What changed in this filing

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Item 1. Financial Statements

2024-08-19 compared with 2024-05-20 · 244 added, 134 removed, 541 unchanged (41% of the section changed)

32 unchanged sentences

Series A, 300,000 shares designated;

126,680 and 128,181 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

126,680 and 128,181 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Series B, 1,500,000 shares designated;

0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

0 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Common stock ($ 0.001 par value);

500,000,000 shares authorized;

229,349,388 and 228,535,886 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

249,602,388 and 228,535,886 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

7 unchanged sentences

For the three months ended

For the six months ended

Product revenue, net

7 unchanged sentences

Loss from operations

Other expense income:

Other income (expense):

Interest expense

Debt extinguishment gain

Debt extinguishment (loss) gain

Change in fair value of derivative liabilities

Total other (expense) income

Net loss per share

Total other (loss) income

Net (loss) income

Net income (loss) per share

Weighted average number of common shares outstanding

3 unchanged sentences

(in thousands)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Convertible Preferred Stock

Additional Paid-in

Total Stockholders'

Paid-in Capital

Balance at April 1, 2024

Issuance of common shares for cash

Issuance of common shares from debt redemption

Forfeiture of restricted stock awards

Stock compensation

Balance at June 30, 2024

For the Three Months Ended June 30, 2023

Convertible Preferred Stock

Total Stockholders'

Paid-in Capital

Balance at April 1, 2023

Conversion of Series A convertible preferred stock

Stock compensation

Balance at June 30, 2023

For the Six Months Ended June 30, 2024

Convertible Preferred Stock

Total Stockholders'

Paid-in Capital

Balance at January 1, 2024

Issuance of common shares for cash

Issuance of common shares from debt redemption

Conversion of Series A convertible preferred stock

1 unchanged sentence

Stock compensation

Balance at March 31, 2024

For the Three Months Ended March 31, 2023

Balance at June 30, 2024

For the Six Months Ended June 30, 2023

Convertible Preferred Stock

Additional Paid-in

Total Stockholders'

Paid-in Capital

Balance at January 1, 2023

1 unchanged sentence

Stock compensation

Balance at March 31, 2023

Balance at June 30, 2023

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the three months ended

For the six months ended

Cash Flows from Operating Activities:

4 unchanged sentences

Change in fair value of derivative liabilities

Debt extinguishment gain

Debt extinguishment loss (gain)

Amortization of operating lease right-of-use asset

7 unchanged sentences

Lease liabilities

Net cash used in operating activities

Net cash (used in) provided by operating activities

Cash Flows from Financing Activities:

Proceeds from issuance of common shares

Proceeds from issuance of notes payable

Proceeds from issuance of note payable to related party

Proceeds from issuance of notes payable to related party

Repayment of notes payable

1 unchanged sentence

Net cash provided by financing activities

Net (decrease) increase in cash

Net increase in cash

Cash, beginning of the period

6 unchanged sentences

Conversion of Series A convertible preferred stock

Issuance of common shares from debt redemption

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4 unchanged sentences

Charlie’s Holdings, Inc., a Nevada corporation, together with its wholly owned subsidiaries and consolidated variable interest entity (collectively, the “ Company ”), currently formulates, markets and distributes premium, non-combustible nicotine-related products, alternative alkaloid vapor products, and hemp-derived vapor and edible products.

The Company’s products are produced through contract manufacturers for sale by select distributors, specialty retailers, and third-party online resellers throughout the United States, as well as in more than 80 countries worldwide.

The Company’s primary international markets include the United Kingdom, Italy, Spain, New Zealand, Australia, and Canada.

Charlie’s Chalk Dust, LLC (“ Charlie ’ s ” or “ CCD ”), is the Company’s wholly owned subsidiary which produces and sells nicotine-based and alternative alkaloid vapor products.

8 unchanged sentences

There was a significant cost associated with the application process and there can be no assurance the FDA will approve previous and/or future applications.

For the three months ended March 31, 2024, the Company’s revenue declined, the Company generated a loss from operations of approximately $ 941,000 , and a consolidated net loss of approximately $ 1,045,000 .

For the six months ended June 30, 2024, the Company’s revenue declined, the Company generated a loss from operations of approximately $ 1,677,000 , and a consolidated net loss of approximately $ 2,012,000 .

Cash used in operations was approximately $ 300,000 .

The Company had a stockholders’ deficit of $ 1,090,000 at March 31, 2024.

During the three months ended March 31, 2024, the Company’s working capital position decreased to a deficit of $ 1,454,000 from $ 332,000 as of December 31, 2023.

The Company had a stockholders’ deficit of $ 296,000 at June 30, 2024.

During the six months ended June 30, 2024, the Company’s working capital position decreased to a deficit of $ 557,000 from $ 332,000 as of December 31, 2023.

Considering these facts, the issuance of one or several Marketing Denial Orders ( "MDOs ”) from the FDA would increase the potential for inventory obsolescence and uncollectable accounts receivables and potentially require us to remove products from circulation.

These regulatory risks, as well as other industry-specific challenges, our low working capital and cash position remain factors that raise substantial doubt about the Company’s ability to continue as a going concern.

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including the expenditure of approximately $5,100,000 as of March 31, 2024, to support our PMTA process for the Company’s submissions to the FDA.

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including the expenditure of approximately $6,000,000 as of June 30, 2024, to support our PMTA process for the Company’s submissions to the FDA.

The Company has undergone cost-cutting measures including salary reductions of up to 25% for officers and certain managers and a reduction in headcount for certain departments.

During the fourth quarter of 2023, the Company launched SPREE BAR, a non-nicotine, disposable vapor product which is not subject to FDA review or covered under the Agriculture Improvement Act (the “ Farm Bill ”).

During the fourth quarter of 2023, the Company launched SPREE BAR, a non-nicotine, disposable pod system vapor product which is not subject to FDA review or covered under the Agriculture Improvement Act (the “ Farm Bill ”).

The Company may require additional financing in the future to support the development of new product categories as well as subsequent PMTA filings, and/or in the event the FDA requests additional testing for one, or several, of the Company’s prior PMTA submissions.

