NOTE 7 – SHAREHOLDERS’ EQUITY

Preferred Stock Conversion and Reverse Stock Split

In October 2019, the Company designated 5,000,000 of its 50,000,000 authorized shares of preferred stock as 8.0% Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”). Series A Preferred Stock ranked senior to common stock for liquidation or dividend and holders were entitled to receive cumulative cash dividends at an annual rate of 8.0% payable monthly in arrears for the prior month.

Among other matters, during the Company's annual meeting held on April 10, 2025, the shareholders of the Company approved:

The Board of Directors elected to effectuate the Automatic Preferred Conversion on May 6, 2025 at 4:01 p.m. Eastern Time (the “Mandatory Exchange Date”). On the Mandatory Exchange Date, all Series A Preferred Stock, together with accrued and unpaid dividends, was converted into 65,000,000 shares (pre-split) of common stock, dividends on converted shares ceased to accrue, and the Series A Preferred Stock ceased trading.

The Board of Directors elected to implement a one-for-eight (1:8) reverse stock split of the Company’s common stock (the “Reverse Stock Split”) on May 6, 2025, effective at 4:02 p.m. Eastern Time, immediately following and therefore inclusive of shares of common stock issued in connection with the Automatic Preferred Conversion. Following the Reverse Stock Split, holders of fractional shares received, in lieu of a fractional share, the number of shares rounded up to the next whole number (“Round Up Shares”). 89 Round Up Shares were issued as a result of the Reverse Stock Split.

Business Combination

On January 12, 2026, the Company and Gaia Botanicals, LLC, a Colorado limited liability company d/b/a Bluebird Botanicals (“Bluebird”) and Bluebird’s wholly owned subsidiaries entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). Under the Asset Purchase Agreement, the Company acquired substantially all of Bluebird’s assets, including Bluebird’s brand name, website, related trademarks, inventory, and certain other assets, and assumed certain liabilities. This strategic acquisition brings together two mission-aligned brands and broadens the Company's customer base. The purchase consideration consisted of (i) 425,000 shares of the Company’s restricted common stock issued at closing and (ii) an earnout amount of up to 525,000 shares of the Company’s restricted common stock, subject to earnout share calculations and right of setoff as set forth in the Asset Purchase Agreement. The earnout shares shall be issued to Bluebird on or before the 60th day following the first anniversary of the closing date. The shares issued at closing and the earnout shares are subject to a 180-day lock-up agreement with certain limited transfer exceptions and dribble-out provisions.

Preferred stock transactions

On September 29, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Series B Certificate of Designation”) designating 1,700,000 shares of the Company’s authorized preferred stock as Series B Convertible Preferred Stock, par value $0.001 per share and stated value of $1.00 per share. Each share of the Series B Preferred Stock is initially convertible into common stock at an initial conversion price of $1.00, subject to anti-dilution adjustments and price protection provisions, which may be triggered upon the issuance of common stock options or convertible securities at a price below the then-applicable conversion price, and Alternate Conversion rights (as defined in the Series B Certificate of Designation) resulting from a Triggering Event (as defined in the Series B Certificate of Designation) and other conversion price adjustment provisions as provided under the Series B Certificate of Designation. The Series B Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Series B Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the Stated Value (as defined in the Series B Certificate of Designation) shall be increased by the amount of such unpaid dividends. The Series B Preferred Stock is further subject to repricing adjustments upon the effectiveness of a registration statement wherein the conversion price shall equal the lower of (a) the original conversion price or (b) the closing price of the common stock on the effective date of such registration statement. Additionally, the Series B Preferred Stock is subject to future financing exchange options upon any issuance by the Company, or subsidiaries, of any security with terms more favorable than those set forth in the Series B Certificate Designation.

With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series B Preferred Stock ranks pari passu with the Series C Convertible Preferred Stock and senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series B Preferred Stock. The holders of Series B Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series B Preferred Stock. In addition, the Series B Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Series B Certificate of Designation contains various restrictive covenants and protective provisions, including restrictions on the Company’s ability to incur additional indebtedness, redeem capital stock, pay cash dividends, dispose of assets outside of the ordinary course of business or make certain issuances of securities. The complete rights, preferences and limitations of the Series B Preferred Stock are set forth in the Series B Certificate of Designation which is filed as Exhibit 3.1 to the Company’s Form 8-K Current Report filed on October 6, 2025.

