What changed in this filing

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Item 9A. Controls and Procedures

2025-05-29 compared with 2024-04-15 · 252 added, 155 removed, 726 unchanged (36% of the section changed)

18 unchanged sentences

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning our executive officers, directors and corporate governance is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2024 Annual Meeting of Stockholders.

Set forth below is information regarding our directors, executive officers, and key personnel as of March 1, 2025:

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Prior to joining the Company, Mr.

Sicignano held multiple positions, including Chief Executive Office r of 2 2nd Century Group, Inc.

Sicignano held multiple positions, including Chief Executive Officer of 22nd Century Group, Inc.

XXII), a plant-based biotechnology company that is focused on tobacco harm reduction, very low nicotine content tobacco, and hemp/cannabis research from March 2015 through July 2019.

He also served as President and as a member of the Board of Directors wi th 2 2nd Century from January 2011 through July 2019.

He also served as President and as a member of the Board of Directors with 22nd Century from January 2011 through July 2019.

In addition, from December 2014 to August 2018, Mr.

Sicignano served on the Board of Directors of Anandia Laboratories, Inc., a cannabis-focused science company that was sold to Aurora Cannabis (NYSE:

He is currently a member of the Board of Directors of Kartoon Studios, Inc.

(NYSE American:

Sicignano holds a B.A.

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Montesano has served as Chief Financial Officer of Charlie’s Chalk Dust, LLC, the Company’s largest and most profitable operating division.

Beginning in 2019, he also began serving as the Chief Financial Officer of Don Polly, LLC, the Company’s hemp-derived products division.

Beginning in 2019, he also began serving as the Chief Financial Officer of Don Polly, LLC, the Company’s alternative products division.

Montesano is the Founder and Managing Partner for MPM Advisors, LLC, an outsourced accounting, and business process firm.

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Cohen was the Founder and Managing Partner at Iroquois Capital Opportunity Fund, a special situations private equity investment fund, and a Co-Founder of Iroquois Capital, a hedge fund with investments in small and micro-cap private and public companies.

Cohen currently serves as a director on the Board of Directors of Wrap Technologies, Inc.

Cohen currently serves as the CEO and Executive Director of Wrap Technologies, Inc.

WRTC), and is active in philanthropic activities with numerous charities including the Jewish Enrichment Council.

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King was appointed as a director in June 2023 pursuant to the terms of a nomination and standstill agreement dated April 26, 2023.

King is the Founder and current Chief Executive Officer of OEM Solutions, a private company that has developed a supply network in Asia with world-class manufacturing companies that offer a wide variety of custom-made medical products, scientific instruments, consumer products, and food service devices.

Operating OEM Solutions has been Mr.

King is the Founder and current Chief Executive Officer of Wessner, Inc., a private company that has developed a supply network in Asia with world-class manufacturing companies that offer a wide variety of custom-made medical products, scientific instruments, consumer products, and food service devices.

Operating Wessner, Inc.

(formerly OEM Solutions) has been Mr.

King’s sole occupation and employment for the past 24 years.

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EXECUTIVE COMPENSATION

Information is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K with respect to its 2024 Annual Meeting of Stockholders

Information is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to its 2025 Annual Meeting of Stockholders

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to its 2025 Annual Meeting of Stockholders

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to its 2025 Annual Meeting of Stockholders

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information is incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to its 2025 Annual Meeting of Stockholders

EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

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Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock, dated April 25, 2019, incorporated by reference to Exhibit 3.7 to the Current Report on Form 8-K, filed April 30, 2019.

Form of Investor Warrant, dated April 26, 2019, incorporated by reference to Exhibit 3.8 to the Current Report on Form 8-K, filed April 30, 2019.

Description of Securities Registered Pursuant to Section 12 (filed herewith)

8 unchanged sentences

Employment Agreement, dated April 1, 2021, by and between Charlie's Holdings, Inc.

and Henry Sicignano, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed April 6, 2021.

and Henry Sicignano III, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed April 6, 2021.

2019 Omnibus Equity Incentive Plan, as amended, incorporated by reference to Appendix B to the Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 28, 2019

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Form of July 2023 Promissory Note, incorporated by reference to Form 10-Q filed on November 14, 2023

Nomination and Standstill Agreement with Michael King dated April 26, 2023 (filed herewith)

Amended and Restated Promissory Notes – with Henry Sicignano III and Ryan Stump dated April 28, 2025

Entry into a Material Definitive Agreement for the Disposition of Assets with R.J.