13 unchanged sentences

Beginning in August 2021, the FDA began issuing Marketing Denial Orders (“MDO”) for ENDS products that lack evidence to demonstrate that permitting the marketing of such products would be appropriate for the protection of the public health.

The Company has not received an MDO for any of its submissions;

The Company has not received an MDO for any of its 2020 PMTA submissions;

however, there is no assurance that regulatory approval to sell our products will be granted or that Charlie’s would be able to raise additional financing if required, which could have a significant impact on our sales.

4 unchanged sentences

On November 3, 2022, FDA accepted for scientific review certain of our PMTAs for synthetic nicotine products and, on November 4, 2022, FDA refused to accept certain other PMTAs for these products, rendering the latter products subject to FDA enforcement.

The Company intends to pursue an administrative appeal with FDA regarding its refusal to accept certain of the PMTAs.

The Company pursued an administrative appeal with FDA regarding its refusal to accept certain of the PMTAs.

The administrative appeal was granted on October 30, 2023 and the products were accepted to move forward in the PMTA review process.

8 unchanged sentences

The documentary support for these facts, including a Certificate of Analysis (“COA”) for the Metatine used in the Company’s SPREE BAR products, corroborates these conclusions.

However, should any of these understandings be incorrect, the Company’s position on Metatine not qualifying as a “tobacco product” would need to be revisited.

However, should any of these understandings be incorrect, the Company’s position on Metatine not meeting the definition of a “tobacco product” would need to be revisited.

Further, should Congress bestow regulatory control over Metatine to the FDA, or should the FDA deem Metatine disposable vape devices “tobacco products” despite the facts that Metatine is not a salt or complex of nicotine, and is not itself derived from nicotine or tobacco, SPREE BAR products might then be subject to the FDA tobacco requirements, including, but not limited to, the requirement that all newly deemed tobacco products obtain premarket authorization before entering the U.S.

7 unchanged sentences

nevertheless, the Company believes that the disclosures are adequate to make the information presented in this Report not misleading.

The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.

The unaudited interim financial statements furnished in this document reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.

Use of Estimates

21 unchanged sentences

Upon adoption, the guidance can be applied prospectively or retrospectively.

The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

Scope Applications of Profits Interests and Similar Awards

13 unchanged sentences

Level 3 – Unobservable inputs for the instrument requiring the development of assumptions by the Company.

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2024, and December 31, 2023 (amounts in thousands):

Fair Value at March 31, 2024

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2024, and December 31, 2023 (amounts in thousands):

Fair Value at June 30, 2024

Derivative liability - Warrants

3 unchanged sentences

Total liabilities

There were no transfers between Level 1, 2 or 3 during the three-month period ended March 31, 2024.

The following table presents changes in Level 3 liabilities measured at fair value for the three-month period ended March 31, 2024.

There were no transfers between Level 1, 2 or 3 during the six-month period ended June 30, 2024.

The following table presents changes in Level 3 liabilities measured at fair value for the six-month period ended June 30, 2024.

Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs (amounts in thousands).

Derivative liability - Warrants

Balance at January 1, 2024

Change in fair value

Balance at March 31, 2024

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in the Monte Carlo simulation measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy as of March 31, 2024 and December 31, 2023, is as follows:

Balance at June 30, 2024

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in the Monte Carlo simulation measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy as of April 26, 2024 and December 31, 2023, is as follows:

Exercise price

13 unchanged sentences

NOTE 4 – PROPERTY AND EQUIPMENT

Depreciation and amortization expense totaled $ 37,000 and $ 42,000 , respectively, during the three months ended March 31, 2024 and 2023.

Property and equipment as of March 31, 2024 and December 31, 2023, are as follows (dollar amounts in thousands):

Estimated Useful Life (years)

Depreciation and amortization expense totaled $ 66,000 and $ 80,000 , respectively, during the six months ended June 30, 2024 and 2023.

Property and equipment as of June 30, 2024 and December 31, 2023, are as follows (dollar amounts in thousands):

Estimated Useful Life

Machinery and equipment

5 unchanged sentences

Accumulated depreciation

Net Property & Equipment

NOTE 5 – CONCENTRATIONS

1 unchanged sentence

For the three months

ended March 31,

During the three months ended March 31, 2024 and 2023, purchases from six vendors represented 72 % and 78 %, respectively, of total inventory purchases.

As of March 31, 2024, and December 31, 2023, amounts owed to these vendors totaled $ 563,000 and $ 410,000 respectively, which are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

ended June 30,

For the six months

ended June 30,

During the three months ended June 30, 2024 and 2023, purchases from five vendors represented 86 % and 56 %, respectively, of total inventory purchases.

During the six months ended June 30, 2024 and 2023, purchases from six vendors represented 67 % and 75 %, respectively, of total inventory purchases.

As of June 30, 2024, and December 31, 2023, amounts owed to these vendors totaled $ 666,000 and $ 266,000 respectively, which are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

Accounts Receivable

The Company’s concentration of accounts receivable is as follows:

For the three-months ended

Three customers made up more than 72 % of net accounts receivable at March 31, 2024.

Six customers made up more than 81 % of net accounts receivable at December 31, 2023.

No customer exceeded 10% of total net sales for the three month period ended March 31, 2024 and 2023, respectively.

Four customers made up more than 61 % of net accounts receivable at June 30, 2024.

Five customers made up more than 81 % of net accounts receivable at December 31, 2023.

No customer exceeded 10% of total net sales for the three-month and six-month periods ended June 30, 2024 and 2023, respectively.

NOTE 6 – DON POLLY, LLC

12 unchanged sentences

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of March 31, 2024 and December 31, 2023, are as follows (amounts in thousands):

Accounts payable and accrued expenses as of June 30, 2024 and December 31, 2023, are as follows (amounts in thousands):

Accounts payable

7 unchanged sentences

Red Beard Note shall bear interest at twenty-one percent ( 21 %) per annum and have maturity through July 24, 2024.

