Date shall be paid entirely in Dividend Shares or (B) elects to pay Dividends as Cash Dividends or a combination of Cash Dividends and Dividend Shares and specifies the amount of Dividends that shall be paid as Cash Dividends and the amount of Dividends, if any, that shall be paid in Dividend Shares and (ii) certifies that there has been no Equity Conditions Failure. Notwithstanding anything herein to the contrary, if no Equity Conditions Failure has occurred as of the Dividend Notice Date but an Equity Conditions Failure occurs at any time prior to the Dividend Date, (A) the Company shall provide each Holder a subsequent notice to that effect and (B) unless such applicable Holder waives the Equity Conditions Failure, the Dividend shall be paid to such Holder in cash. Dividends to be paid on a Dividend Date in Dividend Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share) of Common Stock equal to the quotient of (1) the amount of Dividends payable on such Dividend Date less any Cash Dividends paid and (2) the Dividend Conversion Price in effect on the applicable Dividend Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) When any Dividend Shares are to be paid on a Dividend Date to a Holder, the Company shall (i) (A) provided that the Company's transfer agent (the "<u>Transfer Agent</u>") is participating in the Depository Trust Company ("<u>DTC</u>") Fast Automated Securities Transfer Program ("<u>FAST</u>"), credit such aggregate number of Dividend Shares to which such Holder shall be entitled to such Holder's or its designee's balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if the Transfer Agent is not participating in FAST, issue and deliver on the applicable Dividend Date, to the address set forth in the register maintained by the Company for such purpose or to such address as specified by such Holder in writing to the Company at least two (2) Business Days prior to the applicable Dividend Date, a certificate, registered in the name of such Holder or its designee, for the number of Dividend Shares to which such Holder shall be entitled and (ii) with respect to each Dividend Date, pay to such Holder, in cash by wire transfer of immediately available funds, the amount of any Cash Dividends.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Prior to the payment of Dividends on a Dividend Date, Dividends on the Preferred Shares shall accrue at the Dividend Rate and be payable by way of inclusion of the Dividends in the Conversion Amount on each Conversion Date.

<u>Section 4</u>. <u>Voting Rights</u>. Except as otherwise provided herein or as otherwise required by law, the Preferred Shares shall have no voting rights. However, as long as any Preferred Shares are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then-outstanding Preferred Shares, (a) alter or change adversely the powers, preferences or rights given to the Preferred Shares or alter or amend this Certificate of Designations, Preferences and Rights (the "<u>Certificate of Designations</u>"), (b) amend its Certificate of Incorporation or other charter documents in any manner that materially adversely affects any rights of the Holders, or (c) enter into any agreement with respect to any of the foregoing.

<u>Section 5</u>. <u>Liquidation</u>. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a "<u>Liquidation</u>"), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount on an as-converted basis equal to the amount received by holders of Common Stock. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.

<u>Section 6</u>. <u>Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Conversions at Option of Holder</u>. Each Preferred Share shall be convertible, at any time and from time to time from and after the forty-five (45) day anniversary of the Qualified Event (the "<u>Conversion Restriction Period</u>"), at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(c)) determined by dividing the Stated Value of such Preferred Shares by the Conversion Price (a "<u>Conversion</u>"), in whole or in part at any time and from time to time commencing on the date of this Certificate of Designations. Notwithstanding the foregoing, the Conversion Restriction Period shall end immediately when (i) the trading price of the Common Stock on the Trading Market on which the Common Stock is then listed exceeds $8.00 per share of Common Stock and (ii) the aggregate trading volume of the shares of Common Stock traded on the Trading Market on which the Common Stock is then listed exceeds 125,000. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as <u>Annex A</u> (a "<u>Notice of Conversion</u>"). Each Notice of Conversion shall specify the number of Preferred Shares to be converted, the number of Preferred Shares owned prior to the conversion at issue, the number of Preferred Shares owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by electronic mail or facsimile such Notice of Conversion to the Corporation (such date, the "<u>Conversion Date</u>"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. In the event of any dispute or discrepancy, the calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of Preferred Shares, a Holder shall not be required to surrender the certificate(s) representing the Preferred Shares to the Corporation unless all of the Preferred Shares represented thereby are so converted, in which case such Holder shall deliver the certificate representing such Preferred Shares promptly following the Conversion Date at issue. Preferred Shares converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued. The "Conversion Price" for the Preferred Shares shall be equal to the lower of (i) the price per share equal to a valuation of the Company of $56,000,000 and (ii) the closing price of the Common Stock on the Trading Day immediately preceding the Conversion Date, each subject to adjustment herein (the "<u>Conversion Price</u>"). In the event of a Conversion pursuant to this Section 6(a) of all, or any portion, of any Preferred Shares of a Holder, such Holder's damages would be uncertain and difficult to estimate because of the parties' inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder.

 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Mechanics of Conversion</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Delivery of Conversion Shares Upon Conversion</u>. Not later than the Trading Day after each Conversion Date (the "Share Delivery Date"), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of Conversion Shares being acquired upon the conversion of the Preferred Shares, which Conversion Shares shall be free of restrictive legends and trading restrictions and (B) a bank check in the amount of accrued and unpaid dividends. The Corporation shall deliver the Conversion Shares electronically through the Depository Trust Company or another established clearing corporation performing similar functions. On or before the 1st Trading Day following the date of receipt of a Notice of Conversion, with respect to a Conversion, if the applicable Conversion Price is less than the "conversion price" specified on such Notice of Conversion, the Holder may deliver an updated Notice of Conversion to the Company correcting the Conversion Price (and the aggregate Conversion Amount) as specified in such Notice of Conversion (provided, that if such updated Notice of Conversion is not delivered to the Company on or prior to 12:00 p.m. (local time in New York, NY) on the Trading Day immediately following the applicable Conversion Date, the applicable Share Delivery Date shall be extended by one (1) Trading Day).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Failure to Deliver Conversion Shares</u>. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Preferred Shares certificate delivered to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice. Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, or other remedies provided to Holder herein, the parties agree that if the Company causes the Common Shares issuable upon conversion of the Preferred Shares to not be delivered by the second (2nd) Trading Day following the Conversion Date, the Company shall pay to the Holder the greater of: (i) 2% of the value of the shares of Common Stock issuable upon the conversion of the Preferred Shares, or (ii) $3,000 per day, for each day beyond the Conversion Date that the Company fails to deliver such Common Stock, in addition to the product of the number of shares of Common Stock issuable upon the conversion of the Preferred Shares multiplied by the difference between the highest trade price and the lowest trade price of the Common Stock on the Trading Market on which the Common Stock is then listed or designated for quotation (as applicable) during the period beginning on the date that such conversion was submitted, and the date on which the Shares are delivered to Holder's Prime Broker and are available to be sold. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued. The Company agrees that the right to convert is a valuable right to the Holder, and as such, the Company will not take any actions to hamper, delay or prevent any Holder conversion of the Preferred Shares. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 6(b)(ii) are justified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Obligation Absolute</u>. The Corporation's obligation to issue and deliver the Conversion Shares upon conversion of Preferred Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; <u>provided</u>, <u>however</u>, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of its Preferred Shares, the Corporation may not refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Shares of such Holder shall have been sought and obtained. In the absence of such injunction, the Corporation shall issue Conversion Shares upon a properly noticed conversion. Nothing herein shall limit a Holder's right to pursue actual damages for the Corporation's failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Reservation of Shares Issuable Upon Conversion</u>. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock for the sole purpose of issuance upon conversion of the Preferred Shares as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Preferred Shares), not less than three times such aggregate number of shares of Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then-outstanding Preferred Shares. The Corporation covenants that all Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Transfer Taxes and Expenses</u>. The issuance of Conversion Shares on conversion of this Preferred Shares shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, <u>provided</u> that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such Preferred Shares and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Beneficial Ownership Limitation</u>. The Corporation shall not effect any conversion of the Preferred Shares, and a Holder shall not have the right to convert any portion of the Preferred Shares, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder's Affiliates, and any Persons acting as a group together with such Holder or any of such Holder's Affiliates (such Persons, "<u>Attribution Parties</u>")) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Shares with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Preferred Shares beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Shares) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(c) applies, the determination of whether the Preferred Shares is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many Preferred Shares are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder's determination of whether the Preferred Shares may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many Preferred Shares are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(c), in determining the number of outstanding Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation's most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request (which may be via email) of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Shares, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The "<u>Beneficial Ownership Limitation</u>" shall be 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon conversion of Preferred Shares held by the applicable Holder. A Holder, upon notice to the Corporation, may decrease or increase the Beneficial Ownership Limitation provisions of this Section 6(c) applicable to its Preferred Shares, <u>provided</u> that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock upon conversion of this Preferred Shares held by the Holder and the provisions of this Section 6(c) shall continue to apply. Any such decrease or increase in the Beneficial Ownership Limitation will not be effective until the 61<sup>st</sup> day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Shares.

<u>Section 7</u>. <u>Certain Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Stock Dividends and Stock Splits</u>. If the Corporation, at any time while the Preferred Shares are outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in Common Stock on Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, the Preferred Shares), (ii) subdivides outstanding Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of Common Stock s, any shares of capital stock of the Corporation, the number of shares of Common Stock to be issued upon Conversion of the Preferred Shares, and the amount of assets to be paid to the Holders upon the liquidation, dissolution or winding up of the Corporation, shall be appropriately adjusted so that the Holders shall be treated by the Corporation equitably relative to all other holders of capital stock of the Corporation. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Pro Rata Distributions</u>. During such time as these Preferred Shares are outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "<u>Distribution</u>"), at any time after the issuance of these Preferred Shares, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of these Preferred Shares (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (<u>provided</u>, <u>however</u>, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Adjustment of Conversion Price upon Issuance of Common Stock</u>. Notwithstanding the foregoing, if and whenever on or after the Initial Issuance Date the Company grants, issues or sells (or enters into any agreement to grant, issue or sell, including pursuant to the ELOC (as defined in the Purchase Agreement)), or in accordance with this Section is deemed to have granted, issued or sold, any shares of Common Stock (including the granting, issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities granted, issued or sold or deemed to have been granted, issued or sold) for a consideration per share (the "<u>New Issuance Price</u>") less than a price equal to the Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Conversion Price then in effect is referred to herein as the "<u>Applicable Price</u>") (the foregoing a "<u>Dilutive Issuance</u>"), then, immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the New Issuance Price under this Section), the following shall be applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Issuance of Options</u>. If the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting, issuance or sale of such Option for such price per share. For purposes of this Section, the "lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration (including, without limitation, consideration consisting of cash, debt forgiveness, assets or any other property) received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated in clause (c) below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms thereof or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Issuance of Convertible Securities</u>. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section, the "lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof" shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated in clause (c) below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section, except as contemplated in clause (iii) below, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Change in Option Price or Rate of Conversion</u>. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 7(c) below), the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or sold. For purposes of this Section, if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Initial Issuance Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <u>Calculation of Consideration Received</u>. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the "<u>Primary Security</u>", and such Option and/or Convertible Security and/or Adjustment Right, the "<u>Secondary Securities</u>"), together comprising one integrated transaction (or one or more transactions if such issuances or sales or deemed issuances or sales of securities of the Company either (A) have at least one investor or purchaser in common, (B) are consummated in reasonable proximity to each other and/or (C) are consummated under the same plan of financing), the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued (or was deemed to be issued pursuant to Section 7(c)(ii)(a) or 7(c)(ii)(b) above, as applicable) in such integrated transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration Value of each such Option, if any, (II) the fair market value (as determined by the Holder in good faith) or the Black Scholes Consideration Value, as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Convertible Security, if any, in each case, as determined on a per share basis in accordance with this Section. If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Record Date</u>. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Most Favored Nation Provision</u>. Notwithstanding the foregoing, during such time as this Preferred Shares is outstanding, upon any issuance of (or announcement of intent to effect an issuance of) any security (including pursuant to the ELOC (as defined in the Purchase Agreement)), or amendment to (or announcement of intent to effect an amendment to) any security that was originally issued before the Initial Issuance Date, by the Company or any Subsidiary, with any term that the Holder reasonably believes is more favorable to the purchaser of such security than to the Holder of Preferred Shares, or with a term in favor of the purchaser of such security that the Holder reasonably believes was not similarly provided to the Holder, then (i) the Company shall notify Holders of such additional or more favorable term within three (3) business days of the issuance and/or amendment (as applicable) of the respective security, and (ii) such term, at Holder's option, shall become a part of the Certificate of Designations. The types of terms contained in another security that may be more favorable to the purchaser of such security include, but are not limited to, terms addressing conversion price, conversion price discounts and adjustments, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, commitment shares, warrant coverage, and warrant exercise price. If Holder elects to have the term become a part of the Certificate of Designations, then the Company shall immediately deliver acknowledgment of such adjustment in form and substance reasonably satisfactory to the Holder (the "<u>Acknowledgment</u>") within three (3) business days of Company's receipt of request from the Holder (the "<u>Adjustment Deadline</u>"), provided that Company's failure to timely provide the Acknowledgement shall not affect any automatic amendments contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <u>Rollover Rights</u>. So long as this Preferred Shares is outstanding, if the Company completes any single public offering or private placement of its equity, equity-linked or debt securities (each, a "<u>Future Transaction</u>"), the Holder may, in its sole discretion, elect to apply as purchase consideration for such Future Transaction: (i) all, or any portion, of the then outstanding principal amount of the Preferred Shares and any accrued but unpaid interest, including any amounts that would be added to the principal outstanding balance in the event that any redemption right or prepayment right is exercised by either the Holder or the Company, and (ii) any securities of the Company then held by the Holder, at their fair value (the "<u>Rollover Rights</u>"). The Company shall give written notice to Holder as soon as practicable, but in no event less than fifteen (15) days before the anticipated closing date of such Future Transaction. The Holder may exercise its Rollover Rights by providing the Company written notice of such exercise within five Business Days before the closing of the Future Transaction. In the event Holder exercises its Rollover Rights, then such elected portion with respect to (i) and (ii) above, shall automatically convert into the corresponding securities issued in such Future Transaction under the terms of such Future Transaction, such that the Purchaser will receive all securities (including, without limitation, any warrants) issuable pursuant to the Future Transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <u>Holder's Right of Adjusted Conversion Price</u>. In addition to and not in limitation of the other provisions of this Section, if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (excluding any Excluded Securities) (any such securities, "Variable Price Securities") after the Initial Issuance Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting share splits, share combinations, and share dividends (each of the formulations for such variable price being herein referred to as, the "Variable Price"), the Company shall provide written notice thereof via electronic mail to each Holder on the date of such agreement and/or the issuance of such shares of Common Stock, Convertible Securities or Options, as applicable. From and after the date the Company enters into such agreement or issues any such Variable Price Securities, each Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Conversion Price upon conversion of the Preferred Shares by designating in the Conversion Notice delivered upon any conversion of Preferred Shares that solely for purposes of such conversion such Holder is relying on the Variable Price rather than the Conversion Price then in effect. A Holder's election to rely on a Variable Price for a particular conversion of Preferred Shares shall not obligate such Holder to rely on a Variable Price for any future conversions of Preferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <u>Calculations</u>. All calculations under this Section 7 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) <u>Fundamental Transaction</u>. The Company shall not enter into or be party to a Fundamental Transaction unless the successor entity assumes in writing all of the obligations of the Company under this Certificate of Designation pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the successor entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a stated value and dividend rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and reasonably satisfactory to the Required Holder. Upon the occurrence of any Fundamental Transaction, the successor entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation referring to the "Company" shall refer instead to the successor entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Certificate of Designation with the same effect as if such successor entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the successor entity shall deliver to each Holder confirmation that there shall be issued upon conversion or redemption of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or redemption of the Preferred Shares prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the successor entity which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designation), as adjusted in accordance with the provisions of this Certificate of Designation. Notwithstanding the foregoing, such Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 7(d) to permit the Fundamental Transaction without the assumption of the Preferred Shares. The provisions of this Section 7 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j) <u>Notice to the Holders</u>. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special, nonrecurring cash dividend on or a redemption of the shares of Common Stock, (C) the Corporation shall authorize the granting to all holders of the shares of Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the shares of Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the shares of Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Shares, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the shares of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, <u>provided</u> that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Preferred Shares (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 <u>Section 8</u>. <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Notices</u>. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 6400 SW Rosewood Street, Lake Oswego, Oregon 97035, Attention Chief Executive Officer, by electronic mail at eric.gripentrog@functionalbrandsinc.com, or such other email address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by electronic mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the email address or address of such Holder appearing on the books of the Corporation, or if no such email address or address appears on the books of the Corporation, at the principal place of business of such Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via electronic mail at the email address provided for in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via electronic mail at the email address provided for in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Absolute Obligation</u>. Except as expressly provided herein, no provision of this Certificate of Designations shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and accrued dividends, as applicable, on the Preferred Shares at the time, place, and rate, and in the coin or currency, herein prescribed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Lost or Mutilated Preferred Shares Certificate</u>. If a Holder's Preferred Shares certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the Preferred Shares so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Governing Law</u>. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designations shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Certificate of Designations (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the State of Delaware (the "<u>Delaware Courts</u>"). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designations and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designations or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designations, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Waiver</u>. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designations shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designations or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designations on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designations on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <u>Severability</u>. If any provision of this Certificate of Designations is invalid, illegal or unenforceable, the balance of this Certificate of Designations shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <u>Next Business Day</u>. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <u>Headings</u>. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) <u>Optional Redemption</u>. For so long as the Series B Preferred Stock is outstanding, the Company must offer the Holder thereof one third (33.33%) of any gross proceeds received pursuant to a financing by the Company, including through an equity line of credit, to redeem for cash outstanding shares of Series B Preferred Stock at the Stated Value. Such offer shall be made within one (1) Trading Day of the closing of such financing, and each Holder shall have one (1) Trading Day from receipt of such notice to elect whether to have the Company redeem their Series B Preferred Stock pursuant hereto. If Holder elects for such redemption, the Company shall make such payment by the Trading Day following receipt of the Holder's election. Such proceeds shall be applied pro-rata to all outstanding shares of Series B Preferred Stock being redeemed.

