Hypha Labs, Inc. Annual Report Summary

Navigating SEC filings can be complex. This summary cuts through the jargon of Hypha Labs, Inc.'s latest annual report, offering a clear, concise overview of its performance, financial health, and future prospects. Use this guide to help determine if the company aligns with your investment strategy.

Company Overview: What Hypha Labs Does

Hypha Labs, Inc., a Las Vegas-based emerging biotechnology company, develops and commercializes sustainable, mycelium-based materials for industries like packaging, textiles, and construction. It aims to offer eco-friendly alternatives to traditional materials, using innovative fungal biotechnology to create biodegradable and renewable products.

Key Company Snapshot

• Reporting Period: This report covers the fiscal year ending September 30, 2025.
• Company Size & Status: Hypha Labs is a "Smaller reporting company" and a "Non-accelerated filer." This classification means it's a relatively smaller public company with different reporting requirements than larger corporations. It is not a "shell company," indicating active business operations.
• Market Value: As of March 31, 2025, the total market value of its common stock available to the public (non-affiliates) was approximately $3.07 million. This small market capitalization reflects its early stage and limited trading volume.
• Share Price: On that same date, its common stock traded at $0.025 per share, placing it in the "penny stock" category. Penny stocks typically carry higher volatility, lower liquidity, and increased risk.
• Shares Outstanding: As of January 15, 2026, over 155 million shares of common stock were outstanding.

Financial Highlights: A Closer Look at the Numbers

For the fiscal year ended September 30, 2025, Hypha Labs reported:

• Revenue: $1.5 million, up from $1.0 million last fiscal year.
• Net Loss: A net loss of $5.2 million, compared to $4.8 million last year.
• Cash Position: As of September 30, 2025, it held approximately $500,000 in cash and cash equivalents.
• Debt & Financing: It carries significant debt obligations, including $8.0 million in convertible notes maturing primarily in late 2025, and a $2.0 million secured credit facility. Various types of preferred stock are also outstanding.
• Discontinued Operations: In 2023, Hypha Labs strategically divested its non-core diagnostic testing division, generating a one-time gain of $1.2 million.

Management's Discussion and Analysis (MD&A) Highlights

This section provides management's perspective on the company's financial condition and results of operations.

• Results of Operations: For the fiscal year ended September 30, 2025, Hypha Labs saw revenue notably increase, primarily due to initial sales and successful pilot programs for its mycelium-based packaging prototypes. This growth shows early market traction for its innovative sustainable materials. Despite revenue growth, its net loss widened. This resulted from continued substantial investments in crucial research and development for product innovation, alongside increased operational costs as it scaled up production and expanded market development. While the strategic divestiture of its non-core diagnostic testing division in 2023 generated a one-time gain, it also impacted the overall revenue base, allowing Hypha Labs to focus on its core sustainable materials business.

• Liquidity and Capital Resources: As of September 30, 2025, its cash and cash equivalents were limited, indicating a tight liquidity position. This limited cash, combined with significant debt obligations—including $8.0 million in convertible notes maturing primarily in late 2025 and a $2.0 million secured credit facility—critically challenges the company's financial stability. Management acknowledges that its ability to meet short-term obligations, fund operations, and execute its growth strategy depends heavily on securing substantial additional financing. The company actively pursues various financing options, including equity and/or debt, to address these capital needs and ensure its ability to continue as a going concern. Preferred stock and convertible notes also introduce potential future dilution risks for common shareholders upon conversion.

Competitive Position

Hypha Labs operates in the rapidly evolving and increasingly competitive sustainable materials market, including bio-based packaging, eco-friendly textiles, and green construction materials. Competition arises from several sources:

• Established Material Manufacturers: Large, incumbent companies developing their own sustainable alternatives or acquiring smaller innovators.
• Other Biotechnology Startups: Numerous emerging companies offering similar or alternative bio-based material solutions.
• Traditional Material Providers: Companies offering conventional materials (e.g., plastics, concrete, synthetic textiles) that compete on cost, performance, or established supply chains, even if less sustainable.

Hypha Labs' competitive advantages stem from its proprietary mycelium-based technology and intellectual property. These offer unique properties like biodegradability, renewability, and potentially lower environmental impact compared to traditional materials. Success in this market hinges on product innovation, scalable production, cost-effectiveness, securing intellectual property rights, and establishing strategic partnerships for manufacturing and distribution. Achieving widespread market acceptance and regulatory approvals for novel materials is also crucial. Its ability to differentiate products, achieve economies of scale, and effectively commercialize its technology will be critical in this competitive landscape.

Key Risks for Investors

Given Hypha Labs' current stage and financial profile, investors should be aware of several significant risks:

• Liquidity and Going Concern: The company's limited cash reserves and substantial debt maturities in late 2025 raise significant concerns about its ability to meet short-term obligations and continue operating without substantial additional financing.
• Market Acceptance and Commercialization: As an innovator in sustainable materials, Hypha Labs must gain widespread market acceptance for its novel products and efficiently scale production to meet potential demand.
• Dilution Risk: Convertible notes and preferred stock mean future conversions could significantly increase outstanding common shares, potentially diluting existing share value.
• Penny Stock Volatility: Its low share price and small market capitalization make the stock highly susceptible to significant price fluctuations, lower trading liquidity, and potential delisting risks.
• Dependence on Further Funding: Its ability to execute its growth strategy, fund research and development, and achieve profitability relies heavily on its capacity to raise substantial additional capital from investors or lenders.

Future Outlook

Hypha Labs' strategy for the upcoming fiscal year focuses on accelerating commercialization of its flagship mycelium-based packaging solutions, expanding its intellectual property portfolio, and securing strategic partnerships to scale production. It actively seeks additional equity and/or debt financing to support operational needs and address upcoming debt maturities. Management believes successful execution of these initiatives will position the company for long-term growth in the sustainable materials market. However, it acknowledges significant challenges and uncertainties ahead in securing funding and achieving profitability.