On May 31, 2024, as part of the May 2024 capital raise (see Note 10), the holder of the Red Beard Note (the “Holder” ) converted the principal amount of $ 500,000 in lieu of cash payment for the subscription agreement.

Separately, the Holder was paid $ 52,500 in interest on the maturity date of July 24, 2024.

July 2023 Note Financing

2 unchanged sentences

During the year ended December 31, 2023, the Company made a $ 1,070,000 repayment to the Notes, including a $ 70,000 interest payment.

As of March 31, 2024, $ 400,000 of Notes remained outstanding with Ryan Stump and Henry Sicignano III, and the maturity dates of the outstanding notes have been extended to July 17, 2024.

As of June 30, 2024, $ 400,000 of Notes remained outstanding with Ryan Stump and Henry Sicignano III, and the maturity dates of the outstanding notes have been extended to October 16, 2024.

2023 Receivables Financing

2 unchanged sentences

The Receivables Financing Agreement required fifty-two equal payments of $ 17,740 to be paid weekly for a total repayment of $ 922,500 over the term of the agreement.

As of March 31, 2024, $ 656,000 remained outstanding.

As of June 30, 2024, $ 426,000 remained outstanding.

April 2022 Note Financing

7 unchanged sentences

The Company used the proceeds from the Note for general corporate purposes, and its working capital requirements, pending the availability of alternative debt financing.

On May 31, 2024, as part of the May 2024 capital raise (see Note 10), the Lender converted his next four debt repayments for the period from June to September 2024 for a total amount of $ 100,000 in lieu of cash payment for the subscription agreement.

August 2022 Note Financing – Related Party

7 unchanged sentences

The balance of principal and interest will be payable thirty years from the date of the EID Loan and interest will accrue at the rate of 3.75 % per annum.

The following summarizes the Company’s notes payable maturities as of March 31, 2024 ( amounts in thousands):

Nine Months Ending December 31, 2024

The following summarizes the Company’s notes payable maturities as of June 30, 2024 ( amounts in thousands):

Six Months Ending December 31, 2024

Year Ending December 31, 2025

7 unchanged sentences

Diluted weighted average common shares include common stock potentially issuable under the Company’s convertible preferred stock, warrants and vested and unvested stock options.

The following securities were not included in the diluted net loss per share calculation because their effect was anti-dilutive as of the periods presented (in thousands):

The following table sets forth the computation of (loss) earnings per share (amounts in thousands, except share and per share amounts):

For the three months ended

For the six months ended

Net (loss) income - basic

Reversal of gain due to change in fair value of warrant liability

Net loss - diluted

Weighted average shares outstanding - basic

Diluted preferred shares

Weighted average shares outstanding - diluted

Basic earnings (loss) per share

Diluted earnings (loss) per share

The following securities were not included in the diluted net loss per share calculation because their effect was anti-dilutive as of the periods presented (in thousands):

For the six months ended

Series A convertible preferred shares

1 unchanged sentence

Conversion of Series A Preferred Shares

During the three months ended March 31, 2024, the Company issued approximately 339,000 shares of Common Stock upon conversion of 1,501 shares of Series A Preferred.

During the six months ended June 30, 2024, the Company issued approximately 339,000 shares of Common Stock upon conversion of 1,501 shares of Series A Preferred.

May 2024 Capital Raise

On May 31, 2024, the Company entered into subscription agreements with investors for the sale of an aggregate of 20,375,000 shares of its common stock, par value $ 0.001 per share, at a purchase price per share of $ 0.08 (the “ Offering ”).

The Offering generated gross proceeds of approximately $ 1.63 million, which will be used for working capital purposes.

The Offering was undertaken in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended, as a transaction not involving a public offering.

As part of the Offering, certain note holders converted their outstanding debt and future debt repayments for total amount of $ 600,000 in lieu of cash payment for the subscription agreement (see Note 8).

The Company recognized a $ 75,000 debt extinguishment loss for the three and six months ended June 30, 2024.

NOTE 11 – STOCK-BASED COMPENSATION

6 unchanged sentences

Non-Qualified Stock Options

The following table summarizes stock option activities during the three months ended March 31, 2024 (all option amounts are in thousands):

The following table summarizes stock option activities during the six months ended June 30, 2024 (all option amounts are in thousands):

Stock Options

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (in years)

Aggregate Intrinsic Value

Weighted Average

Exercise Price

Weighted Average

Contractual Life (in

Aggregate Intrinsic

Outstanding at January 1, 2024

Options forfeited/expired

Outstanding at March 31, 2024

Options vested and exercisable at March 31, 2024

Outstanding at June 30, 2024

Options vested and exercisable at June 30, 2024

Restricted Stock Awards

The following table summarizes restricted stock awards activities during the three months ended March 31, 2024 (all share amounts are in thousands):

The following table summarizes restricted stock awards activities during the six months ended June 30, 2024 (all share amounts are in thousands):

Number of Shares

Weighted Average Grant Date Fair Value per Share

Weighted Average

Grant Date Fair

Value per Share

Nonvested at January 1, 2024

Restricted stock granted

Nonvested at March 31, 2024

During the three months ended March 31, 2024, the Company granted 525,000 restricted stock awards (“ RSAs ”) to employees and contractors of the Company pursuant to the 2019 Plan, as amended.

Nonvested at June 30, 2024

During the six months ended June 30, 2024, the Company granted 525,000 restricted stock awards (“ RSAs ”) to employees and contractors of the Company pursuant to the 2019 Plan, as amended.

The RSAs are subject to a vesting schedule and have all the rights of a shareholder of the Company with respect to voting, share adjustments, receipt of dividends (if any) and distributions (if any) on such shares.

The grant date fair value was approximately $ 77,000 .

During the three months ended March 31, 2024, approximately 50,000 RSAs issued to employees were forfeited.

As of March 31, 2024, there was approximately $ 351,000 of total unrecognized compensation expense related to non-vested restricted share-based compensation arrangements granted under the 2019 Plan, as amended.

During the six months ended June 30, 2024, approximately 50,000 RSAs issued to employees were forfeited.

