Functional Brands Swings to Profit on ERTC Refund, Cash Surges

TL;DR

**MEHA's Q3 profit is a one-time ERTC refund boost, not sustainable operational strength; remain cautious as going concern risk persists.**

AI Summary

Functional Brands Inc. (MEHA) reported a significant turnaround in its financial performance for the three months ended September 30, 2025, achieving a net income of $259,001, a substantial improvement from a net loss of $288,081 in the same period of 2024. This positive shift was primarily driven by a substantial 'Other income – ERTC refund' of $491,801. Revenue also saw a healthy increase, rising to $1,694,174 for the quarter, up 21.4% from $1,395,913 in Q3 2024. Despite the quarterly profit, the company still recorded a net loss of $93,837 for the nine months ended September 30, 2025, though this is a significant reduction from the $281,606 net loss in the prior year. Cash balances surged to $1,005,324 as of September 30, 2025, from $211,642 at December 31, 2024, largely due to $1,478,358 in cash provided by operating activities. However, the company continues to face a negative working capital of $1,491,727 and an accumulated deficit of $7,754,767 as of September 30, 2025, raising substantial doubt about its ability to continue as a going concern without further capital raises.

Why It Matters

This 10-Q reveals a mixed but improving picture for Functional Brands Inc. (MEHA). While the quarterly net income is a positive sign, largely due to a one-time ERTC refund, the underlying operational profitability remains a concern for investors. The significant increase in cash from operations is crucial for liquidity, but the persistent negative working capital and accumulated deficit highlight ongoing financial instability. Competitively, MEHA operates in the nutraceutical market, where sustained profitability and strong balance sheets are key to fending off larger, more established players. Employees and customers might see this as a sign of stabilization, but the going concern warning indicates continued uncertainty for all stakeholders.

Risk Assessment

Risk Level: high — The company explicitly states, 'These conditions raise substantial doubt about the Company's ability to continue as a going concern.' This is evidenced by a net loss of $93,837 for the nine months ended September 30, 2025, a negative working capital of $1,491,727, and an accumulated deficit of $7,754,767 as of September 30, 2025.

Analyst Insight

Investors should approach MEHA with extreme caution. While the Q3 net income is positive, it's heavily reliant on a one-time ERTC refund. Focus on the company's ability to generate sustained operational profits and improve its working capital position, rather than one-off gains, before considering any investment.

Financial Highlights

revenue

$1,694,174

total Assets

$8,233,541

total Debt

$7,628,876

net Income

$259,001

gross Margin

57.75%

cash Position

$1,005,324

revenue Growth

+21.4%

Key Numbers

• $259,001 — Net Income (Q3 2025) (Swung from a $288,081 net loss in Q3 2024, largely due to an ERTC refund.)
• $1,694,174 — Revenue (Q3 2025) (Increased by 21.4% from $1,395,913 in Q3 2024.)
• $93,837 — Net Loss (YTD Q3 2025) (Reduced from a $281,606 net loss in YTD Q3 2024.)
• $1,005,324 — Cash (Sept 30, 2025) (Increased significantly from $211,642 at Dec 31, 2024, driven by operating activities.)
• $1,491,727 — Negative Working Capital (Sept 30, 2025) (Indicates ongoing liquidity challenges and contributes to going concern doubt.)
• $7,754,767 — Accumulated Deficit (Sept 30, 2025) (Highlights historical losses and contributes to going concern doubt.)
• $491,801 — ERTC Refund (YTD Q3 2025) (A one-time income source significantly impacting net income.)
• 16,323,524 — Shares Outstanding (Dec 10, 2025) (Reflects the total number of common shares outstanding.)

Key Players & Entities

• Functional Brands Inc. (company) — registrant of the 10-Q filing
• HT Naturals Inc. (company) — former name of Functional Brands Inc.
• HTO Nevada Inc. (company) — wholly owned subsidiary of Functional Brands Inc.
• Kirkman (company) — dba of HTO Nevada Inc., a nutraceutical manufacturer
• Delaware (regulator) — state of incorporation for Functional Brands Inc.
• Nasdaq Stock Market LLC (regulator) — exchange where MEHA common stock is registered
• $259,001 (dollar_amount) — net income for the three months ended September 30, 2025
• $288,081 (dollar_amount) — net loss for the three months ended September 30, 2024
• $491,801 (dollar_amount) — ERTC refund, a significant component of other income
• $1,005,324 (dollar_amount) — cash balance as of September 30, 2025