On December 19, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Series C Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share and stated value of $2.25 per share. Each share of the Series C Preferred Stock is initially convertible into common stock at a conversion price of $1.13, subject to anti-dilution adjustments and price protection provisions, which may be triggered upon the issuance of common stock options or convertible securities at a price below the then-applicable conversion price, and Alternate Conversion rights (as defined in the Series C Certificate of Designation) resulting from a Triggering Event (as defined in the Series C Certificate of Designation) and other conversion price adjustment provisions as provided under the Series C Certificate of Designation. Further, the conversion price of the common stock is subject to adjustment upon the effectiveness of any subsequent registration statement wherein the conversion price shall equal the lower of the (a) original conversion price or (b) the closing price of the common stock on the effective date of such registration statement. Additionally, the Series C Preferred Stock is subject to future financing exchange options upon any issuance by the Company, or subsidiaries, of any security with terms more favorable than those set forth in the Series C Certificate Designation. The Series C Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Series C Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the Stated Value (as defined in the Series C Certificate of Designation) shall be increased by the amount of such unpaid dividends.

With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Series C Certificate of Designation contains various restrictive covenants and protective provisions, including restrictions on the Company’s ability to incur additional indebtedness, redeem capital stock, pay cash dividends, dispose of assets outside of the ordinary course of business or make certain issuances of securities. The complete rights, preferences and limitations of the Series C Preferred Stock are set forth in the Series C Certificate of Designation which is filed as Exhibit 3.12 to the Company’s Form 10-K Annual Report for the year ended September 30, 2025 filed on December 19, 2025.

Securities Purchase Agreement

On December 15, 2025, the Company entered into a Securities Purchase Agreement (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $20,000,000 (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99% of the outstanding shares of the Company’s common stock as of the date of the ELOC Agreement in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S-1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the 30th calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions. In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser 40,000 shares of common stock as commitment shares and thereafter an amount of shares equal to 0.5% of the Available Amount, which shall be issued in a pro rata fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company does not have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $0.50 (the “Purchase Date”), the Company may direct the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”) not to exceed on any single business day the lesser of (i) $500,000 of shares of common stock or (ii) $20,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95% of (A) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (B) the daily volume weighted average price of the common stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase.

In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stock not less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company may also direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95% of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date. If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $10,000,000, unless such limitation is waived by the ELOC Purchaser.

Common Stock Transactions

During the nine months ended June 30, 2026, the Company (i) issued 425,000 shares to Gaia Botanicals, LLC as part of the acquisition of Bluebird Botanicals; (ii) granted 455,000 shares of RSUs to an executive that vested upon shareholder approval of the 2025 equity incentive plan (these shares fully vested on March 30, 2026 and the full value of the shares was recognized in the second quarter of fiscal 2026, (iii) issued 1,108,790 shares during late December 2025 in connection with the conversion of the Series B Preferred Stock (iv) issued 40,000 shares of common stock (commitment shares) in connection with the closing of the ELOC (v) granted 215,000 shares of RSUs under the Company's 2025 equity incentive plan to select employees of which one third vest immediately, one third vests on June 12, 2027 and the remaining one third vests on June 12, 2028, (vi) vested 2,358 RSUs in relation to prior year board of director grants, (vii) issued 9,432 RSUs for the 2026 through 2027 board year that vest quarterly starting June 30, 2026; and (viii) issued 100,000 shares in connection with the ELOC.

During the nine months ended  June 30, 2025, the Company (i) issued 1,875 shares of restricted stock under the Company's 2015 equity incentive plan to a new employee, that vested in June of fiscal year 2026; (ii) issued 267,597 shares of common stock for conversions of notes payable; and (iii) issued 21,875 shares of common stock to a consultant for advisory services which were ultimately forfeited before vesting.