As of June 30, 2024, there was approximately $ 288,000 of total unrecognized compensation expense related to non-vested restricted share-based compensation arrangements granted under the 2019 Plan, as amended.

That cost is expected to be recognized over a weighted average period of 3.0 years.

The Company recorded total stock-based compensation of approximately $ 62,000 and $ 45,000 during the three months ended March 31, 2024 and 2023 related to the RSAs, respectively.

The Company recorded total stock-based compensation of approximately $ 117,000 and $ 82,000 during the six months ended June 30, 2024 and 2023 related to the RSAs, respectively.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

On April 29, 2022, the Company entered into a commercial lease agreement for the Company’s sales and marketing operations in Williamsville, New York (“ Williamsville Lease ”) with Henry Sicignano Jr., a relative of the Company’s President, Henry Sicignano III.

The Williamsville Lease, which became effective on May 1, 2022, has a term of one year and a base rent of $ 1,650 per month.

The Williamsville Lease was extended for additional one year with same terms on May 1, 2023.

The Williamsville Lease, which became effective on May 1, 2022, had a term of one year and a base rent of $ 1,650 per month.

The Williamsville Lease has been extended for additional one year with same terms on May 1, 2024.

The Williamsville Lease is considered a modified gross lease and therefore the Company will also be responsible for additional monthly expenses including gas, electricity, and internet.

10 unchanged sentences

The terms of the Lease were negotiated and approved by the independent members of the Board of Directors, after reviewing a detailed analysis of comparable properties and rent rates compiled by an independent, third-party consultant.

The total rent paid to related parties for the three months ended March 31, 2024 and 2023 was approximately $ 74,000 and $ 74,000 , respectively.

The total rent paid to related parties for the six months ended June 30, 2024 and 2023 was approximately $ 138,000 and $ 138,000 , respectively.

Effective June 1, 2022, the Company’s lease at 5331 Production Drive, Huntington Beach, CA was renewed for an additional three-year term, concluding May 31, 2025.

At March 31, 2024, the Company had operating lease liabilities of approximately $ 328,000 and right of use assets of approximately $ 323,000 which were included in the condensed consolidated balance sheet.

The following table summarizes quantitative information about the Company’s operating leases for the three months ended March 31, 2024 and 2023 (amounts in thousands):

At June 30, 2024, the Company had operating lease liabilities of approximately $ 223,000 and right of use assets of approximately $ 219,000 which were included in the condensed consolidated balance sheet.

The following table summarizes quantitative information about the Company’s operating leases for the three and six months ended June 30, 2024 and 2023 (amounts in thousands):

For the three months ended

For the six months ended

Operating leases

4 unchanged sentences

Total rent expense

For the three months ended

For the six months ended

Operating cash flows from operating leases

1 unchanged sentence

Weighted-average discount rate – operating leases

Maturities of our operating leases as of March 31, 2024, excluding short-term leases, are as follows (amounts in thousands):

Nine Months Ending December 31, 2024

Maturities of our operating leases as of June 30, 2024, excluding short-term leases, are as follows (amounts in thousands):

Six Months Ending December 31, 2024

Year Ending December 31, 2025

29 unchanged sentences

For these reasons, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes.

For the three months ended March 31, 2024 and 2023, the Company's estimate for income taxes was not determined to be significant, and therefore, is not reflected in the Company's condensed consolidated financial statements and related disclosures.

For the six months ended June 30, 2024 and 2023, the Company's estimate for income taxes was not determined to be significant, and therefore, is not reflected in the Company's condensed consolidated financial statements and related disclosures.

NOTE 14 – SUBSEQUENT EVENTS

The Company evaluated subsequent events for their potential impact on the consolidated condensed financial statements and disclosures through May 20, 2024, the date the consolidated condensed financial statements were available to be issued, and determined that, except as set forth below, no subsequent events occurred that were reasonably expected to impact the consolidated condensed financial statements presented herein.

Expiration of Warrants

On April 26, 2024, the Investor Warrants and Placement Agent Warrants expired without being exercised.

Restricted Stock Award Forfeiture

On May 10, 2024, 122,000 shares of restricted stock, issued under the Company’s 2019 Plan, were forfeited by employees whose service was terminated.

The Company evaluated subsequent events for their potential impact on the consolidated condensed financial statements and disclosures through August 19, 2024, the date the consolidated condensed financial statements were available to be issued, and determined that no subsequent events occurred that were reasonably expected to impact the consolidated condensed financial statements presented herein.

ITEM 2 – MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

10 unchanged sentences

Through our Charlie’s subsidiary, we formulate, market, and distribute premium, nicotine-based and alternative alkaloid vapor products.

Charlie’s products are produced through contract manufacturers for sale through select distributors, specialty retailers, and third-party online resellers throughout the United States and select international markets.

Operational Plan

Considering industry-specific hurdles, as well as the potential for future regulatory changes, management has targeted opportunities for growth and has adopted the following operational plan.

In 2022, we initiated a plan and began to invest substantial time and resources to develop various proprietary products and new technologies in order to achieve competitive advantages in the vapor and alternative products marketplace.

Over the last two years, we initiated a plan and began to invest substantial time and resources to develop various proprietary products and new technologies in order to achieve competitive advantages in the vapor and alternative products marketplace.

In conjunction with internal and external research and development resources, we endeavored to identify a nicotine substitute (“ Metatine ™”) to be used in lieu of tobacco-based and synthetically derived nicotine.

3 unchanged sentences

With the advent of our nicotine substitute Metatine, we plan to continue developing product formats that offer adult consumers a satisfying alternative to traditional nicotine products.

The SPREE BAR™ line of vapor products launched in late 2023 and is now offered for sale by twelve master distributors across the United States.

We are currently working on a second-generation disposable device as well as Metatine-based e-liquids that are both slated for launch sometime during the summer of 2024.

We recognize the challenges in marketing non-nicotine-based products in a market saturated with traditional nicotine disposable vapor products and we are committed to continuous improvement of the product in order to satisfy our consumers’ demands.