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

RESOLVED, FURTHER, that the Chief Executive Officer, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designations in accordance with the foregoing resolution and the provisions of Delaware law.

IN WITNESS WHEREOF, the undersigned has executed this Certificate this 18th day of July, 2025.

By:   <br> Name: <br> Title:

**ANNEX A**

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert PREFERRED Shares)

The undersigned hereby elects to convert the number of shares of Series B Preferred Shares indicated below into common stock, par value $0.00001 per share (the "<u>Common Stock</u>"), of Functional Brands Inc., a Delaware corporation (the "<u>Corporation</u>"), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

Conversion calculations:

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| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date to Effect Conversion: _____________________________________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of Preferred Shares owned prior to Conversion: _______________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stated Value of Preferred Shares to be Converted: ________________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of shares of Common Stock to be Issued: ___________________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of Preferred Shares subsequent to Conversion: ________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address for Delivery: ______________________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>or</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DWAC Instructions: |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker no: _________ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Account no: ___________ |

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| |
|:---|
| [HOLDER] |
| By: |
| Name: |
| Title: |

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## Exhibit 4.2

**Exhibit 4.2**

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

**PLACEMENT AGENT COMMON STOCK PURCHASE WARRANT**

**FUNCTIONAL BRANDS INC.**

Warrant Shares: [ ] Issue Date: [__], 2025

THIS PLACEMENT AGENT COMMON STOCK PURCHASE WARRANT (the "<u>Warrant</u>") certifies that, for value received, Joseph Gunnar & Co., LLC, or its registered assigns (the "<u>Holder</u>") is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after [__], 2026<sup>1</sup> (the "<u>Initial Exercise Date</u>") until 5:00 p.m. (New York City time) on the date that is five years following the Initial Exercise Date (the "<u>Termination Date</u>") but not thereafter, to subscribe for and purchase from FUNCTIONAL BRANDS INC., a Delaware corporation (the "<u>Company</u>"), up to [ ] shares (as subject to adjustment hereunder, the "<u>Warrant Shares</u>") of common stock of the Company, par value $0.00001 per share (the "<u>Common Stock</u>"). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant is issued pursuant to that certain Placement Agent Agreement, by and between the Company and Joseph Gunnar & Co., LLC, dated as of July 22, 2025 (the "<u>Placement Agent Agreement</u>").

<u>Section 1</u>. <u>Definitions</u>. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the "<u>Purchase Agreement</u>"), dated July 22, 2025, among the Company and the purchasers signatory thereto.

<u>Section 2</u>. <u>Exercise</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Exercise of Warrant</u>. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the "<u>Notice of Exercise</u>"). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier's check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. **For the avoidance of doubt, there is no circumstance that would require the Company to net cash settle this Warrant.**

<sup>1</sup> Insert date that is 6 months from the Issue Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Exercise Price</u>. The aggregate exercise price of this Warrant shall be $[ ]<sup>2</sup>, subject to adjustment hereunder (the "<u>Exercise Price</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Cashless Exercise</u>. This Warrant may also be exercised, in whole or in part, at such time by means of a "cashless exercise" in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

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| | |
|:---|:---|
| (A) = | as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of "regular trading hours" (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. ("<u>Bloomberg</u>") as of the time of the Holder's execution of the applicable Notice of Exercise if such Notice of Exercise is executed during "regular trading hours" on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of "regular trading hours" on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of "regular trading hours" on such Trading Day; |

---

<sup>2</sup> To be 100% of the per share purchase price in the PIPE.

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c), except to the extent required by applicable law, rules or regulations.

"<u>Bid Price</u>" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported on OTCQB or OTCQX and OTCQB or OTCQX, as applicable, is not a Trading Market, the VWAP of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

"<u>Trading Day</u>" shall have the meaning as set forth in the Purchase Agreement.

"<u>VWAP</u>" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported on OTCQB or OTCQX and OTCQB or OTCQX, as applicable, is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Mechanics of Exercise</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Delivery of Warrant Shares Upon Exercise</u>. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder's or its designee's balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system ("<u>DWAC</u>") if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of this Warrant), and otherwise by physical delivery of a certificate, registered in the Company's share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the "<u>Warrant Share Delivery Date</u>"). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, "<u>Standard Settlement Period</u>" means the standard settlement period, expressed in a number of Trading Days, on the Company's primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time less than the amount stated on the face hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Delivery of New Warrants Upon Exercise</u>. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Rescission Rights</u>. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <u>Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise</u>. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder's brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a "<u>Buy-In</u>"), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. <u>No Fractional Shares or Scrip</u>. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi. <u>Charges, Taxes and Expenses</u>. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; <u>provided</u>, <u>however</u>, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii. <u>Closing of Books</u>. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Holder's Exercise Limitations</u>. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder's Affiliates, (ii) any other Persons acting as a group together with the Holder or any of the Holder's Affiliates, and (iii) any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for the purposes of determination of beneficial ownership pursuant to Section 13(d) and Rule 13d-3 of the Exchange Act (such Persons, "<u>Attribution Parties</u>")), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder's determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of this Warrant that are not in compliance with the Beneficial Ownership Limitation, except to the extent the Holder has detrimentally relied on the number of outstanding shares of Common Stock that was provided to Holder in writing by the Company for such purpose. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of this Warrant that are not in compliance with the Beneficial Ownership Limitation, except to the extent that the Holder relies on the number of outstanding shares of Common Stock that was provided to Holder in writing by the Company for such purpose. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company's most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written request of a Holder, the Company shall within one Trading Day in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The "<u>Beneficial Ownership Limitation</u>" shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61<sup>st</sup> day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

<u>Section 3</u>. <u>Certain Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Stock Dividends and Splits</u>. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Subsequent Rights Offerings</u>. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the "<u>Purchase Rights</u>"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (<u>provided</u>, <u>however</u>, that, to the extent that the Holder's right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Pro Rata Distributions</u>. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "<u>Distribution</u>"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (<u>provided</u>, <u>however</u>, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Fundamental Transaction</u>. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person in which the Company is not the surviving entity (other than a reincorporation in a different state, a transaction for changing the Company's name, or a similar transaction pursuant to which the surviving company remains a public company), (ii) the Company (or any Subsidiary), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company's assets in one or a series of related transactions (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of more than 50% of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a "<u>Fundamental Transaction</u>"), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the "<u>Alternate Consideration</u>") receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the "<u>Successor Entity</u>") to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the "Company" shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Calculations</u>. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <u>Notice to Holder</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Adjustment to Exercise Price</u>. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Notice to Allow Exercise by Holder</u>. If, while this Warrant is outstanding, (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any Fundamental Transaction, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least three (3) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice; and provided, further, that no notice shall be required if the information is disseminated in a press release or a document filed publicly with the Commission. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

<u>Section 4</u>. <u>Transfer of Warrant</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Transferability</u>. Subject to compliance with any applicable securities laws and to the provisions of Section 4.1 of the Purchase Agreement, which are incorporated herein by reference, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company on the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>New Warrants</u>. Subject to compliance with any applicable securities laws, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Warrant Register</u>. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "<u>Warrant Register</u>"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Representation by the Holder</u>. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

<u>Section 5</u>. <u>Registration</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>Demand Registration Rights</u>. The Company hereby grants to the Holder a one-time demand registration right for five (5) years from the Issue Date with respect to the Warrant Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>"Piggyback" Registration Rights</u>. The Holder shall have the right, for a period commencing on the date the Warrants are exercisable and ending on the earlier of (i) five years from the Issue Date, or (ii) the date that all Warrant Shares are eligible for resale by the Holder in compliance with Rule 144, to include any and all of the Warrant Shares underlying the Warrants (the "<u>Registrable Securities</u>") as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Terms</u>. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 5(a) and 5(b) hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than fifteen (15) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company during the five (5) year period following the Initial Exercise Date until such time as all of the Registrable Securities have been sold by the Holder or are eligible for resale by the Holder in compliance with Rule 144. The holders of the Registrable Securities shall exercise the "piggy-back" rights provided for herein by giving written notice within five (5) days of the receipt of the Company's notice of its intention to file a registration statement. Except as otherwise provided in this Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 5(b); provided, however, that such registration rights shall terminate on the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>General Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <u>Indemnification</u>. The Company shall indemnify the Holder(s) of the Registrable Securities to be
sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement
but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Placement
Agent contained in Section 4 of the Placement Agent Agreement. The Holder(s) of the Registrable Securities to be sold pursuant to such
registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion
in such registration statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <u>Exercise of Warrants</u>. Nothing contained in this Warrant shall be construed as requiring the Holder(s)
to exercise their Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <u>Documents Delivered to Holders</u>. The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence
between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff
with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice,
with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable
securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as
any such Holder shall reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <u>Documents to be Delivered by Holder(s)</u>. Each of the Holder(s) participating in any of the foregoing
offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily
sought of selling security holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. <u>Damages</u>. Should the registration or the effectiveness thereof required by Sections 5(a) and 5(b)
hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any
other legal or other relief available to the Holder(s), be entitled to obtain specific performance or other equitable (including injunctive)
relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual
damages and without the necessity of posting bond or other security.

<u>Section 6.</u> <u>Miscellaneous</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <u>No Rights as Stockholder Until Exercise; No Settlement in Cash</u>. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a "cashless exercise" pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <u>Loss, Theft, Destruction or Mutilation of Warrant</u>. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <u>Saturdays, Sundays, Holidays, etc</u>. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then such action may be taken, or such right may be exercised on the next succeeding Trading Day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <u>Authorized Shares</u>.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action that would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <u>Jurisdiction</u>. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Placement Agent Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <u>Restrictions</u>. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <u>Nonwaiver and Expenses</u>. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights, powers or remedies. Without limiting any other provision of this Warrant or the Placement Agent Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <u>Notices</u>. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Placement Agent Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) <u>Limitation of Liability</u>. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j) <u>Remedies</u>. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k) <u>Successors and Assigns</u>. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l) <u>Amendment</u>. Any modifications, amendments or waivers of the provisions hereof shall be subject the terms and conditions of the Placement Agent Agreement regarding the same. Notwithstanding the foregoing, this Warrant may be modified or amended, or the provisions hereof waived, with the written consent of the Company and the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m) <u>Severability</u>. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n) <u>Headings</u>. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

*(Signature Page Follows)*

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

---

| | | |
|:---|:---|:---|
| **FUNCTIONAL BRANDS INC.** | **FUNCTIONAL BRANDS INC.** | **FUNCTIONAL BRANDS INC.** |
| By: |  |  |
|  | Name: | Eric Gripentrog |
|  | Title: | Chief Executive Officer |

---

**NOTICE OF EXERCISE**

FUNCTIONAL BRANDS INC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Payment shall take the form of (check applicable box):

☐ in lawful money of the United States; or

☐ if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number:

_______________________________

_______________________________

_______________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) <u>Accredited Investor</u>. The undersigned is an "accredited investor" as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

*Signature of Authorized Signatory of Investing Entity*: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

ASSIGNMENT FORM

*(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)*

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

---

| | |
|:---|:---|
| Name: | <u> </u>______________________________________ |
|  | (Please Print) |
| Address: | ______________________________________<u> </u> |
| <br>Phone Number:<br>Email Address:  | (Please Print)<br>______________________________________<br>______________________________________ |
| Dated: _______________ __, ______ |  |
| Holder's Signature:<u> </u>_____________________ |  |
| Holder's Address:<u> </u>______________________ |  |

---

## Exhibit 10.23

**Exhibit 10.23**

**SECURITIES PURCHASE AGREEMENT**

This Securities Purchase Agreement (this "**Agreement**") is dated as of July 22, 2025 by and among Functional Brands Inc., a Delaware corporation (the "**Company**"), and the purchasers identified on the signature pages hereto (each, an "**Initial Purchaser**" and, including their respective successors and permitted assigns, a "**Purchaser**").