Reynolds, incorporated by reference to the Current Report on Form 8-K, filed April 17, 2025

Amended and Restated Promissory Note – with Michael King dated April 28, 2025

Code of Ethics filed with Form 10-K on March 31, 2011 and incorporated herein by reference.

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Subsidiaries of Charlie's Holdings, Inc., filed herewith.

Consent of Urish Popeck & Co., LLC filed herewith.

Consent of Mazars USA LLP filed herewith.

Consent of Baker Tilly US, LLP filed herewith.

Certification of Principal Executive Officer as Required by Rule 13a-14(a)/15d-14, filed herewith.

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In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.

April 15, 2024

CHARLIE’S HOLDINGS, INC.

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(Principal Executive Officer)

April 15, 2024

/s/ Matthew P.

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(Principal Financial and Accounting Officer)

April 15, 2024

/s/ Ryan Stump

Chief Operating Officer and Director

April 15, 2024

/s/ Scot Cohen

April 15, 2024

/s/ Jeffrey Fox

April 15, 2024

/s/ Edward Carmines

Edward Carmines

April 15, 2024

/s/ Michael King

April 15, 2024

Report of Independent Registered Public Accounting Firm

To the stockholders and the board of directors of Charlie’s Holdings, Inc:

Opinion on the Financial Statements

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Charlie’s Holdings, Inc.

Costa Mesa, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Charlie’s Holdings, Inc.

and its subsidiaries (the "Company") as of December 31, 2022, the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2024, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year then ended , in conformity with accounting principles generally accepted in the United States of America.

We also have audited the segment and geographical information disclosed in Note 13 to the 2023 consolidated financial statements to retrospectively apply the change in accounting for ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the 2023 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2023 consolidated financial statements taken as a whole.

Substantial Doubt about the Company ’ s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant operating losses, negative cash flows from operations, and has an accumulated deficit.

The Company is dependent on its ability to increase revenues and obtain financing to continue operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans regarding those matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audit provides a reasonable basis for our opinion.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has continued to experience financial and regulatory issues.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

/s/ Baker Tilly US, LLP

We have served as the Company's auditor from 2018 to 2023.

Irvine, California

April 17, 2023

Critical Audit Matters

The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Going Concern

As described further in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has negative working capital and a low cash position, and does not have an established source of revenue sufficient to cover its operating costs.

The ability of the Company to continue as a going concern is dependent on their ability to increase revenues, procure cost-effective financing, and continue its business development efforts to support the PMTA process for the Company’s submissions to the FDA.

Accordingly, the Company has determined that these factors raise substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

Management intends to continue to fund its business by way of public or private offerings of the Company’s stock or through loans from related parties and private funding, in order satisfy the Company’s obligations as they come due for at least one year from the financial statement issuance date.

However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue as a going concern.

The primary procedures we performed to address this critical audit matter included:

We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available capital and the risk of bias in management’s judgments and assumptions in their determination.

Our audit procedures related to the Company’s assertion on its ability to continue as a going concern included the following, among others:

We inquired of Company management and reviewed company records to assess whether there are additional factors that contribute to the uncertainties disclosed;

We assessed whether the Company’s determination that there is substantial doubt about its ability to continue as a going concern was adequately disclosed;

We performed testing procedures such as analytical procedures to identify conditions and events that indicate there could be substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time;

We reviewed and evaluated management's plans for dealing with adverse effect of these conditions and events.

Reserve for Excess and Slow-Moving Inventory

The Company provides valuation allowances for excess and slow-moving inventory on hand that are not expected to be sold to reduce the carrying amount of slow-moving inventory to its estimated net realizable value.

The valuation allowances are based on upon estimates about future demand from its customers and distributors and market conditions.

We determined the reserve for excess and slow-moving inventory to be a critical audit matter because it requires especially subjective auditor judgment.

These reserves are sensitive to changes in the Company’s operations and assumptions used to estimate the reserve including management’s assumptions with regards to projections of future product demand and market conditions, which includes historical usage and on-hand quantities.

The primary procedures we performed to address this critical audit matter included:

Inquiring with management to obtain an understanding of management’s process of determining the reserve for excess and slow-moving inventories, including obtaining an understanding of the key assumptions used in the estimate;

Evaluating and recalculating the methodology used in connection with the Company’s reserve analysis;

Reviewing the significant assumptions used related to the reserve assigned to each item in inventory, and evaluating whether management’s reserve assumptions are appropriate based on historical results;

Testing selected inventory items to evaluate whether the applied reserve percentages were appropriate based on the movement of the item within the past year, as well as the most recent sales price of the inventory item to evaluate its net realizable value.