The SPREE BAR™ line of vapor products launched in late 2023 and is now offered for sale by several master distributors across the United States.

We have recently begun test-marketing Metatine-based e-liquids under the PACHAMAMA PLUS+ trademark and we are developing a second-generation Metatine-based disposable device for launch in Q4 2024.

In response to the rapidly emerging new “pouch products” category in the nicotine products industry, we are also developing a Metatine-based pouch line that could be ready for market as soon as January 2025.

We recognize the challenges in marketing non-nicotine-based products in a market saturated with traditional nicotine products;

accordingly, we are committed to continuous improvement of our alternative alkaloid products in order to satisfy adult consumers’ demands.

Since our founding in 2014, Charlie’s has created literally hundreds of products that provide adult smokers with a viable means of abandoning cigarettes.

2 unchanged sentences

In 2021, we launched our synthetic nicotine (not derived from tobacco) Pacha (formerly Pachamama Disposable) product line, which provides access to additional sales channels and broadens our customer base.

These innovative product formats continue to represent an extremely important product category for Charlie’s and we intend to grow our nicotine disposable business in 2024.

These innovative product formats continue to represent an extremely important product category for Charlie’s and we intend develop new distribution partnerships in order to grow our nicotine disposable business in 2025.

To date, Charlie’s has invested more than $6 million on the submission of Premarket Tobacco Applications (“ PMTAs ”) and subsequent amendments to these applications to the FDA.

10 unchanged sentences

vapor products market.

Underlining the importance of Charlie’s work with age-gating technology is an initiative taken by JUUL Labs, one of the largest competitors in our industry.

In July JUUL announced that it has submitted a PMTA with the FDA for a new e-cigarette device that also included information on novel, data-driven technologies to restrict underage access.

Underlining the importance of Charlie’s work with age-gating technology are initiatives taken by JUUL Labs, Altria, and R.J.

Reynolds, three of the largest competitors in our industry.

In July 2023 JUUL announced that it had submitted a PMTA with the FDA for a new e-cigarette device that also included information on novel, data-driven technologies to restrict underage access.

JUUL’s chief product officer explained, “With our next-generation platform, we have designed a technological solution for two public-health problems:

improving adult-smoker switching from combustible cigarettes and restricting underage access to vapor products...” Similar to the age-gating technology under development at Charlie’s, the JUUL device includes a mobile and web-based app that enables age-verification technology, including device-locking, and real-time product information and usage insights for age-verified consumers with industry-leading data-privacy protections.

improving adult-smoker switching from combustible cigarettes and restricting underage access to vapor products...” In the second quarter of 2024, Altria and R.J.

Reynolds announced news of their own PMTA submissions to the FDA for mobile applications that verify consumers’ ages through third-party age verification providers.

Similar to the age-gating technology under development at Charlie’s, the Big Tobacco company devices include mobile and web-based apps that enable age-verification technology, including device-locking, and real-time product information and usage insights for age-verified consumers with industry-leading data-privacy protections.

In order to mitigate FDA regulatory risk in the domestic market and to capture what management continues to believe is a significant commercial opportunity, we have dedicated additional resources to efforts focused on growing our market share internationally.

11 unchanged sentences

Beginning in August 2021, the FDA began issuing Marketing Denial Orders (“ MDO ”) for ENDS products that lack evidence to demonstrate that permitting the marketing of such products would be appropriate for the protection of the public health.

The Company has not received an MDO for any of its submissions;

The Company has not received an MDO for any of its 2020 PMTA submissions;

however, there is no assurance that regulatory approval to sell our products will be granted or that we would be able to raise additional financing if required, which could have a significant impact on our sales.

29 unchanged sentences

Red Beard Note shall bear interest at twenty-one percent (21%) per annum and have maturity through July 24, 2024.

Results of Operations for the Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Regarding results from operations for the quarter ended March 31, 2024, we generated revenue of approximately $3,051,000, as compared to revenue of $4,030,000 for the three months ended March 31, 2023.

On May 31, 2024, as part of the May 2024 capital raise (see Note 10), the holder of the Red Beard Note (the “Holder” ) converted the principal amount of $500,000 in lieu of cash payment for the subscription agreement.

Separately, the Holder was paid $52,500 in interest on the maturity date of July 24, 2024.

May 2024 Capital Raise

On May 31, 2024, the Company entered into subscription agreements with investors for the sale of an aggregate of 20,375,000 shares of its common stock, par value $0.001 per share, at a purchase price per share of $0.08 (the “ Offering ”).

The Offering generated gross proceeds of approximately $1.6 million, which will be used for working capital purposes.

The Offering was undertaken in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended, as a transaction not involving a public offering.

Results of Operations for the Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Regarding results from operations for the quarter ended June 30, 2024, we generated revenue of approximately $2,043,000, as compared to revenue of $3,970,000 for the three months ended June 30, 2023.

This $1,927,000 decrease in revenue was due primarily to a $1,278,000 decrease in sales of our nicotine-based vapor products, as well as a $649,000 decrease in sales of our hemp-derived products.

We generated a net loss for the three months ended March 31, 2024, of approximately $1,045,000 as compared to a net loss of $1,390,000 for the three months ended March 31, 2023.

The net loss for the three months ended March 31, 2024 includes a non-cash gain in fair value of derivative liabilities of $79,000 compared to a non-cash gain in fair value of derivative liabilities of $223,000 during the three months ended March 31, 2023.

A review of the three-month period ended March 31, 2024, follows:

We generated a net loss for the three months ended June 30, 2024, of approximately $967,000 as compared to a net income of $32,000 for the three months ended June 30, 2023.

The net loss for the three months ended June 30, 2024 includes a non-cash gain in fair value of derivative liabilities of $0 compared to a non-cash gain in fair value of derivative liabilities of $185,000 during the three months ended June 30, 2023.