**WHEREAS**, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the "**Securities Act**"), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

**NOW, THEREFORE,** in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

**ARTICLE I.<br> DEFINITIONS**

**Section 1. <u>Definitions</u>**. In addition to the terms defined elsewhere in this Agreement in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Preferred Shares (as defined herein) and/or the Certificate of Incorporation (as defined herein), and (b) the following terms have the meanings set forth in this <u>Section 1</u>:

"<u>Acquiring Person</u>" shall have the meaning ascribed to such term in <u>Section 4.7</u>.

"<u>Action</u>" shall have the meaning ascribed to such term in <u>Section 3.1(j)</u>.

"<u>Affiliate</u>" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

"<u>Board of Directors</u>" means the board of directors of the Company.

"<u>Bonus Preferred Shares</u>" shall mean, on the Closing Date, the Series B Preferred Stock of the Company with a Stated Value equal to one hundred percent (100%) of the Face Amount.

"<u>Business Day</u>" means any day except Saturdays, Sundays, any day that is a federal holiday in the United States and any day on which the Federal Reserve Bank of New York is not open for business.

"<u>Certificate of Incorporation</u>" means the Amended and Restated Certificate of Incorporation of the Company setting forth and establishing the rights, preferences, privileges and qualifications of the Preferred Shares, in form attached hereto as **Exhibit A**.

"<u>Closing</u>" means the closing of the purchase and sale of the Securities pursuant to <u>Section 2.1</u>.

"<u>Closing Date</u>" means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers' obligations to pay the Subscription Amount and (ii) the Company's obligations to deliver the Securities, in each case, have been satisfied or waived. Pursuant to the terms of this Agreement, there may be one or more Closing Dates hereunder.

"<u>Commission</u>" means the United States Securities and Exchange Commission.

"<u>Common Stock</u>" means the common stock of the Company, par value $0.00001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

"<u>Common Stock Equivalents</u>" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

"<u>Company Counsel</u>" means Sichenzia Ross Ference Carmel LLP, 1185 Avenue of the Americas, 31<sup>st</sup> Floor, New York, New York 10036.

"<u>Company IP</u>" means all Intellectual Property or Intellectual Property Rights owned, in whole or in part, by the Company or its Subsidiaries or exclusively licensed to the Company or its Subsidiaries, including the Company Registered Intellectual Property.

"<u>Company-Owned IP</u>" means Company IP that is owned or purported to be owned by the Company or its Subsidiaries.

"<u>Company Registered Intellectual Property</u>" means all United States, international and foreign (a) patents and patent applications (including provisional applications), (b) registered service marks and trademarks and applications to register service marks and trademarks, (c) registered copyrights and applications for copyright registration, and (d) internet domain name registrations, in each case, of clause (a) through (d) that is Company-Owned IP and which have not expired.

"<u>Company Systems</u>" means all of the following used by or for, or otherwise relied on by, the Company or its Subsidiaries: servers, hardware systems, software, websites, databases, circuits, networks and other computer and telecommunication assets and equipment, and all other information technology equipment and related items of automated, computerized or software systems, together with all information contained therein or transmitted thereby, including any outsourced systems and processes (e.g., hosting locations) and all associated documentation.

"<u>Conversion Price</u>" shall have the meaning ascribed to such term in the Series A Preferred Stock and Series B Preferred Stock, respectively.

"<u>Conversion Shares</u>" means, collectively, the shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock and the Series B Preferred Stock.

"<u>Data Security Requirements</u>" means, collectively, all of the following to the extent relating to Personal Data, payment card data, or other protected information relating to individuals or otherwise relating to privacy, security, or security breach notification requirements and applicable to the business of the Company or its Subsidiaries: (a) the Company's or its Subsidiaries' own rules, policies, and procedures (whether physical or technical in nature, or otherwise), (b) all applicable federal, state, local laws and regulations, and (c) material contracts.

"<u>Disclosure Schedules</u>" means the Disclosure Schedules delivered by the Company concurrently with the execution and delivery of this Agreement.

"<u>Escrow Agent</u>" shall have the meaning ascribed to such term in <u>Section 2.2(b)</u>.

"<u>Escrow Agreement</u>" means the Escrow Agreement, dated the date hereof, by and among the Company, the Placement Agent and the Escrow Agent, in the form of **Exhibit D** attached hereto.

"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"<u>Face Amount</u>" means, as to each Purchaser, the amounts set forth below such Purchaser's signature block on the signature pages hereto next to the heading "**Face Amount**," in United States Dollars.

"<u>FCPA</u>" means the Foreign Corrupt Practices Act of 1977, as amended.

"<u>GAAP</u>" means United States generally accepted accounting principles.

"<u>Governmental Authority</u>" means any nation, sovereign or government, any state, province, territory or other political subdivision thereof, any municipality, any agency, authority or instrumentality thereof and any entity or authority exercising executive, legislative, taxing, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing, including any central bank stock exchange regulatory body arbitrator, public sector entity, supra-national entity and any self-regulatory organization.

"<u>Indebtedness</u>" shall have the meaning ascribed to such term in <u>Section 3.1(x)</u>.

"<u>Intellectual Property</u>" shall mean and includes algorithms, APIs, application program interfaces, customer lists, databases, schemata, data collections, design documents and analyses, diagrams, documentation, domain names, drawings, formulae, inventions (whether or not patentable), internet protocol addresses, know-how, literary works, logistics information, logos, maps, marketing plans and collateral, marks (including names, logos, slogans, and trade dress), methods, methodologies, network configurations, architectures, topologies and topographies, processes, program listings, programming tools, proprietary information, protocols, sales data, schematics, specifications, Software, Software code (in any form including source code and executable or object code), subroutines, user interfaces, techniques, URLs, Web sites, works of authorship, and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing such as blueprints, compilations of information, instruction manuals, notebooks, prototypes, reports, samples, studies, and summaries).

"<u>Intellectual Property Rights</u>" means all proprietary rights to or in Intellectual Property in any jurisdiction throughout the world, including the following: (a) patents and applications therefor, and patent disclosures and any reissue, continuation, continuation-in-part, correction, provisional, divisional, extension or reexamination thereof, (b) inventions, trade secrets, confidential information, and know-how, (c) trademarks, service marks, trade names, trade dress, logos, slogans, brand names, Internet domain names, and other indicia of source of origin and all registrations and applications for registration thereof together with all of the goodwill associated therewith, (d) copyrights and all works of authorship (whether or not copyrightable, and whether registered or unregistered), including mask works rights, database rights and moral rights, and registrations and applications therefor, and (e) rights in Software.

"<u>Knowledge</u>" means, with respect to the Company, the actual knowledge of the following Company officers: the Chief Executive Officer or the Chief Financial Officer.

"<u>Legend Removal Date</u>" shall have the meaning ascribed to such term in <u>Section 4.1(c)</u>.

"<u>Liens</u>" means any lien (statutory or other) mortgage, pledge, hypothecation, assignment, security interest, encumbrance, charge, claim, right of first refusal, preemptive right, restriction on transfer or similar restriction or other security arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement and any capital or financing lease having substantially the same economic effect as any of the foregoing.

"<u>Lock-Up Agreement</u>" means the Lock-Up Agreement, dated as of the date hereof, by and between the Company and its officers, directors, and the beneficial owners of 5% or more of the capital stock of the Company in the form of **Exhibit G** attached hereto.

"<u>Material Adverse Effect</u>" shall have the meaning assigned to such term in <u>Section 3.1(b)</u>.

"<u>Material Permits</u>" shall have the meaning ascribed to such term in <u>Section 3.1(m)</u>.

"<u>Minimum Subscription Amount</u>" means $1,000,000.

"<u>Offering</u>" means the offering of Preferred Shares pursuant to this Agreement and the other Transaction Documents.

"<u>Offering Period</u>" means the period commencing upon the marketing of any Securities and ending on the Termination Date.

"<u>Ordinary Course of Business</u>" means the ordinary and usual course of normal day-to-day operations of the business of the Company through the date hereof consistent with past custom and practice.

"<u>Permitted Equity Issuances</u>" means issuances or sales of (a) shares of Common Stock upon the conversion of Preferred Shares; (b) shares of Common Stock, restricted stock units or options to employees, consultants, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by the Board of Directors for services rendered to the Company (a "**Plan**"), (c) securities upon the exercise, exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, (d) securities issued pursuant to acquisitions, mergers or any other strategic transactions, provided that such acquisitions, mergers and other strategic transactions shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities; (c) securities issued as a result of the recapitalization or reorganization of any securities of the Company; (f) Securities pursuant to the Transaction Documents and (g) warrants and/or common stock underlying any warrants issued in connection with any debt outstanding as of the date hereof (including all currently outstanding debt facilities of Company).

"<u>Person</u>" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"<u>Personal Data</u>" means (a) information related to, or reasonably capable of being associated or linked with, an identified or identifiable individual or household (e.g., name, address, telephone number, email address, financial account number, government-issued identifier) or device, (b) any other data used or intended to be used or which allows one to identify, contact, or precisely locate an individual or device, including any internet protocol address or other persistent identifier, or (c) any other similar information or data regulated by or defined as "personal information" or similar terms under applicable federal, state and local laws and regulations.

"<u>Placement Agent</u>" means Joseph Gunnar & Co., LLC.

"<u>Placement Agent Counsel</u>" means Pryor Cashman LLP with offices located at 7 Times Square, 40th Floor, New York, NY 10036.

"<u>Preferred Shares</u>" means, collectively, the Series A Convertible Preferred Stock and the Series B Preferred Stock of the Company.

"<u>Proceeding</u>" means an action, suit, litigation, arbitration, investigation, complaint, dispute, contest, hearing, inquiry, inquest, audit, examination or other proceeding against, affecting or purporting to affect an applicable Person or its property, whether civil, criminal, administrative, investigative or appellate, in law or equity before any arbitrator or Governmental Authority.

"<u>Public Information Failure</u>" shall have the meaning ascribed to such term in <u>Section 4.3(b)</u>.

"<u>Public Information Failure Payments</u>" shall have the meaning ascribed to such term in <u>Section 4.3(b)</u>.

"<u>Purchaser Party</u>" shall have the meaning ascribed to such term in <u>Section 4.10</u>.

"<u>Qualified Event</u>" means the direct listing of the Company's securities on a Trading Market.

"<u>Registration Statement</u>" shall have the meaning ascribed to such term in <u>Section 4.20</u>.

"<u>Registrable Securities</u>" means Conversion Shares and any shares of Common Stock issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Conversion Shares; *provided*, *however*, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Purchasers in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter of Company Counsel to such effect based upon a representation letter or other customary documentation reasonably requested by the Company from the Purchasers.

"<u>Regulation D</u>" means Regulation D as promulgated under the Securities Act.

"<u>Required Approvals</u>" shall have the meaning ascribed to such term in <u>Section 3.1(c)</u>.

"<u>Required Holders</u>" means holders of the Preferred Shares holding at least 50% plus $1.00 of the Stated Value of the outstanding Preferred Shares.

"<u>Rule 144</u>" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

"<u>Rule 424</u>" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

"<u>Schedules</u>" means the Disclosure Schedules.

"<u>Schedule of Material Liabilities</u>" shall have the meaning ascribed to such term in Section 3.1(i).

"<u>Securities</u>" means the Preferred Shares and the Conversion Shares.

"<u>Securities Act</u>" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"<u>Security Incident</u>" means any (a) breach of security, phishing incident, ransomware or malware attack affecting any Company Systems, or (b) incident in which confidential information or Personal Data was or may have been accessed, disclosed, destroyed, processed, used, or exfiltrated in an unauthorized manner (whether any of the foregoing was possessed or controlled by the Company or its Subsidiaries or by another Person on behalf of the Company or its Subsidiaries).

"<u>Series A Preferred Stock</u>" means the Series A Convertible Preferred Stock of the Company, par value $0.00001 per share.

"<u>Series B Preferred Stock</u>" means the Series B Preferred Stock of the Company, par value $0.00001 per share.

"<u>Short Sales</u>" means all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).

"<u>Software</u>" means all (a) computer programs and software, including firmware, software implementations of algorithms, and software models and methodologies, whether in source code, object code or other form, including libraries, subroutines and other components thereof; (b) data, databases and other compilations of data or information; and (c) all documentation related to the foregoing, including development, diagnostic, support, user and training documentation related to any of the foregoing.

"<u>Stated Value</u>" means the stated value of the Series A Preferred Stock and Series B Preferred Stock, which, in each case, is equal $1,000 per share.

"<u>Subscription Amount</u>" means, as to each Purchaser, the aggregate amount to be paid for the Preferred Shares purchased hereunder as specific on the signature page of this Agreement, *<u>provided</u>*, that the Subscription Amount shall not be less than the Minimum Subscription Amount unless the Company determines to accept subscriptions for the Preferred Shares in lesser amounts in its sole discretion.

"<u>Subsidiary</u>" means any subsidiary of the Company as set forth in <u>Schedule 3.1(a)</u>, and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof (*provided*, that for purposes of <u>Section 3.1</u>, the term "Subsidiary" shall not include any such direct or indirect subsidiary of the Company formed or acquired after an applicable Closing Date).

"<u>Termination Date</u>" means the Offering shall terminate if the Qualified Event has not been consummated on or prior to the four (4) month anniversary of the Closing Date.

"<u>Trading Day</u>" means a day on which the principal Trading Market is open for trading.

"<u>Trading Market</u>" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

"<u>Transaction Documents</u>" means this Agreement, the Certificate of Incorporation, the Lock-up Agreement, the Escrow Agreement, Accredited Investor Questionnaires, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

"<u>Transfer Agent</u>" means Endeavor Trust Corporation, with a mailing address of 702 - 777 Hornby Street, Vancouver, BC, V6Z 1S4, and any successor transfer agent of the Company.

"<u>VWAP</u>" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Required Holders, the reasonable fees and expenses of which shall be paid by the Company.

"<u>Waiver Agreements</u>" shall have the meaning ascribed to such term in <u>Section 2.3(b)(i)</u>.

**ARTICLE II.<br> PURCHASE AND SALE**

**Section 2.1 <u>Purchase and Sale</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **Series A Preferred Stock**. Subject to the terms and conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, at the Closing, the Company agrees to sell, and the Purchasers agree to purchase, severally and not jointly, the Face Amount of the Series A Preferred Stock as set forth on each Purchaser's signature page hereto. The Series A Preferred Stock shall be convertible into the Company's Common Stock at any time and from time to time from and after the forty-five (45) day anniversary of the Qualified Event at the Conversion Price, subject to the terms of the Series A Certificate of Designations, Preferences and Rights of the Series A Preferred Stock, attached hereto as **<u>Exhibit B</u>**. The Series A Preferred Stock shall be sold at the closing of the Offering (the "**Closing**") conducted during the Offering Period until the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Bonus Preferred Shares**. The Company will issue to the Purchasers an amount of Series B Preferred Stock equal in aggregate value to the Bonus Preferred Shares, which shall be allocated ratably to each Purchaser according to his, her or its respective Subscription Amount, on the Closing Date. The Bonus Preferred Shares shall be convertible into the Company's Common Stock at any time and from time to time and after the forty-five (45) day anniversary of the Qualified Event, at the Conversion Price, subject to the terms of the Certificate of Designations, Preferences and Rights of the Series B Preferred Stock, attached hereto as **<u>Exhibit C</u>**.