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: The company faces substantial doubt about its ability to continue as a going concern due to a negative working capital of $1,491,727 and an accumulated deficit of $7,754,767 as of September 30, 2025. While cash increased to $1,005,324, this is contingent on future capital raises and product sales.
• Dependence on Future Capital [high — financial]: The company is significantly dependent on its ability to secure additional equity and/or debt financing to fund ongoing operations. There are no assurances that the company will be successful in obtaining this necessary additional capital.
• Inventory Management [medium — operational]: Inventories, net were $1,690,733 as of September 30, 2025, a slight decrease from $1,709,458 at December 31, 2024. Effective management of inventory levels is crucial to avoid obsolescence and optimize working capital.
• Accounts Payable and Accrued Liabilities [medium — financial]: Accounts payable and accrued liabilities increased to $2,425,006 as of September 30, 2025, from $1,956,165 at December 31, 2024. Managing these short-term obligations is critical for liquidity.
• Deferred Offering Costs [medium — financial]: Deferred offering costs significantly increased to $1,256,451 from $588,641. This indicates ongoing efforts to raise capital, which may or may not be successful.

Industry Context

Functional Brands Inc. operates in the nutraceutical industry, a sector focused on health and wellness products derived from food sources. This industry is characterized by increasing consumer demand for natural and scientifically-backed health supplements, but also faces intense competition and evolving regulatory landscapes.

Regulatory Implications

The nutraceutical industry is subject to regulations from bodies like the FDA regarding product safety, labeling, and marketing claims. Companies must ensure compliance to avoid penalties and maintain consumer trust. The ERTC refund highlights the impact of government policies on financial performance.

What Investors Should Do

1. Monitor future capital raises and their terms.
2. Analyze the sustainability of revenue growth.
3. Evaluate the management of working capital and debt.

Key Dates

• 2025-09-30: End of Q3 2025 — Reported net income of $259,001 and significant increase in cash to $1,005,324, but also negative working capital and accumulated deficit.
• 2024-09-30: End of Q3 2024 — Reported a net loss of $288,081, highlighting the substantial turnaround in the current year's Q3 performance.
• 2025-01-22: Reverse Stock Split — Company effected a 1-for-18.338622 reverse stock split, impacting share counts and per-share data retroactively.

Glossary

ERTC refund

Employee Retention Tax Credit refund, a government stimulus program designed to encourage businesses to keep employees on payroll. (A significant one-time income source of $491,801 that substantially boosted net income for Q3 2025.)

Accumulated deficit

The total cumulative net losses of a company since its inception, less any net income. It represents a negative balance in retained earnings. (A substantial accumulated deficit of $7,754,767 as of September 30, 2025, indicates historical unprofitability and contributes to going concern doubt.)

Working capital

The difference between a company's current assets and current liabilities. Positive working capital indicates a company's ability to meet its short-term obligations. (The company has a negative working capital of $1,491,727 as of September 30, 2025, signaling potential short-term liquidity challenges.)

Going concern

An accounting assumption that a business will continue to operate for the foreseeable future, typically at least 12 months. (The company's financial condition raises substantial doubt about its ability to continue as a going concern, necessitating further capital raises.)

Right-of-use assets

Assets that represent a lessee's right to use an identified asset for a period of time, typically arising from lease agreements. (These assets, valued at $1,753,581 as of September 30, 2025, are part of the company's long-term operational structure.)

Convertible debenture

A type of bond that can be converted into a predetermined amount of the issuer's equity at certain times. (The company had a $100,000 convertible debenture as of December 31, 2024, which was no longer present as of September 30, 2025, indicating it was either paid off or converted.)

Year-Over-Year Comparison

Functional Brands Inc. has shown a significant improvement in its quarterly performance, with Q3 2025 net income of $259,001 compared to a net loss of $288,081 in Q3 2024, largely due to a one-time ERTC refund. Revenue also increased by 21.4% year-over-year. However, the company continues to grapple with a substantial accumulated deficit and negative working capital, which were $7,754,767 and $1,491,727 respectively as of September 30, 2025, raising ongoing concerns about its long-term viability without further financing.