A review of the three-month period ended June 30, 2024, follows:

For the three months ended

11 unchanged sentences

Interest expense

Debt extinguishment gain

Debt extinguishment loss

Change in fair value of derivative liabilities

Total other income

Revenue for the three months ended March 31, 2024, decreased by approximately $979,000 or 24.3%, to approximately $3,051,000, as compared to approximately $4,030,000 for same period in 2023 due to a $657,000 decrease in sales of our nicotine-based vapor products, and a $322,000 decrease in sales of our hemp-derived products.

The decrease in our nicotine-based vapor product sales was primarily driven by decreased sales of our Pacha Disposable line as well as periodic, voluntary stockouts of our e-liquid products.

Despite a strong performance during its initial launch, our Pacha Disposables line has faced challenges including increased competition from low-priced Chinese products, the requirement for synthetic nicotine products to obtain marketing authorization from the FDA, and continued uncertainty surrounding the FDA’s issuance of MDO’s and Refuse-to-File designations.

Total other (loss) income

Net (loss) income

Revenue for the three months ended June 30, 2024, decreased by approximately $1,927,000 or 48.5%, to approximately $2,043,000, as compared to approximately $3,970,000 for same period in 2023 due to a $1,278,000 decrease in sales of our nicotine-based vapor products, and a $649,000 decrease in sales of our hemp-derived products.

The decrease in our nicotine-based vapor product sales was primarily driven by decreased sales of our Pacha Disposable line as well as periodic stockouts of our e-liquid products.

The launch of the Company’s SPREE BAR line of nicotine substitute vapor products required enhanced focus and resource allocation in order to support sales and marketing efforts, which ultimately affected the sales performance of other product categories.

The decrease in sales for our hemp-derived business during the quarter was directly related to the diversion of working capital and other resources towards the ramp up of our SPREE BAR line of nicotine substitute vapor products.

Despite achieving increased market share for our PINWEEL brand of hemp-derived products, we believe that the market for alternative alkaloid products, such as SPREE BAR, offers the Company the most significant opportunity for growth.

SPREE BAR sales have been inconsistent since being launched in late 2023 which has caused a gap in overall sales production.

The decrease in sales for our hemp-derived business during the period was directly related to the diversion of working capital and other resources towards the ramp up of our SPREE BAR line of nicotine substitute vapor products.

Despite achieving increased market share for our PINWEEL brand of hemp-derived products, we believe that the market for nicotine and alternative alkaloid products, such as SPREE BAR, offers the Company the most significant opportunity for growth.

Cost of Revenue

Cost of revenue, which consists of direct costs of materials, direct labor, third party subcontractor services, and other overhead costs decreased by approximately $1,032,000 or 32.9%, to approximately $2,107,000, or 69.0% of revenue, for the three months ended March 31, 2024, as compared to approximately $3,139,000, or 77.9% of revenue, for the same period in 2023.

This cost, as a percent of revenue, decreased compared to last year due to a reduced inventory obsolescence expense related to both nicotine and hemp-derived products.

Cost of revenue, which consists of direct costs of materials, direct labor, third party subcontractor services, and other overhead costs decreased by approximately $614,000 or 32.7%, to approximately $1,265,000, or 61.9% of revenue, for the three months ended June 30, 2024, as compared to approximately $1,879,000, or 47.3% of revenue, for the same period in 2023.

This cost, as a percent of revenue, increased compared to last year due to a high sales mix of SPREE BAR products which contain a higher per unit cost relative to sales.

Lower overhead cost absorption also contributed to a higher cost of revenue as a percent of sales.

General and Administrative Expenses

For the three months ended March 31, 2024, total general and administrative expenses decreased by approximately $443,000 to $1,545,000 as compared to approximately $1,988,000 for the same period in 2023.

This change was primarily due to decreases of approximately $245,000 in non-commission payroll and benefits costs, $82,000 in provision for bad debt, $43,000 in certain professional fees, and approximately $73,000 in other general and administrative expenses.

For the three months ended June 30, 2024, total general and administrative expenses decreased by approximately $352,000 to $1,423,000 as compared to approximately $1,775,000 for the same period in 2023.

This change was primarily due to decreases of approximately $165,000 in non-commission payroll and benefits costs, $69,000 in certain professional fees, and approximately $118,000 in other general and administrative expenses.

The decrease in payroll and benefits costs was primarily driven by elective salary reductions for executives and a reduced bonus accrual.

The decrease in bad debt provision was largely the result of lower sales activity during the period.

Decreased professional fees resulted from reduced legal and accounting services during the period.

The reduction in other general and administrative expenses largely consisted of decreased information systems expenses and merchant service fees.

Decreased professional fees resulted from reduced legal, accounting and other consulting services during the period.

The reduction in other general and administrative expenses largely consisted of decreased information systems expenses and merchant service fees, which vary directly with sales activity.

Sales and Marketing Expense

For the three months ended March 31, 2024, total sales and marketing expense decreased by approximately $34,000 to approximately $334,000 as compared to approximately $368,000 for the same period in 2023, which was primarily due to reduced marketing and commission costs during the period but was offset by slightly higher tradeshow activity.

During the quarter ended March 31, 2024, the Company enhanced its tradeshow presence to support the launch of SPREE BAR.

For the three months ended June 30, 2024, total sales and marketing expense decreased by approximately $202,000 to approximately $117,000 as compared to approximately $319,000 for the same period in 2023, which was primarily due to reduced marketing and commission costs during the period.

Research and Development Expense

For the three months ended March 31, 2024, total research and development costs decreased by approximately $46,000 to approximately $6,000 as compared to approximately $52,000 for the same period in 2023, which was primarily due to reduced costs associated with the development of new technologies and product formats.

For the three months ended June 30, 2024, we had income from research and development of approximately $26,000 as compared to an expense of $39,000 for the same period in 2023.

The decrease of approximately $65,000 was primarily due to a vendor refund of approximately $26,000.

Loss from Operations

We incurred a loss from operations of approximately $941,000 for the three months ended March 31, 2024, compared to loss of approximately $1,517,000 for the three months ended March 31, 2023, due primarily to a higher gross profit and significant decrease in general and administrative expenses.