**Section 2.2 <u>Closing</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The closing (the "**Closing**") of the purchase of the Series A Preferred Stock and the Bonus Preferred Shares by the Purchasers shall occur at the offices of Pryor Cashman LLP, 7 Times Square, 40<sup>th</sup> Floor, New York, NY 10036. The date and time of the Closing (the "**Closing Date**") shall be 10:00 a.m., New York time, on the first (1<sup>st</sup>) Business Day on which the conditions to the Closing set forth herein are satisfied or waived (or such other date as is mutually agreed to by the Company and each Purchaser).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At each Closing, each Purchaser shall deliver the Subscription Amount stated on such Purchaser's signature page hereto by wire transfer of immediately available funds to the Escrow Agent pursuant to the instructions contained on <u>Schedule 2.1</u> who shall hold such funds in a non-interest bearing escrow account maintained at and by Odyssey Trust Company (the "**Escrow Agent**"). Upon the Escrow Agent's receipt of the Subscription Amount from one or more Purchasers and the exchange of items set forth in <u>Section 2.3</u>, the Company and the Placement Agent may give notice to the Escrow Agent to arrange a Closing. At any Closing hereunder, the Company shall deliver to each Purchaser its respective Series A Preferred Stock and Bonus Preferred Shares, and the Company and each Purchaser shall deliver the other items set forth in <u>Section 2.3</u> deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in <u>Sections 2.3</u> and <u>2.4</u>, the Closing shall occur as the parties shall mutually agree.

**Section 2.3 <u>Closing Deliveries</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On or prior to each Closing Date, unless otherwise specified in this <u>Section 2.3(a)</u>, the Company
shall deliver or cause to be delivered to the Placement Agent on behalf of each Purchaser the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Series A Preferred Stock with the Face Amount indicated on such Purchaser's signature page hereto,
registered in the name of such Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Bonus Preferred Shares registered in the name of such Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a copy of a good standing certificate of the Company and each Subsidiary, dated within five (5) days of
the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) on the Closing Date only, a certificate dated as of the Closing Date, duly executed, and delivered by
an officer of the Company, certifying the resolutions of the Company's Board of Directors then in full force and effect authorizing,
to the extent relevant, all aspects of the transaction and the execution, delivery and performance of each Transaction Document to be
executed and the transactions contemplated hereby and thereby; and Investor shall have received a certificate of the Secretary of State
of Delaware certifying that the Certificate of Incorporation has been filed and is effective;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) on the Closing Date (unless specifically requested by the Placement Agent), an opinion of counsel to the
Company, dated as of the Closing Date, in a form and substance reasonably acceptable to the Placement Agent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) the executed Lock-up Agreements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) the Waiver Agreements described in <u>Section 2.4</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) the Schedule of Material Liabilities described in <u>Section 3.1(i);</u> and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) such other approvals, opinions, or documents as the Placement Agent and/or the Purchasers may request
in form and substance reasonably satisfactory to the Placement Agent and/or the Purchasers, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) On or prior to the Closing Date, unless otherwise specified in this <u>Section 2.3(b)</u>, each Purchaser shall deliver or cause to be delivered to the Company the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by such Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) such Purchaser's Subscription Amount as to the Closing by wire transfer to the Escrow Agent to the
account specified in <u>Schedule 2.1</u> hereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a completed and executed Accredited Investor Questionnaire in the form of **Exhibit <u>E</u>** hereto;

**Section 2.4 <u>Closing Conditions</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **Conditions to the Company's Obligations**. The obligations of the Company to consummate any Closing are subject to the satisfaction, or waiver in accordance with this Agreement, of the following conditions on or before the applicable Closing Date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the representations and warranties of each Purchaser contained herein shall be true and correct as of
the applicable Closing Date (unless expressly made as of an earlier date herein in which case they shall be accurate as of such date) **;** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements required to be performed by each Purchaser on or prior to the
applicable Closing Date (other than the obligations set forth in <u>Section 2.3</u> to be performed at the Closing) shall have been performed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by each Purchaser of the applicable items each Purchaser is required to deliver prior to
each Closing Date pursuant to <u>Section 2.3(b)</u>; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) any other conditions contained herein or the other Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Conditions to each Purchaser's Obligations**. The obligations of each Purchaser to consummate any Closing in which he, she or it participates are subject to the satisfaction, or waiver in accordance with this Agreement, of the following conditions on or before each Closing Date, *provided* that <u>Sections 2.4(b)(i)-(iii)</u> shall not be waived:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Waiver Agreements**. As a condition to the consummation of the Closing, if applicable, the Company
shall have notified all existing lenders and holders of Preferred Shares regarding the material terms of the transactions contemplated
under and by this Agreement and the other Transaction Documents, and other than as disclosed in Schedule 3.1 (n), (o) and (x) for which
such lenders or holders have not and shall not provide executed consents, waivers or allonges, shall have obtained from the requisite
number of the Company's existing lenders and holders of Preferred Shares, respectively, executed consents, waiver agreements, and/or
allonges, as the case may be, in such form and substance satisfactory to the Placement Agent, pursuant to which such lenders and stockholders
shall have agreed to waive or relinquish all "most favored nations" provisions, anti-dilution rights, and other rights obtained
in previous financing transactions with the Company that would impede the consummation of the Offering (collectively, and generally, the
" **Waiver Agreements** "), provided that, for the avoidance of doubt, holders of Preferred Shares shall not be required
to waive any price-based anti-dilution rights with respect to the Company's issuance, or deemed issuance, of additional shares of
Common Stock in connection with either (x) the Mandatory Note Conversion (as defined below), or (y) the Company's issuance of the
Bonus Preferred Shares pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Qualified Event shall have occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Company shall have duly adopted the Certificate of Incorporation, which shall have been filed with
the Secretary of State of Delaware and become effective under the Delaware General Corporation Law on or prior to the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the representations and warranties of the Company contained in any Transaction Document shall be true
and correct as of each Closing Date (unless expressly made as of an earlier date herein in which case they shall be accurate as of such
date);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) all obligations, covenants and agreements required to be performed by the Company on or prior to each
Closing Date pursuant to any Transaction Document (other than the obligations set forth in <u>Section 2.3</u> to be performed at the Closing)
shall have been performed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the delivery by the Company of the applicable items required to be delivered on or prior to each Closing
Date pursuant to <u>Section 2.3(a)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) no Material Adverse Effect shall have occurred from the date hereof through the applicable Closing Date;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) any other conditions contained herein or the other Transaction Documents.

