NOTE 12: DISCONTINUED OPERATIONS

Background and Triggering Event

On July 1, 2023, the Company, through its wholly owned subsidiary Ranco LLC, acquired assets from RAN CoPacking Solutions LLC to operate a co-packing and white-label manufacturing business for the hemp and wellness industries. Ranco’s services included third-party logistics, storage and order fulfilment, custom packaging and hardware solutions, and media and design services. On the same date, Ranco entered into a five-year exclusive Packwoods Private Label Services and Intellectual Property Licensing Agreement providing rights to manufacture, package, distribute, and sell hemp-based inhalable and edible products, nicotine-based vaporizer products, and related branded packaging materials.

Following the passage of H.R. 5371 – the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 – which bans intoxicating hemp-derived consumable products nationally effective November 12, 2026, management evaluated the long-term viability of Ranco’s operations. On November 19, 2025, the Company’s Board of Directors formally approved a plan to discontinue the operations of Ranco LLC, with an expected wind-down and exit from the business by December 31, 2025.

Discontinued Operations Classification

Ranco LLC operated as a separate legal entity and wholly owned subsidiary with clearly distinguishable operations, assets, revenues, expenses and cash flows, and represented a distinct line of business significantly impacted by adverse regulatory changes. The Board-approved decision to discontinue Ranco represents a strategic shift that has a major effect on the Company’s operations and financial results. Accordingly, Ranco qualifies for discontinued operations accounting under ASC 205-20 beginning as of November 19, 2025.

Held-for-Sale Analysis – Abandonment Classification

The Company considered whether the long-lived assets of Ranco should be classified as “held for sale” under ASC 360-10-45-9. Management concluded that the criteria for held-for-sale classification were not met as of March 31, 2026 because: (i) although management committed to a plan to explore strategic alternatives, no binding sale agreement has been reached; (ii) the assets are not available for immediate sale in their present condition due to the wind-down status and regulatory uncertainty under H.R. 5371; (iii) no active marketing program to locate a buyer had been initiated; (iv) a sale within twelve months is not probable given the national ban on intoxicating hemp-derived products; and (v) no asking price has been established and no formal marketing has commenced.

Accordingly, the disposition of Ranco is classified as an abandonment under ASC 205-20-45-1(b) rather than a held-for-sale transaction. Under the abandonment model, assets are carried at their historical carrying values (no lower-of-

cost-or-fair-value-less-costs-to-sell adjustment is required), and the assets are not presented as “held for sale” on the balance sheet.

Retrospective Reclassification of Prior Periods

In accordance with ASC 205-20, the Company has retrospectively reclassified the prior-period comparative financial statements to present Ranco’s results as discontinued operations, as follows:

Condensed Consolidated Statements of Operations: Results of Ranco for all prior periods presented have been reclassified from continuing operations to discontinued operations. Revenues and expenses previously included in continuing operations line items have been removed. Total net loss for each period remains unchanged.

Condensed Consolidated Statements of Cash Flows: Prior-period cash flows attributable to Ranco have been reclassified and presented separately as cash flows from discontinued operations within operating, investing and financing activities.

Condensed Consolidated Balance Sheets: No retrospective reclassification is required for prior-period balance sheets. Assets and liabilities of Ranco are presented separately as of March 31, 2026 and December 31, 2025. All Ranco liabilities – including amounts previously classified as long-term (notes payable and right-of-use liabilities) – have been classified as current liabilities of discontinued operations, as there is no ongoing business basis supporting long-term classification under the abandonment model.

Earnings (Loss) Per Share: Prior-period EPS amounts have been recast to separately present income (loss) per share from continuing operations and discontinued operations.

Results of Discontinued Operations

The following table presents the results of Ranco’s discontinued operations for the three months ended March 31, 2026 and 2025:

The increase in the income from discontinued operations from net loss of $1,987,462 during the three months ended March 31, 2025 to net income of $60,375 during the three months ended March 31, 2026 was primarily attributable to: (i) other income of $158,886; (ii) decreased selling, general and administrative of $98,511 (compared to $1,616,266 in prior period) as the Company discontinued operations.

Assets and Liabilities of Discontinued Operations

The following table presents the major classes of assets and liabilities of Ranco included in the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025. As discussed above, all Ranco liabilities have been classified as current under the abandonment model.

The notes payable of $4,044,083 and right-of-use liability of $1,765,842 were previously classified as non-current liabilities. These have been reclassified to current liabilities of discontinued operations as of December 31, 2025, as Ranco no longer has a going-concern basis for long-term classification. The notes payable consist primarily of the notes originally issued in connection with the Ranco acquisition.

Cash Flows from Discontinued Operations

Cash flows from discontinued operations for the three months ended March 31, 2026 and 2025 were as follows:

During the three months ended March 31, 2026, net income from discontinued operations was $60,375 and changes in discontinued operating assets and liabilities of $46,801. During the three months ended March 31, 2025, net loss from discontinued operations was $1,987,462, offset by $281,390 in non-cash charges and changes in discontinued operating assets and liabilities of $2,326,034.