We incurred a loss from operations of approximately $736,000 for the three months ended June 30, 2024, compared to loss of approximately $42,000 for the three months ended June 30, 2023, due primarily to lower sales and gross profit.

We also incurred certain non-cash, general and administrative expenses during the period including a $56,000 expense related to stock-based compensation.

Net loss is determined by adjusting loss from operations by the following items:

Interest Expense.

For the three months ended June 30, 2024, and 2023, we recorded approximately $103,000 and $7,000 of related party interest expense.

For the same periods, we recorded total interest expense related to notes payable of $156,000 and $111,000, respectively.

The increase was primarily due to $700,000 of notes payable that were entered in July 2023, which bear interest at twenty-one percent (21%) per annum.

Debt Extinguishment Loss.

For the three months ended June 30, 2024, we recorded approximately $75,000 of loss from debt extinguishment, which was related to our May 2024 Capital Raise (see Note 10).

For the three months ended June 30, 2024, we incurred a net loss of $967,000 as compared to net income of $32,000 for the same period in 2023.

Results of Operations for the Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

Regarding results from operations for the six months ended June 30, 2024, we generated revenue of approximately $5,094,000, as compared to revenue of $8,000,000 for the six months ended June 30, 2023.

This $2,906,000 decrease in revenue was due primarily to a $1,935,000 decrease in sales of our nicotine-based vapor products, as well as a $971,000 decrease in sales of our hemp-derived products.

We generated a net loss for the six months ended June 30, 2024, of approximately $2,012,000 as compared to a net loss of $1,358,000 for the six months ended June 30, 2023.

The net loss for the six months ended June 30, 2024 includes a non-cash gain in fair value of derivative liabilities of $79,000 compared to a non-cash gain in fair value of derivative liabilities of $408,000 during the six months ended June 30, 2023.

A review of the six months ended June 30, 2024, follows:

For the six months ended

($ in thousands)

Product revenue, net

Total revenues

Operating costs and expenses:

Cost of goods sold - product revenue

General and administrative

Sales and marketing

Research and development

Total operating costs and expenses

Loss from operations

Other income (expense):

Interest expense

Debt extinguishment (loss) gain

Change in fair value of derivative liabilities

For the three months ended March 31, 2024, the gain in fair value of derivative liabilities was $79,000, compared to a gain in fair value of derivative liabilities of $223,000 for the three months ended March 31, 2023.

Total other (loss) income

Revenue for the six months ended June 30, 2024, decreased by approximately $2,906,000 or 36.3%, to approximately $5,094,000, as compared to approximately $8,000,000 for same period in 2023 due to a $1,935,000 decrease in sales of our nicotine-based vapor products, and a $971,000 decrease in sales of our hemp-derived products.

The decrease in our nicotine-based vapor product sales was primarily driven by decreased sales of our Pacha Disposable line as well as periodic stockouts of our e-liquid products.

Cost of Revenue

Cost of revenue, which consists of direct costs of materials, direct labor, third party subcontractor services, and other overhead costs decreased by approximately $1,646,000 or 32.8%, to approximately $3,372,000, or 66.2% of revenue, for the six months ended June 30, 2024, as compared to approximately $5,018,000, or 62.7% of revenue, for the same period in 2023.

This cost, as a percent of revenue, increased compared to last year due to a high sales mix of SPREE BAR products which contain a higher per unit cost relative to sales.

Lower overhead cost absorption also contributed to a higher cost of revenue as a percent of sales.

General and Administrative Expenses

For the six months ended June 30, 2024, total general and administrative expenses decreased by approximately $795,000 to $2,968,000 as compared to approximately $3,763,000 for the same period in 2023.

This change was primarily due to decreases of approximately $410,000 in non-commission payroll and benefits costs, $112,000 in professional fees, $80,000 in information systems costs and approximately $193,000 in other general and administrative expenses.

The decrease in payroll and benefits costs was primarily driven by elective salary reductions for executives and a reduced bonus accrual.

Decreased professional fees resulted from reduced legal, accounting and other consulting services during the period.

The decrease in information systems resulted from reduced software licenses and system support.

The reduction in other general and administrative expenses largely consisted of decreased merchant processing fees and bad debt expense, both of which vary with sales.

Sales and Marketing Expense

For the six months ended June 30, 2024, total sales and marketing expense decreased by approximately $236,000 to approximately $451,000 as compared to approximately $687,000 for the same period in 2023, which was primarily due to reduced marketing and commission costs during the period.

Research and Development Expense

For the six months ended June 30, 2024, we had income from research and development of approximately $20,000 as compared to an expense of $91,000 for the same period in 2023.

The decrease of approximately $111,000 was primarily due to reduced costs associated with the development of new technologies and product formats as well as a vendor refund of approximately $26,000.

Loss from Operations

We incurred a loss from operations of approximately $1,677,000 for the six months ended June 30, 2024, compared to loss of approximately $1,559,000 for the six months ended June 30, 2023, due primarily to lower sales and gross profit.

We also incurred certain non-cash, general and administrative expenses during the period including a $117,000 expense related to stock-based compensation.

Net loss is determined by adjusting loss from operations by the following items:

Change in Fair Value of Derivative Liabilities.

For the six months ended June 30, 2024, the gain in fair value of derivative liabilities was $79,000, compared to a gain in fair value of derivative liabilities of $408,000 for the six months ended June 30, 2023.

The derivative liability is associated with the Investor Warrants and the Placement Agent Warrants (as defined in Note 3 of this Report) in connection with the Share Exchange.

The gain for the quarter ended March 21, 2024, reflects the effect of the decrease in stock price as of March 31, 2024, compared to December 31, 2023.

We had 40,337,693 warrants outstanding as of March 31, 2024, which expired without being exercised in April 2024.

The gain for the six months ended June 30, 2024 was due to the expiration of the warrants in April 2024 which resulted in the warrant liability being written off.

Interest Expense.

For the three months ended March 31, 2024, and 2023, we recorded approximately $107,000 and $7,000 of related party interest expense.

For the six months ended June 30, 2024, and 2023, we recorded approximately $200,000 and $15,000 of related party interest expense.