**ARTICLE III.<br> <u>REPRESENTATIONS AND WARRANTIES</u>**

**Section 3.1 <u>Representations and Warranties of the Company.</u>** The Company hereby represents and warrants to each Purchaser that the statements contained in this <u>Section 3.1</u> are true and correct as of each Closing Date, in each case subject to the exceptions set forth in the Disclosure Schedules, which Disclosure Schedules are deemed a part hereof. The Disclosure Schedules are arranged in sections corresponding to the numbered and lettered sections contained in this <u>Section 3.1</u>, and shall qualify any representation, warranty or otherwise made herein to the extent of the disclosures set forth in such corresponding sections. The disclosures contained in any section of the Disclosure Schedules shall qualify the representations, warranties or otherwise made in other sections of this <u>Section 3.1</u> only to the extent such disclosures are cross-referenced in the applicable corresponding sections of the Disclosure Schedules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **Subsidiaries**. All of the direct and indirect subsidiaries of the Company are set forth on <u>Schedule 3.1(a)</u>. Except as set forth on <u>Schedule 3.1(a)</u>, the Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid and non-assessable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Organization and Qualification**. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's or its Subsidiary's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "**Material Adverse Effect**") and, to the Knowledge of the Company, no Proceeding has been instituted or threatened in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **Authorization; Enforcement**. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery by the Company of this Agreement and each of the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the stockholders of the Company in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **No Conflicts**. Except as disclosed on <u>Schedule 3.1(d)</u>, the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any material Lien upon any of the properties or assets of the Company or any Subsidiary pursuant to, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or Governmental Authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound; except, in the case of each of clauses (ii) and (iii), such as would not reasonably be expected to result in a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **Filings, Consents and Approvals**. Except as disclosed on <u>Schedule 3.1(e)</u>, the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other Governmental Authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents to which it is a party, other than: (i) the filings required pursuant to <u>Section 4.6</u> of this Agreement, and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the "**Required Approvals**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **Issuance of the Securities**. The Preferred Shares and the Conversion Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, the Preferred Shares and the Conversion Shares will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by applicable laws. Each of the Securities, when issued in accordance with the terms of the Transaction Documents and applicable organizational or charter documents of the Company, will be free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or by applicable laws. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Conversion Shares as provided for in <u>Section 4.11</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **Capitalization**. As of the date of this Agreement, the authorized capital stock of the Company consists of (i) 220,000,000 shares of Common Stock, $0.00001 par value per share, of which 7,110,676 shares are issued and outstanding as of the date hereof and (ii) 1,000,000 shares of Preferred Stock, $0.001 par value per share, none of which are issued and outstanding as of the date hereof. No other classes of shares or other securities of the Company are issued or reserved for issuance or outstanding. Except as a result of the purchase and sale of the Securities contemplated herein or as otherwise disclosed on <u>Schedule 3.1(g)</u>, (i) there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary, (ii) except as provided in Section 4.22 hereof, no Person has any "most favored nation" right, right of first refusal, preemptive right, anti-dilution protections, right of participation, or any right to participate in, or triggered by, the transactions contemplated by the Transaction Documents, (iii) the issuance and sale of the Securities pursuant to this Agreement will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers), (iv) there are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary, (v) there are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary and (vi) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in material compliance with all federal and state securities laws, and none of such outstanding shares were issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities as contemplated herein. Except as set forth on <u>Schedule 3.1(g)</u>, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company's capital stock to which the Company is a party or, to the Knowledge of the Company, between or among any of the Company's stockholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) **Financial Statements**. Complete copies of the Company's audited financial statements consisting of the balance sheet of the Company as of December 31 in each of the years 2024 and 2023 and the related statements of income and retained earnings, shareholders' equity, and cash flow for the years then ended (the "**Unaudited Financial Statements**"), and unaudited financial statements consisting of the balance sheet of the Company as of March 31, 2025 and the related statements of income and retained earnings, shareholders' equity, and cash flow for the period then ended (the "**Interim Financial Statements**" and together with the Unaudited Financial Statements, the "**Financial Statements**") have been delivered to the purchaser. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end and the absence of notes. The Financial Statements are based on the books and records of the Company, and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations of the Company for the periods indicated. The Company maintains a standard system of accounting established and administered in accordance with GAAP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Material Changes; Undisclosed Events, Liabilities or Developments**. Except as set forth on <u>Schedule 3.1(i)</u>, since the date of the latest unaudited financial statements, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the Ordinary Course of Business and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any executive officer, director or Affiliate, except pursuant to existing Company stock option plans or similar incentive plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement or as set forth on <u>Schedule 3.1(i)</u>, no event, liability, fact, circumstance, occurrence or development has occurred or exists with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition that is required to be disclosed by the Company under applicable securities laws and for which such required disclosure has not been made. Concurrently with the execution of this Agreement, the Company shall provide the Purchaser with a detailed schedule of its existing material liabilities (contingent or otherwise) as of a date reasonably contemporaneously with the date hereof (the "**Schedule of Material Liabilities**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) **Litigation**. Except as set forth in <u>Schedule 3.1(j)</u>, there is no action, suit, inquiry, notice of violation, proceeding or investigation by or before any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "**Action**") pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties which (i) challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) to the Knowledge of the Company, could, if there were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Knowledge of the Company, any director or executive officer thereof, is or has been the subject of any Action involving a claim of violation of or material liability under federal or state securities laws or a claim of breach of fiduciary duty. The Company has not received notice of, and to the Knowledge of the Company, there is not pending or threatened, any investigation by the Commission involving the Company or any current or former director or executive officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any Registration Statement filed by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) **Labor Relations**. Except as set forth in <u>Schedule 3.1(k)</u>, no labor dispute exists or, to the Knowledge of the Company, is threatened with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. None of the Company's or its Subsidiaries' employees is a member of a union that relates to such employee's employment relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement. Except as set forth in <u>Schedule 3.1(k)</u>, to the Knowledge of the Company, no executive officer of the Company or any Subsidiary is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer would not reasonably be expected to subject the Company or any of its Subsidiaries to any material liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in material compliance with all U.S. federal, state, local and, to the Knowledge of the Company, foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, in each case except where the failure to so comply could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) **Compliance**. Except as disclosed on <u>Schedule 3.1(l)</u>, neither the Company nor any Subsidiary: (i) is in default under or in violation of, nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any material term of any indenture, loan or credit agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other Governmental Authority or (iii) is in violation of any material provision of any statute, rule, ordinance or regulation of any Governmental Authority to which it is subject, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except, in each case, for defaults, violations or notices thereof that would not reasonably be expected to result in a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) **Regulatory Permits**. Except as disclosed on Schedule 3.1(m), the Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities which are reasonably necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect ("**Material Permits**"), and neither the Company nor any Subsidiary has received written notice of proceedings relating to the revocation or modification of any Material Permit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) **Title to Assets**. Except as disclosed on <u>Schedule 3.1(n)</u>, the Company and the Subsidiaries have good and marketable title to all personal property owned by them that is material to their respective business, in each case free and clear of all Liens, except for (i) Liens that do not materially affect the value of such property and do not materially interfere with the use made and currently proposed to be made of such property by the Company and the Subsidiaries, as applicable and (ii) Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in material compliance. The Company does not own any real property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) **Intellectual Property; Cyber Security**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Except as set forth on <u>Schedule 3.1(o)</u> of the Disclosure Schedules, the Company and its Subsidiaries exclusively own all right, title and interest in the Company-Owned IP, and have the valid right or license to all other Company IP. The Company-Owned IP is not subject to any Lien, other than non-exclusive licenses of Intellectual Property or Intellectual Property Rights granted by the Company and its Subsidiaries in the Ordinary Course of Business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Schedule 3.1(o)</u> of the Disclosure Schedules lists all Company Registered Intellectual Property, including the jurisdictions in which each such item of Company Registered Intellectual Property has been applied for, issued or registered. Each item of Company Registered Intellectual Property is valid, enforceable, and subsisting (or in the case of applications, applied for), and all registration, maintenance and renewal fees due prior to the date of this Agreement in connection with the Company Registered Intellectual Property have been paid.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The performance of the Company and its Subsidiaries' obligations under this Agreement will not cause the forfeiture or termination of, nor will it give rise to a right of forfeiture or termination of, any Company-Owned IP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) There is no Action pending or threatened, against the Company and its Subsidiaries relating to any Company-Owned IP and the Subsidiaries have not received any written notice of any claim and no claim has been threatened, in each case that (i) challenges the validity, enforceability, use or ownership of any Company-Owned IP, or (ii) alleges that the Company and/or any of its Subsidiaries infringes, misappropriates or otherwise violates any third party's right in or to such third party's own Intellectual Property or Intellectual Property Rights. To the Company's Knowledge, neither the Company nor the conduct of the business of its Subsidiaries infringes, misappropriates or otherwise violates the Intellectual Property Rights of any other Person. The Company and its Subsidiaries have not, in the past two (2) years, received any written notice from any Person alleging that the Company and/or its Subsidiaries have infringed, misappropriated or otherwise violated, the Intellectual Property Rights of any other Person. To the Company's Knowledge, no Person is infringing, misappropriating or otherwise violating, and has not in the past two (2) years infringed, misappropriated or otherwise violated, any of the Company-Owned IP or any Intellectual Property Rights exclusively licensed to the Company or its Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Reserved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) The Company and its Subsidiaries take commercially reasonable actions to protect the Company-Owned IP, including the confidentiality of all trade secrets, know-how and confidential information included therein, and the integrity and security of the Company Systems from any unauthorized use, access, disclosure, destruction or modification, and no such use, access, disclosure, destruction or modification has occurred. The Company Systems (A) are sufficient for the current needs of the business of the Company and its Subsidiaries, including as to capacity, scalability and ability to process current and anticipated peak volumes in a timely manner, and (B) are in sufficiently good working condition to effectively perform all information technology operations and include a sufficient number of licenses seats for all software as necessary for the operation of the business of the Company and its Subsidiaries as currently conducted. To the Company's Knowledge, there have been no material unauthorized intrusions, failures, breakdowns, continued substandard performance, or other adverse events affecting any such Company Systems that have caused any substantial disruption of or interruption in or to the use of such Company Systems. The Company and its Subsidiaries maintain commercially reasonable disaster recovery and business continuity plans, procedures and facilities in connection with the operation of their business, acts in compliance therewith, and have taken commercially reasonable steps to test such plans and procedures on a periodic basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) The Company and its Subsidiaries maintain and enforce commercially reasonable policies, procedures, and rules regarding data privacy, protection and security that comply in all material respects with all Data Security Requirements. The Company and its Subsidiaries comply with, and has complied with, all Data Security Requirements in all material respects. The use of any Personal Data by the Company and its Subsidiaries immediately following the Closing in substantially the same manner as such Personal Data was used by the Company and its Subsidiaries prior to the Closing will not result in a material breach or violation of, or constitute a default under, any Data Security Requirement. The Company and its Subsidiaries have not received any written, threatened, complaint, claim or demand from any Person with respect to any Security Incident.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) **Insurance**. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. To the Knowledge of the Company, no facts or circumstances exist that would reasonably be expected to prevent the Company or any Subsidiary from renewing its existing insurance coverage as and when such coverage expires, or to obtain similar coverage from similar insurers as may be necessary to continue its business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) **Transactions With Affiliates and Employees**. Except as set forth on <u>Schedule 3.1(q)</u>, none of the executive officers or directors of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as executive officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any executive officer, director or, to the Knowledge of the Company, any entity in which any executive officer or director has a substantial interest or is an officer or director, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other Company benefits, including stock option agreements or similar arrangements under any stock option or other incentive plan of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) **Certain Fees**. Except with respect to the fees and expenses payable to the Placement Agent as described in <u>Section 5.2</u>, no brokerage or finder's fees or commissions or other remuneration are payable by the Company or any Subsidiaries directly or indirectly to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other similarly situated Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of such other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) **Private Placement**. Assuming the accuracy of each Purchaser's representations and warranties set forth in this Agreement and all other Transaction Documents to which such Purchasers are party, no registration under the Securities Act is required for the offer and sale of the Preferred Shares by the Company to the Purchasers as contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) **Investment Company**. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Preferred Shares, will not be or be an Affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) **Registration Rights**. Except as provided in the Transaction Documents, no Person has any right to cause the Company or any Subsidiary to affect the registration under the Securities Act of any securities of the Company or any Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) **MNPI**. Except with respect to the terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which has not been otherwise disclosed to all Purchasers and/or their agents or counsel. To the Knowledge of the Company, all of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in the Transaction Documents or in any other document or instrument executed and/or delivered by the Purchasers in connection with this Agreement or the consummation of the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) **No Integrated Offering**. Assuming the accuracy of (x) representations and warranties of prior investors and (y) the Purchasers' representations and warranties set forth in this Agreement and all other Transaction Documents to which the Purchasers are party, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior securities offerings by the Company in a manner that would require the registration under the Securities Act of the sale of the Preferred Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) **Solvency**. Based on the consolidated financial condition of the Company as of the date hereof, after giving effect to the receipt by the Company of the proceeds from the sale of the Preferred Shares hereunder, the Company will have sufficient cash to operate its business as currently operated for a period of six (6) months from the Closing Date. To the Company's Knowledge, no facts or circumstances exist which would reasonably be expected to cause the Company to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. <u>Schedule 3.1(x)</u> sets forth, as of the date hereof, all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary. For the purposes of this Agreement, "**Indebtedness**" means (x) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than accounts payable incurred in the Ordinary Course of Business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company's consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Except as disclosed on <u>Schedule 3.1(x)</u>, neither the Company nor any Subsidiary is in material default with respect to any Indebtedness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) **Taxes**. Except as set forth in <u>Schedule 3.1(y)</u>, (a) each of the Company and its Subsidiaries has duly and timely submitted or caused to be submitted all material Tax returns that it is required to submit on and through the date hereof or the date of the relevant Closing, as applicable (including, in each case, all applicable extensions), and all such Tax returns were accurate and complete in all material respects; (b) each of the Company and its Subsidiaries has timely paid all material taxes and other charges due by the Company to any local or foreign tax authorities, including, without limitation, income taxes, estimated taxes, excise taxes, sales taxes, value added taxes, use taxes, gross receipts taxes, franchise taxes, national insurance taxes, national healthcare contributions, employment and payroll related taxes, property taxes and import duties, whether or not measured in whole or in part by net income (hereinafter, "**Taxes**" or, individually, a "**Tax**") shown as due on any such Tax returns; (c) with respect to all Tax returns of the Company and its Subsidiaries, no audit is in progress with respect to any return for Taxes, and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax; and (d) all provisions for Tax liabilities of the Company and its Subsidiaries have been made consistent with GAAP consistently applied, and all liabilities for Taxes of the Company and its Subsidiaries attributable to periods prior to or ending on the date hereof or the date of the relevant Closing, as applicable, have been adequately provided for.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) **No General Solicitation**. Neither the Company nor any Person acting on behalf of the Company has offered any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities only to the Purchasers and certain other "accredited investors" within the meaning of Rule 501 under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) **Foreign Corrupt Practices**. Neither the Company nor any Subsidiary, nor to the Knowledge of the Company, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) Reserved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) Reserved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) Reserved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee) **Acknowledgment Regarding Purchasers' Purchase of Securities**. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers' purchase of the Securities. The Company further represents to each Purchaser that the Company's decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff) **Stock Option Plans**. Except as set forth in <u>Schedule 3.1(ff)</u>, each stock option granted by the Company under the Company's stock option plan was granted (i) in accordance with the terms of the Company's stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. To the Company's Knowledge, no stock option granted under the Company's stock option plan has been backdated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg) **Office of Foreign Assets Control**. Neither the Company nor any Subsidiary nor, to the Company's Knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("**OFAC**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh) **U.S. Real Property Holding Corporation**. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) **Bank Holding Company Act**. Neither the Company nor any of its Subsidiaries or, to the Knowledge of the Company, any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the "**BHCA**") and to regulation by the Board of Governors of the Federal Reserve System (the "**Federal Reserve**"). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj) **Money Laundering**. The operations of the Company and its Subsidiaries are and have been conducted at all times in material compliance with (i) applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and other applicable money laundering statutes of the United States and (ii) to the Company's Knowledge, applicable money laundering statutes of all foreign jurisdictions to which the Company is subject (in each case, including applicable rules and regulations promulgated thereunder) (collectively, the "**Money Laundering Laws**"), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk) **No Disqualification Events**. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of (i) the Company, or (ii) to the Company's Knowledge, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an "**Issuer Covered Person**" and, together, "**Issuer Covered Persons**") is subject to any of the "**Bad Actor**" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a "**Disqualification Event**"), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(c), and has furnished to the Purchasers a copy of any disclosures provided thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll) **Other Covered Persons**. To the Company's Knowledge, no person other than an Issuer Covered Person has been or will be paid remuneration for solicitation of purchasers in connection with the sale of any Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm) **Shell Status**. The Company has never been, and is not presently, an issuer identified as a "Shell Company".

**Section 3.2 <u>Representations and Warranties of the Purchasers</u>**. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **Organization; Authority**. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Own Account**. Such Purchaser understands that the Securities are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser's right to sell the Securities pursuant to a Registration Statement covering the resale of such security or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **Purchaser Status**. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts any Preferred Shares, it will be an "accredited investor" as defined in Rule 501 under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **Experience of Such Purchaser**. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **General Solicitation**. Such Purchaser is not, to such Purchaser's knowledge, purchasing the Securities because of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **Access to Information**. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities, including the risk factors set forth in **Exhibit F**; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect to the Securities nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **Certain Transactions and Confidentiality**. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material pricing terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser's representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) **Risk Factors**. Such Purchaser has carefully read and fully understands the risks involved with such Purchaser's investment in the Securities and the transactions contemplated hereby, including, without limitation, the risks identified in **Exhibit E**, incorporated by reference herein, and in the Disclosure Schedules. The Purchaser understands that there is no guarantee of any investment return. The Purchaser is aware that an investment in the Securities is a speculative investment that involves a significant degree of risk and that there is no guarantee that the Purchaser will realize any return or gain from the Offering. The Purchaser (i) acknowledges that there are restrictions on the Purchaser's ability to cancel an investment commitment and obtain a return of the investment at any time, (ii) understands that that there is no public or private trading market for the Securities and, therefore, it may be difficult to resell Securities acquired through this Offering, if at all, (iii) is able to be party to this Agreement and bear the financial risk of such investment in the Securities and in the event no trading market for the Securities develops, and (iv) is able to afford a complete loss of its Subscription Amount. The Purchaser acknowledges and accepts that part or all of such Purchaser's Subscription Amount may be lost with no further recourse to the Company.

**ARTICLE IV.<br> <u>OTHER AGREEMENTS OF THE PARTIES</u>**

**Section 4.1 <u>Transfer Restrictions</u>.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective Registration Statement, to the Company or to an Affiliate of a Purchaser, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Purchasers agree that any certificate issued in respect of or in exchange for any of the Securities, so long as is required by this <u>Section 4.1</u>, shall include an endorsement typed or otherwise denoted conspicuously thereon of the following legend (along with any other legends that may be required under applicable Laws:

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "**SECURITIES ACT**"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY.

In the event such Securities are represented by book-entry account on the books and records of the Company's transfer agent, such book-entry shall include such a restrictive legend.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Certificates (or book-entries) evidencing the Conversion Shares shall not contain any legend (including the legend set forth in <u>Section 4.1(b)</u> hereof): (i) following any sale of such Conversion Shares pursuant to Rule 144, or (ii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). In such instances, the Company shall, at its expense, cause Company Counsel to issue a legal opinion to the Transfer Agent if required by the Transfer Agent to effect the removal of the legend hereunder from such Conversion Shares, subject to compliance with the Securities Act and/or Rule 144 (for the avoidance of doubt, the Company shall pay all costs associated with such legend removals incurred by the Company). The Company agrees that at such time as such legend is no longer required under this <u>Section 4.1(c)</u> and the Company's Common Stock is listed or quoted, as the case may be, on a Trading Market, it will use its reasonable best efforts to take all actions reasonably requested by any Purchaser to remove any and all restrictive and other legends from the certificates (or book-entries) evidencing the Conversion Shares. Any requesting Purchaser shall provide the Company, Company Counsel, or the Transfer Agent with the evidence reasonably requested by them to cause the removal of any such "restrictive" legend, including any information such persons reasonably deem necessary to determine that the legend is no longer required under the Securities Act or applicable state laws, including a certification that the requesting Purchaser is not an Affiliate of the Company (and a covenant to inform the Company if such Purchaser should thereafter become an Affiliate and to consent to exchange any certificates or instruments representing the Conversion Shares for ones bearing an appropriate restrictive legend) and regarding the length of time such Conversion Shares have been held. The Company shall deliver all documentation requested by the Transfer Agent within two (2) Trading Days of receiving all reasonably requested information from the Purchaser ("Legend Removal Request Date"). The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this <u>Section 4</u> (unless required by law). Certificates for Conversion Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to each Purchaser in book-entry or certificated form or by crediting the account of such Purchaser's prime broker with the Depository Trust Company System as directed by such Purchaser. The Company shall pay to Purchaser, in cash, as liquidated damages and not as a penalty, 1% of the total of the value of the Conversion Shares for which the removal of the legend is sought (based on the VWAP of the Common Stock on the date such Conversion Shares are submitted to the Transfer Agent) for each full month (or pro rata portion thereof) that the required documentation is not delivered to the Transfer Agent after the Legend Removal Date until such documentation is delivered, provided that such liquidated damages shall not exceed in the aggregate to ten percent (10.0%) of such Purchaser's aggregate Subscription Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this <u>Section 4.1</u> is predicated upon the Company's reliance upon this understanding.

**Section 4.2 <u>Acknowledgment of Dilution</u>**. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Conversion Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

**Section 4.3 <u>Furnishing of Information; Public Information</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Until the earlier of (i) one (1) year after the Closing Date, or (ii) the time that no Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Regulation D.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding the foregoing, in the event the Company becomes subject to the reporting requirements of Section 13 or 15(a) of the Exchange Act (a "**Reporting Issuer**") while the Purchaser owns any Securities, until such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) has ever been an issuer described in Rule 144(i)(1)(i) or becomes an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a "**Public Information Failure**") then, in addition to such Purchaser's other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one percent (1.0%) of the aggregate Subscription Amount of such Purchaser's Securities on the day of a Public Information Failure and on every thirtieth (30<sup>th</sup>) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Conversion Shares pursuant to Rule 144, provided that such liquidated damages shall not exceed in the aggregate to ten percent (10.0%) of such Purchaser's aggregate Subscription Amount. The payments to which a Purchaser shall be entitled pursuant to this <u>Section 4.3(b)</u> are referred to herein as "**Public Information Failure Payments**." Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3<sup>rd</sup>) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (pro-rated for partial months) until paid in full. Nothing herein shall limit such Purchaser's right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. Further, for the avoidance of doubt, the parties agree that notwithstanding anything to the contrary herein, no payment for a Public Information Failure shall be payable if the Public Information Failure is due to any Purchaser's actions that delay or prevent the Company from performing its obligations under this Section 4.3(b).