/s/ Urish Popeck & Co., LLC

We have served as the Company's auditor since 2024

Pittsburgh, Pennsylvania

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Charlie’s Holdings, Inc.

To Board of Directors and Stockholders of Charlie ’ s Holdings, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Charlie’s Holdings, Inc.

We have audited, before the effects of the adjustments to retrospectively apply the change in accounting described in Note 13, the accompanying consolidated balance sheet of Charlie’s Holdings, Inc.

(the “Company”) as of December 31, 2023, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements, before the effects of the adjustments to retrospectively apply the change in accounting (as described in Note 13), present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting (as described in Note 13) and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited by Urish Popeck & Company, LLC.

Substantial Doubt About the Company ’ s Ability to Continue as a Going Concern

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We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Reserve for Excess and Slow-Moving Inventory

The valuation allowances are based on upon estimates about future demand from its customers and distributors and market conditions.

We determined the reserve for excess and slow-moving inventory to be a critical audit matter because it requires especially subjective auditor judgment.

The primary procedures we performed to address this critical audit matter included:

Evaluating and recalculating the methodology used in connection with the Company’s reserve analysis;

Performing a retrospective review analysis to assess the adequacy of the prior year reserve in comparison to inventory write-offs during the current year;

We have served as the Company's auditor from 2023 to 2024.

/s/ Mazars USA LLP

We have served as the Company’s auditor since 2023.

Fort Washington, PA

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COMMITMENTS AND CONTINGENCIES (see Note 12)

Stockholders' (deficit) equity:

Stockholders' deficit:

Convertible preferred stock ($ 0.001 par value);

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Accumulated deficit

Total stockholders' (deficit) equity

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Total stockholders' deficit

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

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

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Interest expense

Debt extinguishment gain

Debt extinguishment (loss) gain

Change in fair value of derivative liabilities

Total other income

Loss before income taxes

Income taxes benefit

Total other (loss) income

Net loss per share

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(in thousands)

Total Stockholders'

Convertible Preferred Stock

Stockholders'

Paid-in Capital

Balance at January 1, 2023

Conversion of Series A convertible preferred stock

Forfeiture of restricted stock awards

Stock compensation

Balance at December 31, 2023

Issuance of common shares for cash

Issuance of common shares from debt redemption

Conversion of Series A convertible preferred stock

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Cash Flows from Operating Activities:

Net (loss) income

Reconciliation of net (loss) income to net cash used in operating activities:

Reconciliation of net loss to net cash used in operating activities:

Allowance for doubtful accounts

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Accretion of debt discount

Loss on disposal of fixed assets

Change in fair value of derivative liabilities

Debt extinguishment gain

Debt extinguishment loss (gain)

Amortization of operating lease right-of-use asset

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Net cash used in operating activities

Cash Flows from Investing Activities:

Purchase of property, plant and equipment

Net cash used in investing activities

Cash Flows from Financing Activities:

Proceeds from issuance of common shares

Proceeds from issuance of notes payable

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Net cash provided by financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

Cash, beginning of the year

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Conversion of Series A convertible preferred stock

Recognize minimum accrued interest

Issuance of common shares from debt redemption

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

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Description of the Business

Charlie’s Holdings, Inc., a Nevada corporation, together with its wholly owned subsidiaries and consolidated variable interest entity (collectively, the “ Company ”, “ we ”), 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 through select distributors, specialty retailers, and third-party online resellers throughout the United States, and in select international markets including 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.

Don Polly is a consolidated variable interest entity, for which the Company is the primary beneficiary, which develops, markets and distributes products containing cannabinoids derived from hemp.

The Company's Common Stock, par value $ 0.001 per share (the " Common Stock "), trades under the symbol "CHUC" on the OTCQB Venture Market.

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The Company had a stockholders’ deficit of $ 1,780,000 at December 31, 2024.

During the year ended December 31, 2023, the Company’s working capital position decreased to $ 332,000 from $ 1,067,000 , as of December 31, 2022.

During the year ended December 31, 2024, the Company’s working capital position decreased to a deficit of $ 1,855,000 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.

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The Company has undergone cost-cutting measures including salary reductions of up to 50% 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 2024, the Company launched SBX, a non-nicotine, disposable vapor product which is not subject to FDA review.

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.