Key Financial Figures

• $0.00001 — ange On Which Registered Common Stock, $0.00001 par value share MEHA The Nasdaq Stock M

Filing Documents

• ea0268934-10q_functional.htm (10-Q) — 923KB
• ea026893401ex31-1_functional.htm (EX-31.1) — 9KB
• ea026893401ex31-2_functional.htm (EX-31.2) — 9KB
• ea026893401ex32-1_functional.htm (EX-32.1) — 4KB
• ea026893401ex32-2_functional.htm (EX-32.2) — 4KB
• 0001213900-25-121689.txt ( ) — 7313KB
• meha-20250930.xsd (EX-101.SCH) — 100KB
• meha-20250930_cal.xml (EX-101.CAL) — 59KB
• meha-20250930_def.xml (EX-101.DEF) — 391KB
• meha-20250930_lab.xml (EX-101.LAB) — 669KB
• meha-20250930_pre.xml (EX-101.PRE) — 408KB
• ea0268934-10q_functional_htm.xml (XML) — 818KB

Financial Statements (Unaudited)

Financial Statements (Unaudited) 1 Unaudited Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 1 Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 2 Unaudited Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the three and nine months ended September 30, 2025 and 2024 3 Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 4 Notes to Unaudited Consolidated Financial Statements 5 Item 2.

Management's Discussion and Analysis of Financial

Management's Discussion and Analysis of Financial Condition and Results of Operations 30 Item 3.

Quantitative and Qualitative Disclosures about Market

Quantitative and Qualitative Disclosures about Market Risk 38 Item 4.

Controls and Procedures

Controls and Procedures 38 PART II. OTHER INFORMATION 39 Item 1.

Legal Proceedings

Legal Proceedings 39 Item 1A.

Risk Factors

Risk Factors 39 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 Item 3. Defaults Upon Senior Securities 40 Item 4. Mine Safety Disclosures 40 Item 5. Other Information 40 Item 6. Exhibits 41 PART III.

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. FUNCTIONAL BRANDS INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In U.S. dollars, except share data or otherwise noted) September 30, 2025 December 31, 2024 Assets Current assets: Cash $ 1,005,324 $ 211,642 Accounts receivable, net 89,213 303,471 Inventories, net 1,690,733 1,709,458 Prepaid expenses and other current assets 169,070 45,112 Deferred offering costs 1,256,451 588,641 Total current assets 4,210,791 2,858,324 Noncurrent assets: Property and equipment, net 42,086 49,564 Right-of-use assets, net 1,753,581 2,000,092 Intangible assets, net 1,408,944 1,443,541 Goodwill 818,139 818,139 Total non-current assets 4,022,750 4,311,336 Total assets $ 8,233,541 $ 7,169,660 Liabilities and stockholders' equity / (deficit) Current liabilities: Accounts payable and accrued liabilities $ 2,425,006 $ 1,956,165 Line of credit 21,286 32,235 SBA loan, current 3,547 3,436 Lease liabilities, current 364,505 291,213 Other current liabilities 34,425 35,332 Payable for acquisition, current 2,227,366 2,342,366 Loans payable (related party), current 58,886 370,703 Loans payable 567,497 171,500 Total current liabilities 5,702,518 5,202,950 Non-current liabilities: Lease liabilities, net of current 1,527,586 1,844,819 SBA loan, net of current 137,780 140,468 Loan payable (related party), net of current 260,992 - Convertible debenture - 100,000 Total non-current liabilities 1,926,358 2,085,287 Total liabilities 7,628,876 7,288,237 Stockholders' equity / (deficit) Series A Preferred stock, par value $ 0.001 , 100,000 shares authorized; 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively - - Series B Preferred stock, par value $ 0.001 , 80,000 shares authorized; 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively - - Common stock, par value $

FINANCIAL STATEMENTS

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 the production, marketing, sales, and distribution of nutraceutical products within the U.S. and in 21 other countries globally. 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 1-for-18.338622 reverse stock split in its outstanding common stock. The authorized common stock of the Company remained unchanged at 220,000,000 . 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 September 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. Summary of Significant Accounting Policies Going Concern The accompanying financial the Company had a net loss of $ 93,837 , and as of September 30, 2025 the Company had a negative working capital of $ 1,491,727 , and an accumulated deficit of $ 7,754,767 . As of September 30, 2025 the Company had cash of $ 1,005,324 and has raised additional capital subsequent to September 30, 2025. (see Note 25, Subsequent Events ). These conditions raise substantial doubt about the Company's ability to con

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