**Section 4.4 <u>Integration</u>**. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the Offering in a manner that would require the registration under the Securities Act of the sale of the Preferred Shares.

**Section 4.5 <u>Conversion Procedure</u>**. The form of Notice of Conversion included in the Preferred Shares sets forth the totality of the procedures required of each Purchaser to convert such Purchaser's Preferred Shares. Without limiting the preceding sentence, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required to convert the Preferred Shares. The Company shall honor conversions of the Preferred Shares and shall deliver Conversion Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

**Section 4.6 <u>Disclosure; Publicity.</u>** No Purchaser shall issue any such press release nor otherwise make any such public statement with respect to the transactions contemplated hereby without the prior consent of the Company, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.

**Section 4.7 <u>Shareholder Rights Plan</u>**. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an "**Acquiring Person**" under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities in accordance with the Transaction Documents.

**Section 4.8 <u>Non-Public Information</u>**. Notwithstanding anything provided herein to the contrary, the covenants contained in this <u>Section 4.8</u>, shall not apply until the earlier of the Company filing a registration statement in connection with a Qualified Event with the SEC or submitting its application to have its securities listed or quoted, as the case may be, on a Trading Market the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. To the extent that the Company delivers any material, non-public information to a Purchaser without such Purchaser's consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis of, such material, non-public information, provided that such Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice through a press release to notify the general public and/or by filing a Current Report on Form 8-K with the SEC, unless the Purchasers have provided prior consent. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

**Section 4.9 <u>Use of Proceeds</u>**. The Company shall use the net proceeds from the sale of the Securities hereunder for general working capital and growth purposes, and shall not use such proceeds: (a) for the satisfaction of any portion of the Company's debt, except that no more than $2.228 million of net proceeds may be used to satisfy debt owed to David Humprey arising from the Company's prior acquisition of assets from Kirkland Group, Inc., (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) in violation of FCPA or OFAC regulations or (d) to lend, give credit or pay or make advances towards accrued and/or unpaid salary or bonuses, of any officers, directors, employees or affiliates of the Company, except further, that no more than $550,000 of net proceeds may be paid in satisfaction of accrued unpaid compensation due to each of the Chief Executive Officer and Chief Financial Officer of the Company.

**Section 4.10 <u>Indemnification of Purchasers</u>**. Subject to the provisions of this <u>Section 4.10</u>, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a "**Purchaser Party**") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to such Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company's prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this <u>Section 4.10</u> shall be made by periodic payments of the amount thereof during the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

**Section 4.11 <u>Reservation of Conversion Shares</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) As of the date hereof, the Company has reserved, and the Company shall, until such time as all the Preferred Shares are converted, continue to reserve and keep available at all times, free of preemptive rights, the number of shares of Common Stock reasonably required for the purpose of enabling the Company to issue all of the Conversion Shares multiplied by two.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Reserve Shares on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company's certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Reserve Shares at such time, as soon as possible and in any event not later than the 90<sup>th</sup> day after such date.

**Section 4.12 <u>Restricted and Permitted Equity Issuances; Restricted Indebtedness</u>.** From the date hereof until 180 days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents, except the Company shall be permitted to issue Permitted Equity Issuances. While the Preferred Shares are outstanding, the Company may not issue more than an aggregate of $1,000,000 of Indebtedness, whether senior or subordinated or secured or unsecured.

**Section 4.14 <u>Equal Treatment of Purchasers</u>**. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to such Transaction Documents. Further, the Company shall not make any payment with respect to the Preferred Shares in amounts which are disproportionate to the respective Stated Value outstanding on the Preferred Shares at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

**Section 4.15 <u>Certain Transactions and Confidentiality.</u>** Other than consummating the transactions contemplated hereunder, each Purchaser, severally and not jointly with the other Purchasers, covenants that such Purchaser, has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, if Purchaser is a multi-managed investment vehicle (whereby separate portfolio managers manage separate portions of Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of Purchaser's assets), the representation set forth above in this <u>Section 4.15</u> shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Parties, Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

**Section 4.16 <u>Form D; Blue Sky Filings</u>**. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or "Blue Sky" laws of the states of the United States and shall provide evidence of such actions promptly upon request of any Purchaser.

**Section 4.17 <u>Capital Changes</u>**. Except in connection with the Qualified Event, until the six (6) month anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in Stated Value outstanding of the Preferred Shares.

**Section 4.20 <u>Resale Registration of Conversion Shares</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **Mandatory Registration**. No later than the Closing Date (such date, the "**Filing Deadline**"), the Conversion Shares, including any shares of Common Stock used to pay dividends on the Preferred Shares, and the Bonus Preferred Shares shall be included for resale in any registration statement filed in connection with a Qualified Event on Form S-1 or S-4, as applicable, or such other form under the Securities Act as is then available to the Company (including the prospectus, amendments and supplements to such registration statement or prospectus, including pre- and post-effective amendments (and any additional registration statements filed in accordance herewith), all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement, the "**Registration Statement**"), providing for the resale from time to time by the Purchasers of any and all Registrable Securities. The Registrable Securities shall be immediately tradable at the time of the Qualified Event. In the event that any Bonus Preferred Shares have converted into the Company's Common Stock in advance of a Qualified Event, such Bonus Preferred Shares shall be afforded the same registration rights as outlined in the preceding sentence. The Company agrees to use its best efforts to cause the Registration Statement to be declared effective by the Commission on the Closing Date (the "**Effectiveness Deadline**"). The Company shall promptly, and in any event within one (1) Business Day, notify the Purchasers of the effectiveness of the Registration Statement. The Company shall maintain the effectiveness of the Registration Statement for so long as there are any Registrable Securities outstanding, with respect to such Registrable Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Effect of Failure to Obtain Effectiveness by Effectiveness Deadline**. If (i) the Registration Statement is not (A) filed with the Commission on or before the Filing Deadline (a "**Filing Failure**") or (B) declared effective by the Commission on or before the Effectiveness Deadline (an "**Effectiveness Failure**"), (ii) on any day after the Registration Statement has been declared effective by the Commission, sales of all the Registrable Securities required to be included on the Registration Statement cannot be made pursuant to the Registration Statement (including because of a failure to keep the Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to the Registration Statement or to register sufficient Registrable Securities) (a "**Maintenance Failure**") or (iii) if the Company fails to file with the Commission required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) and as a result of which any of the Purchasers are unable to sell Registrable Securities under Rule 144 (a "**Current Public Information Failure**", and each of a Filing Failure, an Effectiveness Failure, a Maintenance Failure and a Current Public Information Failure being referred to as a "Registration Failure"), then, subject to the last sentence of this Section 4.20(b) (and subject to Section 4.20(c) with respect to Cutback Shares), as full relief (but not as a penalty) for the damages to any Purchaser by reason of its inability to sell Registrable Securities under the Registration Statement other than as a result of a Willful Registration Failure (as defined below), the Company shall, (i) on or prior to the fifth (5<sup>th</sup>) day following a Registration Failure and (ii) on or prior to the fifth (5th) day following each monthly anniversary of such Registration Failure and until such Registration Failure shall have been cured (prorated for any period of less than a month), pay to each Purchaser holding Registrable Securities an amount in cash equal to one percent (1%) of the Subscription Amount paid by such Purchaser for such Purchaser's Preferred Shares (such amounts, collectively, "**Registration Delay Payments**"); *<u>provided</u>*, that the aggregate amount of Registration Delay Payments payable by the Company shall in no event exceed an amount equal to ten percent (10%) of the aggregate Subscription Amount paid by all Purchasers hereunder (the "**RDP Cap**"). Notwithstanding the foregoing, if there is (i) a Filing Failure or an Effectiveness Failure resulting from the Company's failure to have complied with clause (3) of the definition of "Effectiveness Deadline" or (ii) any Registration Failure that shall have been due to the Company's failure to use its reasonable best efforts to comply with its obligations under this Section 4.5 (each of the immediately preceding clauses (i) and (ii), a "**Willful Registration Failure**"), then as partial relief (but not as a penalty) for the damages to any Purchaser by reason of its inability to sell Registrable Securities under the Registration Statement and without limiting each Purchaser's rights to any other remedy available hereunder or otherwise at law or in equity, the Registration Delay Payments in respect of a Willful Registration Failure shall be an amount in cash equal to one and one-half percent (1.5%) of the Subscription Amount paid by such Purchaser for such Purchaser's Preferred Shares, and such Registration Delay Payments shall not be subject to the RDP Cap. For the avoidance of doubt, no more than one Registration Delay Payment shall be payable by the Company at any given time, notwithstanding that more than one failure giving rise to a Registration Delay Payment shall have occurred and is continuing (e.g., a Filing Failure and an Effectiveness Failure continuing simultaneously); *provided*, that, Registration Delay Payments shall continue in accordance with this Section 4.20(b) until all failures giving rise to such payments are cured.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **Rule 415 Cutback**. Notwithstanding the registration obligations set forth in Section 4.20(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, then the Company agrees to promptly inform each of the Purchasers thereof and use its commercially reasonable efforts to file amendments to the Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission. Unless otherwise directed in writing by a Purchaser as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows (the number of Registrable Securities not registered, the "**Cutback Shares**"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Second, the Company shall reduce Registrable Securities represented by Conversion Shares issuable pursuant
to the terms of the Preferred Shares (applied, in the case that some Conversion Shares issuable pursuant to the terms of the Preferred
Shares may be registered, to the Purchasers on a pro rata basis based on the total number of unregistered Conversion Shares issuable to
such Purchasers pursuant to the terms of the Preferred Shares).

In the event of a cutback hereunder, the Company shall give each Purchaser at least five (5) Business Days prior written notice along with the calculations as to such Purchaser's allotment. In the event the Company amends the Registration Statement in accordance with the foregoing, the Company will use its reasonable best efforts to file with the Commission, as promptly as allowed by the Commission or guidance of the Staff thereof provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the initial Registration Statement, as amended (any such other registration statements, an "**Additional Registration Statement**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **Related Obligations**. In furtherance of this Section 4.20, the Company shall have the following obligations:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when
filed and at all times while effective, the Registration Statement shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the
light of the circumstances in which they were made) not misleading. The Company shall submit to the Commission, within five (5) days after
the Staff of the Commission advises the Company (orally or in writing, whichever is earlier) that the Staff either will not review the
Registration Statement or has no further Comments on the Registration Statement (as the case may be), a request for acceleration of effectiveness
of the Registration Statement to a time and date not later than forty-eight (48) hours after the submission of such request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Company shall prepare and file with the Commission such amendments (including, without limitation,
post-effective amendments) and supplements to the Registration Statement (and to the extent necessary additional registration statements,
which shall be deemed to constitute part of the Registration Statement for all purposes hereof) and the prospectus used in connection
with the Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be
necessary to keep the Registration Statement effective and available for resales of all of the Registrable Securities at all times during
the Registration Period, and, during such period, comply with all other applicable provisions of the Securities Act in connection with
the Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Company shall promptly furnish to each Purchaser, without charge, (i) upon request, after the same
is prepared and filed with the Commission, a reasonable number of copies of the Registration Statement and any amendment(s) and supplement(s)
thereto, including, if so requested, the financial statements and schedules filed therewith, all documents incorporated therein by reference,
all exhibits and each preliminary prospectus, (ii) upon request, upon the effectiveness of the Registration Statement, two (2) copies
of the prospectus included in the Registration Statement and all amendments and supplements thereto (or such other number of copies as
such Purchaser may reasonably request from time to time), and (iii) such other documents, including, without limitation, copies of any
preliminary or final prospectus, as such Purchaser may reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Purchaser; *provided*, that the Company shall have no obligation to furnish any documents
pursuant to this clause that is available on the Commission's Electronic Data Gathering, Analysis and Retrieval system (EDGAR).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from
registration and qualification applies, the resale by Purchasers of the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of jurisdictions in the United States as shall be reasonably appropriate for the
distribution of the Registrable Securities covered by the Registration Statement, (ii) prepare and file in those jurisdictions, such amendments
(including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary
to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required
in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required
to qualify but for this Section 4.20(d)(iv), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent
to service of process in any such jurisdiction. The Company shall promptly notify each Purchaser who holds Registrable Securities of the
receipt by the Company of any written notification with respect to the suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual
written notice of the initiation or threatening of any proceeding for such purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) The Company shall notify each Purchaser in writing of the happening of any event, as promptly as practicable
after becoming aware of such event, as a result of which the prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading (*provided* that in no event shall such notice
contain any material, non-public information regarding the Company or any of its Subsidiaries), and, promptly prepare a supplement or
amendment to the Registration Statement and such prospectus contained therein to correct such untrue statement or omission and, upon request
by any Purchaser, deliver two (2) copies of such supplement or amendment to such Purchaser (or such other number of copies as such Purchaser
may reasonably request). If the Company receives Commission comments which challenge the right of a Purchaser to have its Registrable
Securities included in the Registration Statement without being deemed an underwriter thereunder, the Company shall, in discussions with
and responses to the Commission, use its reasonable best efforts and time to cause as many Registrable Securities as possible to be included
in the Registration Statement without characterizing any Purchaser as an underwriter and in such regard use its reasonable best efforts
to cause the Commission to permit the affected Purchasers or their respective counsel to reasonably participate in Commission conversations
on such issue together with Company counsel, and timely convey relevant information concerning such issue with the affected Purchasers
or their respective counsel. In no event may the Company name any Purchaser as an underwriter without such Purchaser's prior written
consent; *provided*, *however*, that if, after the Company complies with its covenants contained in this Section 4.20(d)(v),
the Commission requires that such Purchaser be named an underwriter and such Purchaser refuses to promptly deliver its written consent
to be so named, then the Company may exclude such Purchaser and such Purchaser's Registrable Securities from the Registration Statement,
and such Purchaser's Conversion Shares issuable to such Purchasers pursuant to the terms of the Preferred Shares shall be deemed
to no longer be Registrable Securities, irrespective of the definition of "Registrable Securities" contained in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) The Company shall (i) use commercially reasonable best efforts to prevent the issuance of any stop order
or other suspension of effectiveness of the Registration Statement or the use of any prospectus contained therein, or the suspension of
the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and,
if such an order or suspension is issued, to obtain the withdrawal of such order or suspension as soon as reasonably practicable and (ii)
notify each Purchaser who holds Registrable Securities of the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) The Company shall use its commercially reasonable best efforts either to (i) cause all of the Registrable
Securities to be listed on the Trading Market on which securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and
quotation of all of the Registrable Securities on the applicable over the counter market.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) The Company shall otherwise use its reasonable best efforts to comply with all applicable rules and regulations
of the Commission in connection with the Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **Suspension of Use of Registration Statement.** Each Purchaser, upon receipt of any notice from the Company of any event pursuant to Section 4.20(d)(v), shall suspend use of the prospectus included in the Registration Statement covering the Registrable Securities until such Purchaser is advised in writing by the Company that the use of the prospectus may be resumed and is furnished with copies of a supplement or amendment to the Registration Statement and such prospectus contained therein as contemplated by Section 4.20(d)(v).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **Obligations of the Purchasers**. Each Purchaser shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the registration of the Registrable Securities. Each Purchaser, by such Purchaser's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement, unless such Purchaser has notified the Company in writing of such Purchaser's election to exclude all of such Purchaser's Registrable Securities from the Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **Expenses of Registration**. All expenses incurred in connection with the Registration Statement, excluding underwriters' discounts and commissions, but including without limitation all registration, filing and qualification fees, word processing, duplicating, printers' and accounting fees, stock exchange fees, messenger and delivery expenses, all fees and expenses of complying with state securities or blue sky laws and the fees and disbursements of counsel for the Company shall be paid by the Company.

**Section 4.21 <u>Variable Rate Transactions</u>**. For so long as any Preferred Shares remains outstanding, other than the ELOC, the Company shall not effect or enter into an agreement to effect any issuance of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. "**Variable Rate Transaction**" means a transaction in which a Person (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of common stock (including Common Stock) either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of such Person or the market for the common stock or (ii) enters into any agreement, including an equity line of credit, whereby such Person may issue securities at a future determined price.

**Section 4.22 <u>Participation Right</u>**. For so long as the Preferred Shares remain outstanding, neither the Company nor any of its Subsidiaries shall, other than pursuant to a Plan directly or indirectly, issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any "equity security" (as that term is defined under Rule 405 promulgated under the 1933 Act), any convertible securities, any debt, any preferred stock or any purchase rights) (any such issuance, offer, sale, grant, disposition or announcement, a "**Subsequent Placement**") unless the Company shall have first complied with this Section 4.22. The Company acknowledges and agrees that the right set forth in this Section 4.22 is a right granted by the Company, separately, to each Purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) At least three (3) Trading Days prior to any proposed or intended Subsequent Placement, the Company shall deliver to each Purchaser a written notice (each such notice, a "**Pre-Notice**"), which Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (A) if the proposed Offer Notice (as defined below) constitutes or contains material, nonpublic information, a statement asking whether the Purchaser is willing to accept material non-public information or (B) if the proposed Offer Notice does not constitute or contain material, non-public information, (x) a statement that the Company proposes or intends to effect a Subsequent Placement, (y) a statement that the statement in clause (x) above does not constitute material, non-public information and (z) a statement informing such Purchaser that it is entitled to receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written request of a Purchaser within three (3) Trading Days after the Company's delivery to such Purchaser of such Pre-Notice, and only upon a written request by such Purchaser, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver to such Purchaser an irrevocable written notice (the "**Offer Notice**") of any proposed or intended issuance or sale or exchange (the "**Offer**") of the securities being offered (the "**Offered Securities**") in a Subsequent Placement, which Offer Notice shall (A) identify and describe the Offered Securities, (B) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (C) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (D) offer to issue and sell to such Buyer in accordance with the terms of the Offer such Buyer's pro rata portion of 50% of the Offered Securities, provided that the number of Offered Securities which such Buyer shall have the right to subscribe for under this Section 4.22 shall be (x) based on such Purchaser's pro rata portion of the aggregate Stated Value of the Preferred Shares purchased hereunder by all Purchasers (the "**Basic Amount**"), and (y) with respect to each Purchaser that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than their Basic Amounts (the "**Undersubscription Amount**"), which process shall be repeated until each Purchaser shall have an opportunity to subscribe for any remaining Undersubscription Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) To accept an Offer, in whole or in part, such Purchaser must deliver a written notice to the Company prior to the end of the second (2<sup>nd</sup>) Business Day after such Purchaser's receipt of the Offer Notice (the "**Offer Period**"), setting forth the portion of such Purchaser's Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the "**Notice of Acceptance**"). If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts, then each Purchaser who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the "**Available Undersubscription Amount**"), each Purchaser who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to each Purchaser a new Offer Notice and the Offer Period shall expire on the third (3rd) Business Day after such Purchaser's receipt of such new Offer Notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Company shall have five (5) Business Days from the expiration of the Offer Period above (A) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Purchaser (the "**Refused Securities**") pursuant to a definitive agreement(s) (the "**Subsequent Placement Agreement**"), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (B) to publicly announce (x) the execution of such Subsequent Placement Agreement, and (y) either (I) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (II) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4.22(iii) above), then each Purchaser may, at its sole option and in its sole discretion, withdraw its Notice of Acceptance or reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Purchaser elected to purchase pursuant to Section 4.22(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Purchasers pursuant to this Section 4.22 prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Purchasers in accordance with Section 4.22(i) above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Purchaser shall acquire from the Company, and the Company shall issue to such Purchaser, the number or amount of Offered Securities specified in its Notice of Acceptance, as reduced pursuant to Section 4.22(iv) above if such Purchaser has so elected, upon the terms and conditions specified in the Offer. The purchase by such Purchaser of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and such Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to such Purchaser and its counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Any Offered Securities not acquired by a Purchaser or other Persons in accordance with this Section 4.22 may not be issued, sold or exchanged until they are again offered to such Purchaser under the procedures specified in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) The Company and each Purchaser agree that if any Purchaser elects to participate in the Offer, (x) neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the "**Subsequent Placement Documents**") shall include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received from the Company, and (y) any registration rights set forth in such Subsequent Placement Documents shall be similar in all material respects to the registration rights contained in this Agreement. Notwithstanding anything to the contrary in this Section 4.22 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the fifth (5th) Business Day following delivery of the Offer Notice. If by such fifth (5th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide such Purchaser with another Offer Notice and such Purchaser will again have the right of participation set forth in this Section 4.22. The Company shall not be permitted to deliver more than one such Offer Notice to such Purchaser in any sixty (60) day period, except as expressly contemplated by the last sentence of Section 4.22(ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) The restrictions contained in this Section 4.22 shall not apply in connection with Permitted Equity Issuances or the ELOC. The Company shall not circumvent the provisions of this Section 4.22 by providing terms or conditions to one Purchaser that are not provided to all.

**Section 4.22 <u>ELOC Provider</u>**. The Purchaser with the highest Subscription Amount at Closing shall have the right to enter into an Equity Line of Credit facility with the Company for an amount ranging between $15-$25 million (the "**ELOC**"). The securities issuable pursuant to such facility shall be afforded the same registration rights as are set forth in Section 4.20 herein.

**ARTICLE V.<br> <u>MISCELLANEOUS</u>**

**Section 5.1 <u>Termination</u>**. This Agreement shall automatically terminate if the Closing has not been consummated on or prior to the Termination Date, and such termination will not affect the right of any party to sue for any breach by the other party (or parties).

**Section 5.2 <u>Fees and Expenses</u>**. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants, and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery, and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers. In addition, Joseph Gunnar & Co. LLC is acting as placement agent for this private offering pursuant to a placement agency agreement with the Company and will receive 8% cash compensation on amounts closed on pursuant to this Agreement, as well as an expense reimbursement from the Company of up to $50,000 for documented legal fees incurred for Placement Agent Counsel, which legal fees shall be paid from the proceeds of the Closing.

**Section 5.3 <u>Entire Agreement</u>**. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

**Section 5.4 <u>Notices</u>**. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2<sup>nd</sup>) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice through a press release.

**Section 5.5 <u>Amendments; Waivers</u>**. No provision of this Agreement or the Preferred Shares may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Required Holders or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially, and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this <u>Section 5.5</u> shall be binding upon each Purchaser and holder of Securities and the Company.

**Section 5.6 <u>Headings</u>**. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

**Section 5.7 <u>Successors and Assigns</u>**. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger or combination). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the "Purchasers."

**Section 5.8 <u>No Third-Party Beneficiaries</u>**. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in <u>Section 4.10</u>. Notwithstanding the foregoing, the Placement Agent shall be deemed a third-party beneficiary of the representations and warranties of the Company as contained in <u>Section 3.1</u> of this Agreement and shall have the right to enforce such provisions directly to the extent it may deem such enforcement necessary or advisable to protect its rights.

**Section 5.9 <u>Governing Law</u>**. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under <u>Section 4.10</u>, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding.

**Section 5.10 <u>Survival</u>**. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

**Section 5.11 <u>Execution</u>**. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such ".pdf" signature page were an original thereof.

**Section 5.12 <u>Severability</u>**. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

**Section 5.14 <u>Replacement of Securities</u>**. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

**Section 5.15 <u>Remedies</u>**. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.

**Section 5.16 <u>Payment Set Aside</u>**. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

**Section 5.17 <u>Independent Nature of Purchasers' Obligations and Rights</u>**. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

**Section 5.18 <u>Liquidated Damages</u>**. The Company's obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

**Section 5.19 <u>Saturdays, Sundays, Holidays, etc</u>**<u>.</u> If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

**Section 5.20 <u>Construction</u>**. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

**Section 5.21 <u>WAIVER OF JURY TRIAL</u>. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.** 

*(Signature Pages Follow)*

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

---

| | | | |
|:---|:---|:---|:---|
| **FUNCTIONAL BRANDS INC.** | **FUNCTIONAL BRANDS INC.** | **FUNCTIONAL BRANDS INC.** | <u>Address for Notice:</u> |
| By: |  |  | Functional Brands Inc. |
|  | Name: | Eric Gripentrog | 6400 SW Rosewood Street |
|  | Title: | Chief Executive Officer | Lake Oswego, Oregon 97035 |
|  |  |  | Attention: Eric Gripentrog<br> Email: |
| With a copy to (which shall not constitute notice): | With a copy to (which shall not constitute notice): | With a copy to (which shall not constitute notice): |  |
| Sichenzia Ross Ference Carmel LLP<br> 1185 Avenue of the Americas, 31<sup>st</sup> Floor<br> New York, New York 10036 | Sichenzia Ross Ference Carmel LLP<br> 1185 Avenue of the Americas, 31<sup>st</sup> Floor<br> New York, New York 10036 | Sichenzia Ross Ference Carmel LLP<br> 1185 Avenue of the Americas, 31<sup>st</sup> Floor<br> New York, New York 10036 |  |
| Attn: Ross D. Carmel, Esq. | Attn: Ross D. Carmel, Esq. | Attn: Ross D. Carmel, Esq. |  |
| Email: | Email: | Email: |  |

---

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

PURCHASER SIGNATURE PAGE TO

<u>FUNCTIONAL BRANDS INC. SECURITIES PURCHASE AGREEMENT</u>

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: ________________________________________________________

 

*Signature of Authorized Signatory of Purchaser*: _________________________________

Name of Authorized Signatory: _______________________________________________

Title of Authorized Signatory: ________________________________________________

Email Address of Authorized Signatory:_________________________________________

Address for Notice to Purchaser:

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount: $_________________

Face Amount (*1.25 x Subscription Amount*): $_________________

EIN Number: ____________________

[SIGNATURE PAGES CONTINUE]

**DISCLOSURE SCHEDULES**

**EXHIBIT A**

**CERTIFICATE OF INCORPORATION** 

**EXHIBIT B**

**CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES A**

**PREFERRED STOCK**

**EXHIBIT C**

**CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES B**

**PREFERRED STOCK**

**EXHIBIT D**

**ESCROW AGREEMENT**

**EXHIBIT E**

**ACCREDITED INVESTOR QUESTIONNAIRE**

**EXHIBIT F**

**RISK FACTORS**

**EXHIBIT G**

**FORM OF LOCK-UP AGREEMENT**

## Exhibit 10.24

**Exhibit 10.24**

**FORM LOCK-UP AGREEMENT**

July 22, 2025

---

| | |
|:---|:---|
| Re: | Securities Purchase Agreement, dated as of July 22, 2025 (the "<u>Purchase Agreement</u>"), between Functional Brands Inc., a Delaware corporation (the "<u>Company</u>") and the purchasers signatory thereto (each, a "<u>Purchaser</u>" and, collectively, the "<u>Purchasers</u>") |

---

Ladies and Gentlemen:

Defined terms not otherwise defined in this letter agreement (the "<u>Letter Agreement</u>") shall have the meanings set forth in the Purchase Agreement. Pursuant to Section 2.3(a)(vii) of the Purchase Agreement and in satisfaction of a condition of the Company's obligations under the Purchase Agreement, the undersigned irrevocably agrees with the Company that, from the date hereof until one-hundred and eighty (180) days after the Closing Date (such period, the "<u>Restriction Period</u>") the undersigned will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any Affiliate of the undersigned or any person in privity with the undersigned or any Affiliate of the undersigned), directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the "<u>Exchange Act</u>"), with respect to, any shares of Common Stock of the Company or securities convertible, exchangeable or exercisable into, shares of Common Stock of the Company beneficially owned, held or hereafter acquired by the undersigned (collectively, the "<u>Securities</u>"). Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.

Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Securities provided that (1) the Company receives a signed lock-up letter agreement (in the form of this Letter Agreement) for the balance of the Restriction Period from each donee, trustee, distributee, or transferee, as the case may be, prior to such transfer, (2) any such transfer shall not involve a disposition for value, (3) such transfer is not required to be reported with the Securities and Exchange Commission in accordance with the Exchange Act and no report of such transfer shall be made voluntarily, and (4) neither the undersigned nor any donee, trustee, distributee or transferee, as the case may be, otherwise voluntarily effects any public filing or report regarding such transfers, with respect to transfer:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) as a *bona fide* gift or gifts;

ii) to any immediate family member or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this Letter Agreement, "immediate family" shall mean any relationship by blood, marriage or adoption, not more remote than first cousin);

iii) to any corporation, partnership, limited liability company, or other business entity all of the equity holders of which consist of the undersigned and/or the immediate family of the undersigned;

iv) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (a) to another corporation, partnership, limited liability company, trust or other business entity that is an Affiliate of the undersigned or (b) in the form of a distribution to limited partners, limited liability company members or stockholders of the undersigned;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v) if the undersigned is a trust, to the beneficiary of such trust;

vi) by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the undersigned; or

vii) of securities purchased in open market transactions after the Closing Date.

In addition, notwithstanding the foregoing, this Letter Agreement shall not restrict the delivery of shares of Common Stock to the undersigned upon (i) exercise any options granted under any employee benefit plan of the Company; provided that any shares of Common Stock or Securities acquired in connection with any such exercise will be subject to the restrictions set forth in this Letter Agreement, or (ii) the exercise of warrants; provided that such shares of Common Stock delivered to the undersigned in connection with such exercise are subject to the restrictions set forth in this Letter Agreement.