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More generally, FDA’s regulatory initiatives and enforcement priorities regarding ENDS products are unpredictable and continue to evolve, and the Company cannot predict whether FDA’s priorities and review of our premarket submissions will impact our products to a greater degree than our competitors in the industry.

During the fourth quarter of 2023 the Company launched new disposable vape products, under the “SPREE BAR™” brand.

The Company and its attorneys believe SPREE BAR products are not subject to FDA review.

Based on the information provided by the Company’s contracted chemical suppliers and its consultants, the proprietary Metatine™ (patented in the United States and in China by the Company’s chemical supplier) in the Company’s SPREE BAR products does not meet the definition of nicotine set forth in 21 U.S.C.

During the fourth quarter of 2024 the Company launched new disposable vape products, under the “SBX™” brand.

The Company and its attorneys believe SBX products are not subject to FDA review.

Based on the information provided by the Company’s contracted chemical suppliers and its consultants, the proprietary Metatine™ (patented in the United States and in China by the Company’s chemical supplier) in the Company’s SBX products does not meet the definition of nicotine set forth in 21 U.S.C.

§ 387(12) and therefore its products containing Metatine, as their active ingredient, are not subject to regulation as “tobacco products” under 21 U.S.C.

Further, according to information provided by the Company’s chemists, the other ingredients in the Company’s SPREE BAR vape liquid are not made or derived from tobacco, nor do they contain nicotine from any source.

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.

Further, according to information provided by the Company’s chemists, the other ingredients in the Company’s SBX vape liquid are not made or derived from tobacco, nor do they contain nicotine from any source.

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

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.

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, SBX 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.

If this were to happen, the FDA could bring an enforcement action against our Metatine products for lack of premarket authorization.

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Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business in one operating segment.

The following table disaggregates revenue from our single operating segment by geographic market and customer type for the periods ending December 31, 2023 and 2022, respectively:

Geographic Market

International

United States

Customer Type

Recently Adopted Accounting Standards

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued Accounting Standards Update ASU No.

2016‑13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which was codified with its subsequent amendments as ASC Topic 326, Financial Instruments – Credit Losses (“ ASC 326 ”).

ASC 326 seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date.

The amendments require an entity to replace the incurred loss impairment methodology in other GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The adoption of this guidance on January 1, 2023 did not have a material impact on the Company’s consolidated financial statements and disclosures.

Debt – Debt with conversion and Other Options

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.

The ASU is effective for the Company on December 1, 2022, Early adoption is permitted, but no earlier than December 1, 2021.

The Company elected to early adopt this guidance on January 1, 2022 with no impact on its consolidated financial statements and related disclosures.

Earnings per Share

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40).

This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic.

It specifically addresses:

(1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange;

(2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange;

and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange.

This ASU will be effective for all entities for fiscal years beginning after December 15, 2021.

An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments.

Early adoption is permitted, including adoption in an interim period.

On October 1, 2022, the Company adopted this standard with no impact on its consolidated financial statements and related disclosures.

The Company’s chief operating decision maker ( "CODM" ) is the President.

The CODM is the highest level of management responsible for assessing the Company’s overall performance, and making operational decisions such as resource allocations related to operations, product prioritization and delegations of authority.

The CODM has determined that the Company operates in a single operating and reportable segment and manages segment profit (loss) based upon consolidated net income (loss).

The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

Recently Issued Accounting Standards Not Yet Adopted

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 updates segment reporting disclosure requirements and brings about significant changes, particularly in the realm of transparency and accountability within organizations.

The primary thrust of ASU 2023-07 is the inclusion of detailed disclosures regarding significant reportable segment expenses.

These are expenses regularly provided to the Chief Operating Decision Maker (“CODM”) and are integral components of each reported measure reflecting a segment's profit or loss.

Furthermore, the ASU mandates disclosure of the CODM's title, position, and a comprehensive explanation of how the reported measures of segment profit or loss factor into assessing segment performance and resource allocation decisions.

This transparency aims to provide stakeholders with a clearer understanding of the decision-making processes within an organization and how segment performance is evaluated.

Induced Conversions of Convertible Debt Instruments

In November 2024, the FASB, issued ASU 2024-04, Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or extinguishment of convertible debt.

The standard is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods.

The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which is intended to improve disclosures by requiring additional information about specific expense categories in the notes to the financial statements on an annual and interim basis.

The standard will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The standard updates may be applied on either a prospective or retrospective basis.

The Company is currently evaluating the disclosure requirements related to this new standard.

Scope Applications of Profits Interests and Similar Awards

In March 2024, the FASB issued ASU No.

2024-01, “Compensation-Stock Compensation (Topic 718):

Scope Applications of Profits Interests and Similar Awards” (ASU 2024-01).

ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S.

ASU 2024-01 is effective for annual periods beginning after December 15, 2024, although early adoption is permitted.

Upon adoption, ASU 2024-01 is not expected to have an impact on the Company’s consolidated financial statements.

Improvements to Income Tax Disclosures

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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, 2023

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Balance at December 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 December 31, 2023 and 2022 is as follows:

Exercise price

11 unchanged sentences

Changes in fair value are reflected in the Company’s earnings for each reporting period.

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

NOTE 4 – INVENTORY

The components of inventory as of December 31, 2024 and 2023 are summarized as follows:

Finished goods

Raw materials

Overhead allocation

Inventory in transit

inventory reserves

NOTE 5 – PROPERTY AND EQUIPMENT

Property and Equipment detail as of December 31, 2024 and 2023 are as follows (amounts in thousands):

Estimated Useful Life (years)

Estimated Useful Life

Machinery and equipment

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Leasehold improvements

Lesser of lease term or

estimated useful life

Lesser of lease term or estimated useful life

Accumulated depreciation

3 unchanged sentences

For the years ended

During the year ended December 31, 2023, purchases from two vendors represented 61 % of total inventory purchases.

During the year ended December 31, 2024, purchases from three vendors represented 58 % of total inventory purchases.

During the year ended December 31, 2023, purchases from two vendors represented 61 % of total inventory purchases.

Vendor C is an international vendor.

As of December 31, 2024 and 2023, amounts owed to these vendors totaled $ 263,000 and $ 266,000 respectively, which are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

2 unchanged sentences

For the years ended December 31,

Five customers made up more than 10 % of net accounts receivable at December 31, 2023, and two customers made up more than 10 % of net accounts receivable as of December 31, 2022.

Four customers made up more than 10 % of net accounts receivable at December 31, 2024, and five customers made up more than 10 % of net accounts receivable as of December 31, 2023.

No customer exceeded 10% of total net sales for the years ended December 31, 2024 and 2023, respectively.

1 unchanged sentence

Don Polly, LLC is a Nevada limited liability company that is owned by an entity controlled by Ryan Stump, a current executive officer of the Company, and a consolidated variable interest for which the Company is the primary beneficiary.

Don Polly formulates, sells and distributes the Company’s hemp-derived product lines.

Under Don Polly, the Company had previously focused on the research and development and sale of alternative products.

Don Polly is classified as a variable interest entity (“ VIE ”) for which the Company is the primary beneficiary.

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The Company evaluates its relationships with VIE to determine whether it is the primary beneficiary of a VIE at the time it becomes involved with the entity and it re-evaluates that conclusion each reporting period.

Effective April 25, 2019, we began consolidating the financial statements of Don Polly and it is still considered a VIE of the Company.

Effective April 25, 2019, the Company began consolidating the financial statements of Don Polly and it is still considered a VIE of the Company.

Don Polly operates under exclusive licensing and service contracts with the Company whereby the Company receives 100 % of net income, or incurs 100 % of the net loss of the VIE.

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NOTE 9 – NOTES PAYABLE

January 2025 Chemular Secured Promissory Note

On January 7, 2025, the Company issued a secured promissory note (“ Chemular Note ”) to one of its vendors Chemular, Inc.

(“ Chemular ”), in the principal amount of $ 370,000 which will bear interest at the rate of 10 % per annum.

Commencing on January 15, 2025 and continuing on the first (1st) day and the fifteenth (15th) day of each month thereafter until June 15, 2025, (the “ Maturity Date ”), the Company shall pay Ten Thousand Dollars ($ 10,000 ) in accordance with the repayment schedule.

As part of the closing of the Asset Purchase Agreement (see Note 16 – Subsequent Events) on April 16, R.J.

Reynolds Vapor Company wired directly to Chemular approximately $ 319,000 to satisfy the Chemular Note in full.

September 2024 Pinnacle Receivables Financing

On September 6, 2024, the Company entered into a future receivables sale agreement (“ Pinnacle Receivables Financing Agreement ”) with Pinnacle Business Funding (“ Pinnacle ”) by which Pinnacle purchases from the Company its future accounts receivable and contract rights arising from the sale of goods or services to the Company’s customers.

The purchase price, as defined by the Pinnacle Receivables Financing Agreement, was $ 750,000 which was paid to the Company on September 12, 2024, net of a 1 % origination fee.

The Pinnacle Receivables Financing Agreement requires forty equal payments of $ 25,687.50 to be paid weekly for a total repayment of $ 1,027,500 over the term of the agreement.

As of December 31, 2024, the outstanding balance was approximately $ 642,000 .

On April 16 th , 2025 the Company issued a payment of approximately $ 1,250,000 to satisfy all outstanding principal and interest owed to Pinnacle.

By satisfying the balance in full prior to April 16, 2025, the Company was able to secure a discount of approximately $ 99,000 .

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.

On May 31, 2024, as part of the May 2024 capital raise (see Note 11), 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 December 31, 2023, $ 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 May 17, 2024.

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

On April 28, 2025 Ryan Stump and Henry Sicignano III were each paid approximately $ 75,000 of accrued interest and have agreed to modify the Notes to include a 10 % interest rate, with monthly payments of principal and interest of approximately $ 18,000 .

The maturity date has been extended to April 28, 2026.

2023 Receivables Financing

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The Second 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 December 31, 2024, the Company had fully repaid the outstanding principal balance and accrued interest totaling $ 922,500 on its Second Receivables Financing Agreement.

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 11), 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.

On April 28, 2025 the Lender agreed to accept a payment of approximately $ 420,000 and entered into a further modification for the remaining balance that includes monthly payments of approximately $ 37,000 and a maturity date of April 28, 2026.

August 2022 Note Financing – Related Party

7 unchanged sentences

On December 15, 2023, the Company and Stump Lender entered into a fourth modification to the Loan to extend the maturity date to April 15, 2024.

On April 15, 2024 the Company and Stump Lender entered into a fifth modification to the Loan to extend the maturity date to August 21, 2024.

On August 21, 2024 the Company and Stump Lender entered into a sixth modification to the Loan to extend the maturity date to December 31, 2024.

On April 28, 2025, the Company paid to Ryan Stump approximately $ 308,000 to satisfy all outstanding principal and interest due on the Loan entered into August 17, 2022.

Economic Injury Disaster Loan

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For the year ended December 31, 2023, the Company issued approximately 1,183,000 shares of Common Stock upon conversion of 5,242 shares of Series A Preferred.

November 2024 Capital Raise

On November 22, 2024, the Company entered into subscription agreements with investors for the sale of an aggregate of 6,875,000 shares of its common stock, par value $ 0.001 per share, at a purchase price per share of $ 0.08 (the “ November Offering ”).

The Offering generated gross proceeds to the Company of approximately $ 550,000 , which will be used for working capital purposes.

The November 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.

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 “ May Offering ”).

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

The May 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 9).

The Company recognized a $ 75,000 debt extinguishment loss for the year ended December 31, 2024.

NOTE 12 – STOCK-BASED COMPENSATION

2 unchanged sentences

Up to 11,072,542 stock options were originally grantable under the 2019 Plan.

On December 22, 2021, our Board of Directors unanimously adopted resolutions by written consent approving an amendment to increase the number of shares of Common Stock available for issuance under the 2019 Plan by 15.0 million shares, from 11,072,542 to 26,072,542 shares (the “ 2019 Plan Amendment ”).

On December 22, 2021, our Board of Directors unanimously adopted resolutions by written consent approving an amendment to increase the number of shares of Common Stock available for issuance under the 2019 Plan by 15,000,000 shares, from 11,072,542 to 26,072,542 shares (the “ 2019 Plan Amendment ”).

Furthermore, the Company received written consents approving the 2019 Plan Amendment from holders of approximately 50.3 % of our outstanding voting securities.

3 unchanged sentences

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, 2023

5 unchanged sentences

As of December 31, 2024, all stock options were fully vested and no stock-based compensation expense related to the issuance of stock options was recognized.

For the year ended December 31, 2022, the Company recognized approximately $ 11,000 in stock-based compensation expense related to the issuance of stock options.

Restricted Stock Awards

1 unchanged sentence

Number of Shares

Weighted Average Grant Date Fair Value per Share

Weighted Average

Grant Date Fair

Value per Share

Nonvested at January 1, 2023

3 unchanged sentences

Nonvested at December 31, 2024

During the year ended December 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.

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 year ended December 31, 2024, approximately 209,000 RSAs issued to employees were forfeited.

During the year ended December 31, 2023, the Company granted 9,100,000 restricted stock awards (“ RSAs ”) to employees, officers, directors and contractors of the Company pursuant to the 2019 Plan, as amended.

2 unchanged sentences

During the year ended December 31, 2023, approximately 911,000 RSAs issued to employees and contractors were forfeited.

During the year ended December 31, 2022, the Company granted approximately 7,142,000 RSAs to employees, officers and directors of the Company pursuant to the 2019 Plan, as amended.

The RSAs had a grant date fair value of approximately $ 290,000 .

As of December 31, 2024, there was approximately $ 170,000 of total unrecognized compensation expense related to non-vested restricted share-based compensation arrangements granted under the 2019 Plan, as amended.

1 unchanged sentence

The Company recorded total stock-based compensation of approximately $ 230,000 and $ 288,000 during the years ended December 31, 2024 and 2023 related to the RSAs, respectively.

NOTE 13 – SEGMENT AND GEOGRAPHICAL INFORMATION

In November 2023, the Financial Accounting Standards Board, or FASB, issued ASU 2023-07, Segment Reporting:

Improvements in Reportable Segment Disclosures (“ASU No.

The amendments in the ASU are expected to improve disclosures about a public entity’s reportable segments and addresses requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses.

ASU 2023-07 requires public companies to disclose, on an annual and interim basis, significant expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit and loss.

The amendments in the ASU require that a public company provide all annual disclosures about a reportable segment’s profit or loss and assets currently required under ASC 280 in interim periods.

The amendments in the ASU also require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition.

The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss.

The amendments in the ASU, among other items, also requires that a public company disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU applies to all public entities that are required to report segment information in accordance with Topic 280.

All public entities will be required to report segment information in accordance with the new guidance starting in annual periods beginning after December 15, 2023.

The Company adopted ASU 2023-07 effective with the 2024 10-K and the adoption only impacted its disclosures with no impacts to the Company's results of operations, cash flows, or financial condition.

The Company's CODM is its President.

The CODM has determined that the Company operates in a single operating and reportable segment and manages segment performance and resource allocation based upon consolidated net income (loss).

The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

Significant expenses reviewed by the CODM include those that are presented in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table disaggregates revenue from our single operating segment by geographic market and customer type for the periods ending December 31, 2024 and 2023, respectively:

Geographic Market

International

United States

Customer Type

NOTE 14 - COMMITMENTS AND CONTINGENCIES

16 unchanged sentences

David Allen, the Company’s former Chief Financial Officer, after reviewing a detailed analysis of comparable properties and rent rates compiled by an independent, third-party consultant.

Effective October 1, 2024, the lease was on a month-to-month basis.

The total amount paid to related parties for the years ended December 31, 2024 and 2023 was $ 275,280 and $ 275,280 , 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.

The Company is currently operating in this facility on a month to month basis and is working with the landlord to renew the lease.

At December 31, 2024, the Company had operating lease liabilities of approximately $ 73,000 and right of use assets of approximately $ 71,000 , which were included in the consolidated balance sheet.

9 unchanged sentences

Operating cash flows from operating leases

Right-of-use assets exchanged for operating lease liabilities

Weighted-average remaining lease term – operating leases (in years)

2 unchanged sentences

Year Ending December 31, 2025

Less present value discount

1 unchanged sentence

Legal proceedings

As of the date hereof, the Company is not a party to any material legal or administrative proceedings.

There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

From time to time, the Company may be involved in various claims and counterclaims and legal actions arising in the ordinary course of business.

There are not material pending or threatened legal proceedings at this time.

Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.

New Executive Employment Agreement

On June 15, 2023, the Company entered into a new employment agreement with Ryan Stump (the “ New Agreement ”).

Pursuant to the New Agreement, Mr.

Stump will earn a base salary of $ 300,000 per year and serve as Chief Operating Officer for a term of two years, renewable on an annual basis unless earlier terminated by the Company or Mr.

In the event that Mr.

Stump is terminated by the Company without Cause (as defined therein) or for Good Reason (as defined therein), he will be entitled to receive his base salary and benefits for a period of one year.

In the event of a change in control, all unvested equity awards will immediately vest.

Stump has elected to reduce his current compensation to the rate of $ 225,000 annually.

As a point of reference, all the Company’s other executives have also elected to reduce their current compensation.

It is anticipated that, when financial circumstances permit, executive base salaries will revert to their previous levels.

NOTE 15- INCOME TAXES

16 unchanged sentences

Capitalized R&D

Total deferred income tax assets

Gross deferred income tax assets

Deferred income tax liabilities:

24 unchanged sentences

To the extent that a study is completed and additional or future ownership changes are deemed to occur, the Company's net operating losses and tax credits could be further limited.

