MEHA · Functional Brands, Inc. Common Stock

Functional Brands, Inc. announced its financial results for the fourth quarter and full-year ended December 31, 2025, highlighting a significant turnaround in profitability. For the full year, the company reported net income of $0.8 million, or $0.01 per diluted share, compared to a net loss of $0.6 million, or $(0.08) per diluted share, in the prior year. This improvement occurred despite a slight contraction in gross profit, which fell to $3.48 million from $3.61 million in the prior year. Gross margin for the full year decreased 220 basis points to 52.7%, primarily attributed to inventory adjustments associated with the company's strategic transition out of the hemp business. Revenue demonstrated stability, increasing approximately 0.7% to $6.61 million, largely due to the performance of the Kirkman brand.

In the fourth quarter, revenue declined 11.0% to $1.50 million compared to the prior year period. Management explained that this decrease was primarily driven by a shift in the Amazon business model from a reseller approach to a direct-to-consumer model via the company's own Amazon Seller’s Central account. Despite the revenue decline in the quarter, net income improved to $0.9 million, heavily influenced by a $7.36 million change in the fair value of derivative liabilities, partially offset by a $5.29 million loss on the issuance of preferred stock derivative liability. The company also recognized $0.42 million in Other Income from an ERTC refund during the full year.

Operationally, the company executed several strategic initiatives highlighted by CEO Eric Gripentrog. In February 2026, the company launched Tru2u.health, a digital health platform integrating peptide solutions and GLP-1-based weight management programs. Additionally, the Kirkman brand portfolio was expanded with new product bundles, and a strategic partnership with iHerb was established to broaden international distribution. The balance sheet reflects a strengthened liquidity position, with cash increasing to $2.73 million as of December 31, 2025, from $0.21 million in the prior year, primarily driven by $8.0 million in proceeds from the issuance of preferred stock. However, the company reported a net cash use in operating activities of $1.27 million for the year.