Furthermore, the undersigned may enter into any new plan established in compliance with Rule 10b5-1 of the Exchange Act; provided that (i) such plan may only be established if no public announcement or filing with the Securities and Exchange Commission, or other applicable regulatory authority, is made in connection with the establishment of such plan during the Restriction Period and (ii) no sale of shares of Common Stock are made pursuant to such plan during the Restriction Period.

The undersigned acknowledges that the execution, delivery and performance of this Letter Agreement is a material inducement to the Company to complete the transactions contemplated by the Purchase Agreement and the Company shall be entitled to specific performance of the undersigned's obligations hereunder. The undersigned hereby represents that the undersigned has the power and authority to execute, deliver and perform this Letter Agreement, that the undersigned has received adequate consideration therefor and that the undersigned will indirectly benefit from the closing of the transactions contemplated by the Purchase Agreement.

This Letter Agreement may not be amended or otherwise modified in any respect without the written consent of each of the Company and the undersigned. This Letter Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to the principles of conflict of laws. The undersigned hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in Manhattan, for the purposes of any suit, action or proceeding arising out of or relating to this Letter Agreement, and hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that (i) it is not personally subject to the jurisdiction of such court, (ii) the suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of the suit, action or proceeding is improper. The undersigned hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The undersigned hereby waives any right to a trial by jury. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The undersigned agrees and understands that this Letter Agreement does not intend to create any relationship between the undersigned and any Purchaser and that no Purchaser is entitled to cast any votes on the matters herein contemplated and that no issuance or sale of the Securities is created or intended by virtue of this Letter Agreement.

This Letter Agreement shall be binding on successors and assigns of the undersigned with respect to the Securities and any such successor or assign shall enter into a similar agreement for the benefit of the Company. This Letter Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

\*\*\* SIGNATURE PAGE FOLLOWS\*\*\*

This Letter Agreement may be executed in two or more counterparts, all of which when taken together may be considered one and the same agreement.

_____________________________

Signature

_____________________________

Print Name

<u>_____________________________</u>

Position in Company, if any

Address for Notice:

_____________________________

_____________________________

By signing below, the Company agrees to enforce the restrictions on transfer set forth in this Letter Agreement.

**FUNCTIONAL BRANDS, INC.**

By:   <br> Name: <br> Title:

## Exhibit 10.25

**Exhibit 10.25**

**OUTSIDE THE BOX CAPITAL INC.**

2202 Green Orchard Place.

Oakville ON L6H 4V4

Canada

July 23, 2025

**CONFIDENTIAL**

**Functional Brands**

*6400 SW Rosewood Street*

*Lake Oswego, OR 97035*

*United States*

**Attention:** 

**Re: Marketing Services Agreement**

Dear Sirs/Mesdames:

Outside The Box Capital Inc. ("**Outside The Box Capital**") is pleased to provide marketing and distribution services to **Functional Brands** (the "**Company**"), as more fully described in this letter agreement (the "**Agreement**"). This Agreement sets forth the terms and conditions pursuant to which the Company engages Outside The Box Capital to provide such services.

1. **Services** 

(a) Outside The Box Capital's services to the Company will commence on July 23, 2025 ("**Effective Date**") and end on October 23, 2025 ("**Ending Date**") overall being the Initial Period ("**Initial Period**). Outside The Box Capital will provide marketing and distribution services to communicate information about the Company (''Marketing Services''), including, but not limited to:

● Initial planning and strategy call with ongoing checkpoints to cover feedback, advice, and other strategic matters of the campaign

● Assist in social media and other community-driving mediums, with the goal of creating more company awareness and investor engagement.

● Distribute company approved messaging, press releases, and other approved company materials across social channels that include Reddit, Discord, Telegram, Twitter, and StockTwits.

● Spread company insights and announcements to new communities with hopes of attracting new clients and other interested parties.

● Featuring the Company in different influencer-based videos, driving more engagement to the Company's story.

● An occasional Q&A or highlight video surrounding recent company news to be posted on the Company's YouTube channel or other company mediums

Outside The Box Capital's services under this Agreement may be modified or supplemented in schedules to this Agreement, mutually agreed upon in writing by Outside The Box Capital and Company.

(b) Outside The Box Capital will not participate in discussions or negotiations with potential investors. Outside The Box Capital will not solicit orders, make recommendations or give investment advice. Outside The Box Capital will not affect transactions of securities for potential investors or anyone else. Outside The Box Capital and the Company agree that Outside The Box Capital is not being engaged for, and is not permitted to engage in, activities that would give rise to Outside The Box Capital being required to register as a broker-dealer under applicable securities laws, the U.S. Exchange Act, or with FINRA. To the extent, a financial intermediary expresses interest in the Company, Outside The Box Capital will refer the intermediary to the Company. In providing services under this Agreement, Outside The Box Capital agrees to comply with all applicable United States securities laws and regulations. .Outside The Box Capital acknowledges that the Company has a Registration Statement on Form S-1 on public file with the U.S. Securities and Exchange Commission (the "SEC") (File No. 333-284180) in order to give effect to the Company's plan to list its common stock on NASDAQ (the "Direct Listing"). Outside The Box Capital further acknowledges that such Registration Statement has not yet been declared effective by the SEC.

(c) The Company acknowledges that Outside The Box Capital is the sole and exclusive owner of any and all databases developed by it. Outside The Box Capital may access third-party databases in order to increase the efficiency of its marketing outreach.

(d) It is hereby acknowledged and agreed that Outside The Box Capital shall be entitled to communicate with and shall rely upon the immediate advice, direction, and instructions of the CEO of the Company, or upon the advice or instructions of such other director or officer of the Company as the CEO of the Company shall, from time to time, designate in times of the CEO's absence, in order to initiate, coordinate and implement the Marketing Services as contemplated herein.

2. **Information** 

(a) The Company will make available to Outside The Box Capital on a timely basis relevant information pertaining to the Company. The Company also agrees to provide Outside The Box Capital with timely access to appropriate personnel. Outside The Box Capital will only use the information provided by the Company. The Company hereby grants Outside The Box Capital the right to use the name and service marks of the Company in its Marketing Services as long as this Agreement is continuing under the Initial Period (as defined below) or any Renewal Term (as defined below) and has not been terminated in accordance with the provisions hereof.

(b) Outside The Box Capital will be entitled to rely upon the information provided by the Company and all other information that the Company files with applicable regulators. Outside The Box Capital will be under no obligation to verify independently any such information. Outside The Box Capital will also be under no obligation to determine whether there have been, or to investigate any changes in, such information. However, any marketing materials shall be provided to the Company for review and approval prior to such marketing materials being published or disseminated to anyone.

3. **Term and Termination** 

The term of this Agreement shall commence on the Effective Date until the End Date overall being the Initial Period. During the Initial Period, the parties may terminate this Agreement by mutual consent and either may terminate this Agreement if the other party files for bankruptcy, becomes insolvent, or is in material breach of this Agreement. The Company shall pay Outside The Box Capital for all services performed up to and including the effective date of termination. Within ten (10) days after the termination or expiration of this Agreement, each party shall return to the other all Proprietary or Confidential Information (defined below) of the other party (and any copies thereof) in the party's possession or, with the approval of the party, destroy all such Proprietary or Confidential Information.

4. **Confidentiality** 

The parties agree to hold each other's Proprietary or Confidential Information in strict confidence. "Proprietary or Confidential Information" shall include, but is not limited to, written or oral contracts, trade secrets, know-how, business methods, business policies, memoranda, reports, records, computer-retained information, notes, or financial information. Proprietary or Confidential Information shall not include any information which: (i) is or becomes generally known to the public by any means other than a breach of the obligations of the receiving party; (ii) was previously known to the receiving party or rightly received by the receiving party from a third party that was not subject to a duty of confidentiality to the disclosing party; (iii) is independently developed by the receiving party as shown by the receiving party's then-contemporaneous written files and records kept in the ordinary course of business; or (iv) is subject to disclosure under a court order or other lawful processes. The parties agree not to make each other's Proprietary or Confidential Information available in any form to any third party or to use each other's Proprietary or Confidential Information for any purpose other than as specified in this Agreement. Each party's Proprietary or Confidential Information shall remain the sole and exclusive property of that party. The parties agree that in the event of use or disclosure by the other party other than as specifically provided for in this Agreement, the non-disclosing party may be entitled to equitable relief. Notwithstanding termination or expiration of this Agreement, Outside The Box Capital and the Company acknowledge and agree that their obligations of confidentiality with respect to Proprietary or Confidential Information shall survive termination of this Agreement.

5. **Compensation** 

For the Initial Term, Company agrees to pay Outside The Box Capital the compensation set forth in <u>Schedule A</u> attached hereto on the sixth Business Day after the Direct Listing is consummated., <u>Schedule A</u> forms part of this Agreement.

6. **Expenses** 

In the occasion where the Company requests Outside The Box Capital to travel outside of the agreement, upon mutual agreement outside of this agreement Outside The Box Capital shall also be reimbursed for all direct, pre-approved, and reasonable expenses actually and properly incurred by Outside The Box Capital in performing the Marketing Services (collectively, the "**Expenses**"); and which Expenses, it is hereby acknowledged and agreed, shall be payable by the Company to the order, direction and account of Outside The Box Capital as Outside The Box Capital may designate in writing, from time to time, in Outside The Box Capital' sole and absolute discretion, as soon as conveniently possible after the prior delivery by Outside The Box Capital to the Company of written substantiation on account of each such pre-approved reimbursable Expense.

7. **Notices** 

Notices under this Agreement are sufficient if given by nationally recognized overnight courier service, certified mail (return receipt requested), or personal delivery to the other party at the addresses first set out above.

8. **Choice of Law and Jurisdiction** 

This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and the parties hereby irrevocably attorn to the jurisdiction of the courts of the Province of Ontario.

9. **Waiver** 

The failure of any party to seek redress for violation of or to insist upon the strict performance of any agreement, covenant, or condition of this Agreement shall not constitute a waiver with respect thereto or with respect to any subsequent act.

10. **Assignment** 

Except as may be necessary for the rendition of the services as provided herein, neither Outside The Box Capital nor Company may assign any part or all of this Agreement, or subcontract or delegate any of their respective rights or obligations under this Agreement, without the other party's prior written consent. Any attempt to assign, subcontract, or delegate in violation of this paragraph is void in each instance.

*[the rest of this page intentionally left blank]*

 

11. **Entire Agreement** 

This Agreement and the schedules attached constitute the agreement between Outside The Box Capital and Company relating to the subject matter hereof and supersede any prior agreement or understanding between them. This Agreement may not be modified or amended unless such modification or amendment is agreed to in writing by both Outside The Box Capital and the Company.

12. **Acceptance** 

Please confirm that the foregoing is in accordance with Company's understanding by signing and returning this Agreement, which will thereupon constitute a binding Agreement between Outside The Box Capital Inc. and Company. This Agreement may be executed in counterparts and with electronic or facsimile signatures.

---

| | |
|:---|:---|
| Yours very truly, | Yours very truly, |
| **Outside The Box Capital Inc.** | **Outside The Box Capital Inc.** |
| By: | */s/ Jason Coles* |
| Name: | Jason Coles |
| Title: | CEO |

---

The foregoing is in accordance with our understanding and is accepted and agreed upon by us as of the date first written above.

---

| | |
|:---|:---|
| **Functional Brands** | **Functional Brands** |
| By: | */s/ Eric Gripentrog* |
| Name: | Eric Gripentrog |
| Title: | CEO |

---

**SCHEDULE "A"**

**COMPENSATION**

For the **Initial Period**, in consideration of the performance of the services by Outside The Box Capital pursuant to the Agreement to which this <u>Schedule A</u> is attached, the Company hereby agrees to compensate Outside The Box Capital as follows:

$200,000 USD worth of shares of Company common stock priced at the lower of $8.00 per share or 5 day VWAP after the Direct Listing; with the payment due on the date specified in Section 5 of the Agreement.

## Exhibit 23.1

**Exhibit 23.1**

![](ex23-1_001.jpg)

Consent of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Functional Brands, Inc.

We hereby consent to the inclusion in this Registration Statement of Functional Brands, Inc. (the "Company") on Amendment No. 9 of the Form S-1 of our report dated March 27, 2025 except for Notes 4 and 24, as to which the date is August 12, 2025 with respect to our audit of the Company's consolidated financial statements as of and for the years ended December 31, 2024 and 2023.

We also consent to the reference to our Firm under the caption "Experts" in such prospectus.

![](ex23-1_002.jpg)

Diamond Bar, California

August 12, 2025

## Ex-Filing

?xml version='1.0' encoding='ASCII'? Filing Fee Exhibit

**Ex-Filing Fees**

**CALCULATION OF FILING FEE TABLES**

**S-1**

**Functional Brands Inc.**

**Table 1: Newly Registered and Carry Forward Securities**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Line Item Type** | **Security Type** | **Security Class Title** | **Notes** | **Fee Calculation<br> Rule** | **Amount Registered** | **Proposed Maximum Offering<br> Price Per Unit** | **Maximum Aggregate Offering Price** | **Fee Rate** | **Amount of Registration Fee** |
| *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* | *Newly Registered Securities* |
| Fees to be Paid | Equity | Common Stock, par value $0.0001 per share | (1) | Other | 17883693 | $8.00 | $143069544.00 | 0.0001531 | $21903.95 |
| Total Offering Amounts: | Total Offering Amounts: | Total Offering Amounts: | Total Offering Amounts: | Total Offering Amounts: | Total Offering Amounts: | Total Offering Amounts: | $143069544.00 |  | 21903.95 |
| Total Fees Previously Paid: | Total Fees Previously Paid: | Total Fees Previously Paid: | Total Fees Previously Paid: | Total Fees Previously Paid: | Total Fees Previously Paid: | Total Fees Previously Paid: |  |  | 2893.59 |
| Total Fee Offsets: | Total Fee Offsets: | Total Fee Offsets: | Total Fee Offsets: | Total Fee Offsets: | Total Fee Offsets: | Total Fee Offsets: |  |  | 0.00 |
| Net Fee Due: | Net Fee Due: | Net Fee Due: | Net Fee Due: | Net Fee Due: | Net Fee Due: | Net Fee Due: |  |  | $19010.36 |

---

**__________________________________________ Offering Note(s)**

&nbsp;&nbsp;&nbsp;&nbsp;(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(d) of the Securities Act of 1933, as amended, based on a market value per share reference price of $8.00. Given that the registrant's shares of common stock are not traded on an exchange or over-the-counter, the registrant did not use the market prices of its common stock in accordance with Rule 457(c). Represents 17,883,693 shares of the registrant's common stock being registered for resale by our shareholders identified in this prospectus, or their permitted transferees, in connection with our direct listing on the Nasdaq Global Market. A registration fee of $2,893.59 was previously paid in connection with the S-1 (defined below).