A reconciliation of the statutory income tax rates and the Company's effective tax rate for the years ended December 31, 2023 2022, are as follows:

A reconciliation of the statutory income tax rates and the Company's effective tax rate for the years ended December 31, 2024 and 2023, are as follows:

Statutory federal income tax rate

22 unchanged sentences

As of December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations.

The Company’s tax years from 2019 and 2018 forward remain open for examination by the Federal and state taxing authorities, respectively.

The Company’s tax years from 2019 and 2018 remain open for examination by the Federal and state taxing authorities, respectively.

In addition, to the extent that the Company's tax attributes are utilized in future years to offset income or income taxes, those years which generated the tax attributes are open and subject to examination by the taxing authorities.

1 unchanged sentence

NOTE 16 - SUBSEQUENT EVENTS

The Company evaluated subsequent events for their potential impact on the consolidated financial statements and disclosures through April 15, 2024, the date the consolidated financial statements were available to be issued, and determined that no subsequent events occurred that were reasonably expected to impact the consolidated financial statements presented herein.

Common and Restricted Stock Issuance

As of April 15, 2024, the Company issued an additional 525,000 shares of restricted stock to new employees and cancelled 50,000 shares of restricted stock related to terminated employees.

As of April 15, 2024, 338,502 shares of common stock were issued related to the conversion of Series Convertible Preferred A stock.

January 2025 Chemular Secured Promissory Note

On January 7, 2025, the Company issued a secured promissory note (“ Chemular Note ”) to one of its vendors Chemular, Inc.

(“ Chemular ”), in the principal amount of $ 370,000 which will bear interest at the rate of 10 % per annum.

As part of the closing of the Asset Purchase Agreement on April 16 (see below), R.J.

Reynolds Vapor Company wired directly to Chemular approximately $ 319,000 to satisfy CHUC's debt in full.

Entry into a Material Definitive Agreement for the Disposition of Assets

On April 16, 2025, the Company entered into and closed an Asset Purchase Agreement (the “ Agreement ”) with R.J.

Reynolds Vapor Company (the “ Buyer ”) pursuant to which the Buyer purchased twelve of the Company’s PACHA synthetic products and related assets (the “ Assets ”) that are covered by a premarket tobacco application (“ PMTA ”) first submitted by the Company in 2022.

The purchase price for the Assets was $ 5.0 million paid at closing, plus a contingent one-time payment of up to $ 4.2 million based on product sold by the Buyer during the one year following the first day of commercialization of the Assets.

The Agreement contains customary representations, warranties, and indemnities by each of the parties.

Company Receives FDA PMTA Acceptance Filings for Eleven PACHA ™ Flavored Disposables

On March 4, 2025 the Company announced that the Center for Tobacco Products of the U.S.

Food and Drug Administration ( "FDA" ) informed Charlie’s that eleven (11) of Charlie's best-selling flavored PACHA Disposables Pre-Market Tobacco Applications ( "PMTAs" ) received Acceptance Filings.

To date, no company in the world has received an FDA marketing order for a flavored (non-tobacco or non-menthol) disposable vape product.

Charlie's has received Acceptance Filings for more than 700 of its PMTA submissions.

Repayment of Pinnacle Receivables Financing Agreement

On April 16 th , 2025 the Company issued a payment of approximately $ 1,250,000 to satisfy all outstanding principal and interest owed to Pinnacle.

By satisfying the balance in full prior to April 16, 2025, the Company was able to secure a discount of approximately $ 99,000 .

Modification of Ryan Stump and Henry Sicignano III Promissory Notes

On April 28, 2025 Ryan Stump and Henry Sicignano III were each paid approximately $ 75,000 of accrued interest and have agreed to modify their Notes to include a 10 % interest rate, with monthly payments of principal and interest of approximately $ 18,000 .

The maturity date has been extended to April 28, 2026.

(Exhibit 10.15)

Repayment of August 17, 2022 Loan From Ryan Stump

On April 28, 2025, the Company paid to Ryan Stump approximately $ 308,000 to satisfy all outstanding principal and interest due on the Loan entered into August 17, 2022.

Modification of April 22, 2022 Loan From Michael King

On April 28, 2025 Michael King, a current member of the Company’s Board of Directors, agreed to accept a payment of approximately $ 420,000 and entered into a further modification for the remaining balance that includes monthly payments of approximately $ 37,000 and a maturity date of April 28, 2026.

(Exhibit 10.17)

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-K

Item 9A. Controls and Procedures