For the same periods, we recorded total interest expense related to notes payable of $339,000 and $242,000, respectively.

The increase was primarily due to $700,000 of notes payable that were entered in July 2023, which bear interest at twenty-one percent (21%) per annum.

For the three months ended March 31, 2024, we incurred a net loss of $1,045,000 as compared to net loss of $1,390,000 for the same period in 2023.

Debt Extinguishment Loss.

For the six months ended June 30, 2024, we recorded approximately $75,000 of loss from debt extinguishment, which was related to our May 2024 Capital Raise (see Note 10).

For six months ended June 30, 2024, we incurred a net loss of $2,012,000 as compared to a net loss of $1,358,000 for the same period in 2023.

Liquidity and Capital Resources

As of March 31, 2024, we had working capital deficit of approximately $1,454,000, which consisted of current assets of approximately $4,187,000 and current liabilities of approximately $5,641,000, as compared to working capital of approximately $332,000 at December 31, 2023.

As of June 30, 2024, we had working capital deficit of approximately $557,000, which consisted of current assets of approximately $4,816,000 and current liabilities of approximately $5,373,000, as compared to working capital of approximately $332,000 at December 31, 2023.

The current liabilities include approximately $3,016,000 of accounts payable and accrued expenses, notes payable of $382,000, notes payable from related parties of $1,514,000, approximately $238,000 of deferred revenue associated with product shipped but not yet received by customers, and approximately $223,000 of current lease liabilities.

Our cash and cash equivalents balance at March 31, 2024 was approximately $176,000.

As of March 31, 2024, we have the following notes outstanding:

January 2024 Note Financing .

On January 24, 2024, the Company issued an unsecured promissory note (the “ Red Beard Note ”) to one of its largest stockholders Red Beard Holdings LLC (the “ Red Beard Lender "), in the principal amount of $500,000.

Red Beard Note shall bear interest at twenty-one percent (21%) per annum and have maturity through July 24, 2024.

Our cash and cash equivalents balance at June 30, 2024 was approximately $1,085,000.

As of June 30, 2024, we have the following notes outstanding:

July 2023 Note Financing .

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Notes shall bear interest at twenty-one percent (21%) per annum and have maturity dates ranging from November 17, 2023 to December 10, 2023.

As of March 31, 2024, $400,000 remained outstanding and the maturity dates of the outstanding notes have been extended to July 17, 2024.

As of June 30, 2024, $400,000 remained outstanding and the maturity dates of the outstanding notes have been extended to October 16, 2024.

April 2022 Note Financing .

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The Company used the proceeds from the Note for general corporate purposes, and its working capital requirements, pending the availability of alternative debt financing.

As of June 30, 2024, approximately $827,000 of principal remained outstanding

On May 31, 2024, as part of the May 2024 capital raise (see Note 10), the Lender converted his next four debt repayments for the period from June to September 2024 for a total amount of $100,000 in lieu of cash payment for the subscription agreement.

August 2022 Note Financing .

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The Second Receivables Financing Agreement requires fifty-two equal payments of $17,740 to be paid weekly for a total repayment of $922,500 over the term of the agreement.

For the three months ended March 31, 2024, net cash used in operating activities was approximately $431,000, resulting from a net loss of $1,045,000, offset by a change in operating assets and liabilities of $412,000 and net non-cash activity of $202,000.

For the three months ended March 31, 2023, net cash used in operating activities was approximately $241,000, resulting from a net loss of $1,390,000, offset by a change in operating assets and liabilities of $1,063,000 and net non-cash activity of $86,000.

For the three months ended March 31, 2024, we generated approximately $240,000 in cash from financing activities related to the issuance of notes payable to a related party of $500,000 and the repayment of $260,000 in notes payable, including $30,000 to a related party.

For the six months ended June 30, 2024, net cash used in operating activities was approximately $300,000, resulting from a net loss of $2,012,000, offset by a change in operating assets and liabilities of $1,181,000 and net non-cash activity of $531,000.

For the six months ended June 30, 2023, net cash provided by operating activities was approximately $124,000, resulting from a net loss of $1,358,000, offset by a change in operating assets and liabilities of $1,364,000 and net non-cash activity of $118,000.

For the six months ended June 30, 2024, we generated approximately $1,018,000 in cash from financing activities related to the issuance of common shares of $1,030,000, notes payable to a related party of $500,000 and the repayment of $512,000 in notes payable, including $50,000 to a related party.

Substantial Doubt to Continue as a Going Concern Regarding the Legal and Regulatory Environment, Liquidity and Management ’ s Plan of Operation

5 unchanged sentences

There was a significant cost associated with the application process and there can be no assurance the FDA will approve previous and/or future applications.

For the three months ended March 31, 2024, the Company’s revenue declined, the Company generated a loss from operations of approximately $941,000, and a consolidated net loss of approximately $1,045,000.

For the six months ended June 30, 2024, the Company’s revenue declined, the Company generated a loss from operations of approximately $1,677,000, and a consolidated net loss of approximately $2,012,000.

Cash used in operations was approximately $300,000.

The Company had a stockholders’ deficit of $1,090,000 at March 31, 2024.

During the three months ended March 31, 2024, the Company’s working capital position decreased to a deficit of $1,454,000 from $332,000 as of December 31, 2023.

The Company had a stockholders’ deficit of $296,000 at June 30, 2024.

During the six months ended June 30, 2024, the Company’s working capital position decreased to a deficit of $557,000 from $332,000 as of December 31, 2023.

These regulatory risks, as well as other industry-specific challenges and our low working capital and cash position, remain factors that raise substantial doubt about the Company’s ability to continue as a going concern.

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including cumulative expenditures of approximately $5,100,000 as of March 31, 2024, to support our PMTA process for the Company’s submissions to the FDA.

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including cumulative expenditures of approximately $6,000,000 as of June 30, 2024, to support our PMTA process for the Company’s submissions to the FDA.

The Company has undergone cost-cutting measures including salary reductions of up to 25% for officers and certain managers and a reduction in headcount for certain departments.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements