What changed in this filing

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Item 1. Financial Statements

2025-11-19 compared with 2025-08-21 · 296 added, 229 removed, 619 unchanged (46% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

17 unchanged sentences

Note payable, net of current portion

Lease liabilities, net of current portion

Total non-current liabilities

5 unchanged sentences

Series A, 300,000 shares designated;

122,366 and 122,930 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

94,278 and 122,930 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Series B, 1,500,000 shares designated;

0 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

0 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Common stock ($ 0.001 par value);

500,000,000 shares authorized;

259,946,903 and 257,286,631 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

270,568,616 and 257,286,631 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

7 unchanged sentences

For the three months ended

For the six months ended

For the nine months ended

September 30,

Product revenue, net

Total revenues

Cost of goods sold

Operating costs and expenses:

Cost of goods sold - product revenue

General and administrative

7 unchanged sentences

Change in fair value of derivative liabilities

Gain on sale of PMTA assets

Gain on sale of intellectual property

Total other income (loss)

8 unchanged sentences

(in thousands)

For the Three Months Ended June 30, 2025

For the Three Months Ended September 30, 2025

Convertible Preferred Stock

2 unchanged sentences

Equity (Deficit)

Balance at April 1, 2025

Balance at July 1, 2025

Conversion of Series A convertible preferred stock

Warrants exercised for vendor credit

Stock compensation

Forfeiture of restricted stock awards

Balance at June 30, 2025

For the Three Months Ended June 30, 2024

Balance at September 30, 2025

For the Three Months Ended September 30, 2024

Convertible Preferred Stock

1 unchanged sentence

Paid-in Capital

Balance at April 1, 2024

Issuance of common shares for cash

Issuance of common shares from debt redemption

Balance at July 1, 2024

Forfeiture of restricted stock awards

Stock compensation

Balance at June 30, 2024

For the Six Months Ended June 30, 2025

Balance at September 30, 2024

For the Nine Months Ended September 30, 2025

Convertible Preferred Stock

4 unchanged sentences

Conversion of Series A convertible preferred stock

Warrants exercised for vendor credit

Stock compensation

1 unchanged sentence

Issuance of warrant in connection with a settlement of accounts payable

Balance at June 30, 2025

For the Six Months Ended June 30, 2024

Balance at September 30, 2025

For the Nine Months Ended September 30, 2024

Convertible Preferred Stock

7 unchanged sentences

Stock compensation

Balance at June 30, 2024

Balance at September 30, 2024

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

2 unchanged sentences

(in thousands)

For the six months ended

For the nine months ended

September 30,

Cash Flows from Operating Activities:

Net income (loss)

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

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

Allowance for doubtful accounts

5 unchanged sentences

Stock based compensation

Gain on sale of PMTA assets

Gain on sale of intellectual property

Subtotal of non-cash charges

7 unchanged sentences

Cash Flows from Investing Activities:

Proceeds from sale of PMTA assets

Proceeds from sale of intellectual property

Net cash provided by investing activities

2 unchanged sentences

Proceeds from issuance of notes payable

Proceeds from issuance of notes payable to related party

Repayment of notes payable

Proceeds from issuance of notes payable to related party

Repayment of notes payable to related party

6 unchanged sentences

Cash paid for interest to related party

Cash paid for income taxes

Supplemental disclosure of cash flow information

Conversion of Series A convertible preferred stock

Exchange accounts payable with a note payable and warrants

Issuance of common shares from debt redemption

Exchange accounts payable with a note payable

Issuance of warrant for settlement of accounts payable

Warrants exercised for vendor credit

Right-of-use asset recognized in exchange for lease liability

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 and alternative alkaloid vapor 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 six primary countries worldwide.

In Q4 2025 the Company intends to begin manufacturing certain of its products in a Company operated facility located in the United States.

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 other alternative products.

In October 2025, the Company’s Board of Directors unanimously approved a resolution to wind down and close permanently the Don Polly division.

(See Subsequent Events.)

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

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

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company operates in a rapidly changing legal and regulatory environment;

new laws and regulations or changes to existing laws and regulations could significantly limit the Company’s ability to sell its products, and/or result in additional costs.

Additionally, the Company was required to obtain approval from the United States Food and Drug Administration (“ FDA ”) to continue selling and marketing certain of products used for the vaporization of nicotine in the United States.

For the six months ended June 30, 2025, the Company’s revenue declined.

The Company generated a loss from operations of approximately $ 1,703,000 , and had a consolidated net income of approximately $ 3,744,000 .

Substantial Doubt to Continue as a Going Concern

Our consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

For the nine months ended September 30, 2025, the Company’s revenue increased, the Company generated loss from operations of approximately $ 2,042,000 , and a consolidated net income of approximately $ 4,368,000 .

Net cash used in operating activities was approximately $ 6,172,000 .

The Company had a stockholders’ equity of $ 2,190,000 at June 30, 2025.

During the six months ended June 30, 2025, the Company’s working capital was increased to $ 2,211,000 from deficit of $ 1,855,000 as of December 31, 2024.

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

During the second quarter of 2025, the Company entered into and closed an Asset Purchase Agreement (the “ Agreement ”) and subsequent amendment with R.J.

The Company had a stockholders’ equity of $ 3,239,000 at September 30, 2025.

During the nine months ended September 30, 2025, the Company’s working capital was increased to $ 3,079,000 from a deficit of $ 1,855,000 as of December 31, 2024.

Given these factors, there remains a substantial doubt about the Company’s ability to continue as a going concern.

During the nine months ended September 30, 2025, the Company entered into and closed an Asset Purchase Agreement (the “ Agreement ”) and subsequent amendment with R.J.

Reynolds Vapor Company (the “ Buyer ”) pursuant to which the Buyer purchased 16 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 combined purchase price for the Assets was $ 6.5 million paid at closings in April and May 2025, 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 combined purchase price for the Assets was $ 6.5 million paid at closings in April and May 2025, and an additional $ 1.0 million paid at closings in August 2025, 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.

These asset sales have substantially improved the Company’s debt and working capital short-term concerns, and the Company’s cash position.

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including the cumulative expenditures related to our premarket tobacco product application (“ PMTA ”) process of obtaining FDA approval.

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 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.

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts.

The Company may require additional financing in the future to support the development of new product categories as well as general operations.

There can be no assurance that additional financing will be available on acceptable terms, or at all, and there can be no assurance that any such arrangement, if required or otherwise sought, would be available on terms deemed to be commercially acceptable and, in the Company’s best interests.

5 unchanged sentences

Federal, state, and local governmental bodies across the United States have indicated that flavored e-cigarette liquid, vaporization products and certain other consumption accessories may become subject to new laws and regulations at the federal, state, and local levels.

In addition, in June 2022, the FDA announced a plan to reduce nicotine levels in cigarettes to minimally or non-addictive levels.

In addition, in September 2022, the FDA announced a plan to reduce nicotine levels in cigarettes to minimally or non-addictive levels.

The application of any new laws or regulations that may be adopted in the future, at a federal, state, or local level, directly or indirectly implicating nicotine, flavored e-cigarette liquid and other electronic nicotine delivery system (“ ENDS ”) products, could significantly limit the Company’s ability to sell such products, result in additional compliance expenses, and/or require the Company to change its labeling and/or methods of distribution.

13 unchanged sentences

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

The Company continues to sell the affected synthetic nicotine products while the PMTA review process continues.

The FDA may bring an enforcement action against our synthetic nicotine products for lack of premarket authorization and/or issue an MDO to our pending applications at any time.

On October 28, 2025, the Company received an MDO from the FDA with respect to certain of our timely-submitted PMTAs.

On November 5, 2025, the Company filed a motion for a temporary administrative stay with the United States Court of Appeals for the Fifth Circuit.

On November 10, 2025, the Court granted the Company’s opposed motion for a temporary administrative stay pending resolution of our forthcoming stay motion.

Though a very small percentage of our current sales are related to our affected PMTA Products, we intend to promptly seek a preliminary injunction to remain in effect during the pendency of the litigation, and we plan to vigorously defend our PMTAs and pursue all available legal remedies.

The FDA may bring an enforcement action against our synthetic nicotine products for lack of premarket authorization and/or issue an MDO to our other pending applications at any time.

More generally, FDA’s regulatory initiatives and enforcement priorities regarding ENDS products are unpredictable and continue to evolve, and we 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.

In the event the FDA denies our PMTAs, we would be required to remove products and cease selling them.

In the event the FDA denies our PMTAs, absent a court-ordered stay, we would be required to remove products and cease selling them.

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

4 unchanged sentences

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, 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.

However, 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.

More generally, FDA’s regulatory initiatives and enforcement authority regarding our products are unpredictable and continue to evolve and we cannot predict whether FDA’s priorities and/or potential jurisdiction over our products will require us to remove our products from the market and to cease selling them.

More generally, FDA’s regulatory initiatives and enforcement authority regarding our products are unpredictable and continue to evolve and we cannot predict whether FDA’s priorities and/or potential jurisdiction over our products will prompt the Agency to attempt to require us to remove our products from the market and to cease selling them.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

31 unchanged sentences

Recently Issued Accounting Standards, Not Yet Adopted

Intangibles - Goodwill and Other - Internal-Use Software

In September 2025, the FASB issued ASU No.

2025-06, Intangibles - Goodwill and Other - Internal-Use Software (“ASU 2025-06”), which amends the guidance for accounting for software costs to reflect current software development practices, including iterative and agile methodologies, by removing references to development stages.

It also clarifies the criteria for capitalization, which begins when both of the following occur:

(1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed, and the software will be used to perform the function intended.

ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years.

Early adoption is permitted.

The amendments may be applied either prospectively, retrospectively, or utilizing a modified transition approach.

The Company is currently assessing the impact of ASU 2025-06 on its condensed consolidated financial statements and disclosures.

Induced Conversions of Convertible Debt Instruments

25 unchanged sentences

These assets and liabilities are not remeasured at each reporting period.

As of June 30, 2025 and December 31, 2024, the Company did not have any Level 1, 2 or 3 assets or liabilities measured on a recurring basis.

As of September 30, 2025 and December 31, 2024, the Company did not have any Level 1, 2 or 3 assets, liabilities or debt instrument at fair value measured on a recurring basis.

NOTE 4 – INVENTORY

The components of inventory as of June 30, 2025 and December 31, 2024 are summarized as follows:

The components of inventory as of September 30, 2025 and December 31, 2024 are summarized as follows:

September 30,

Finished goods

4 unchanged sentences

NOTE 5 – PROPERTY AND EQUIPMENT

Depreciation and amortization expense totaled $ 25,000 and $ 66,000 , respectively, during the six months ended June 30, 2025 and 2024.

Property and equipment as of June 30, 2025 and December 31, 2024, are as follows (dollar amounts in thousands):

Estimated Useful Life

Depreciation and amortization expense totaled $ 33,000 and $ 90,000 , respectively, during the nine months ended September 30, 2025 and 2024.

Property and equipment as of September 30, 2025 and December 31, 2024, are as follows (dollar amounts in thousands):

September 30,

Machinery and equipment

2 unchanged sentences

Leasehold improvements

Lesser of lease term or estimated useful life

Accumulated depreciation

2 unchanged sentences

For the three months

For the six months

ended June 30,

During the three months ended June 30, 2025 and 2024, purchases from six vendors represented 77 % and 86 %, respectively, of total inventory purchases.

During the six months ended June 30, 2025 and 2024, purchases from five vendors represented 71 % and 67 %, respectively, of total inventory purchases.

As of June 30, 2025, and December 31, 2024, amounts owed to these vendors totaled $ 673,000 and $ 539,000 respectively, which are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

For the nine months

ended September 30,

During the three months ended September 30, 2025 and 2024, purchases from three vendors represented 79 % and four vendors represented 94 %, respectively, of total inventory purchases.

During the nine months ended September 30, 2025 and 2024, purchases from five vendors represented 77 % and 67 %, respectively, of total inventory purchases.

As of September 30, 2025, and December 31, 2024, amounts owed to these vendors totaled $ 1,210,000 and $ 539,000 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:

June 30, 2025

September 30, 2025

December 31, 2024

Three customers made up more than 88 % of net accounts receivable at June 30, 2025.

Four customers made up more than 36 % of net accounts receivable at September 30, 2025.

Four customers made up more than 81 % of net accounts receivable at December 31, 2024.

No customer exceeded 10% of total net sales for the three month period ended June 30, 2025 and 2024, respectively.

No customer exceeded 10% of total net sales for the three and nine month periods ended September 30, 2025 and 2024, respectively.

NOTE 7 – DON POLLY, LLC

11 unchanged sentences

There are no non-controlling interests recorded.

In October 2025, the Company’s Board of Directors unanimously approved a resolution to wind down and close permanently the Don Polly division.

(See Subsequent Events.)

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of June 30, 2025 and December 31, 2024, are as follows (amounts in thousands):

Accounts payable and accrued expenses as of September 30, 2025 and December 31, 2024, are as follows (amounts in thousands):

September 30,

Accounts payable

10 unchanged sentences

(“ Chemular ”) to settle the outstanding accounts payable of $ 495,000 , in the principal amount of $ 370,000 which bears 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 $ 10,000 in accordance with the repayment schedule.

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

The Company also issued 3,700,000 warrants (“ Chemular Warrants ”) to Chemular in conjunction with the Chemular Note.

On September 24, 2025, the Vendor exercised the Warrants entirely.

The Vendor issued the Company a $ 370,000 vendor credit as the purchase price consideration for the warrant exercise.

The Company recognized the $ 370,000 vendor credit in prepaid expenses and other current assets on the consolidated balance sheet as of September 30, 2025.

The fair value of the Chemular Warrants was $ 148,000 as of the issuance date (see Note 11).

As a result, the Company recognized a debt extinguishment loss of $ 23,000 during the three months ended June 30, 2025.

As a result, the Company recognized a debt extinguishment loss of $ 23,000 during the nine months ended September 30, 2025.

As part of the closing of the Asset Purchase Agreement on April 16, 2025, R.J.

1 unchanged sentence

September 2024 and January 2025 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.

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 purchased from the Company its future accounts receivable and contracted 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.

On January 10, 2025, the Company entered into another future receivables sale agreement (“ Amended Pinnacle Receivables Financing Agreement ”) with Pinnacle pursuant to which Pinnacle restructured the existing Pinnacle Receivables Financing Agreement as described the above by amending the outstanding amount to $ 1,644,000 for gross proceeds to the Company of $ 1,188,000 , less the outstanding balance under the Pinnacle Receivables Financing Agreement of $ 591,000 , resulting in net proceeds to the Company of $ 597,000 .

The Amended Pinnacle Receivables Financing Agreement shall be repaid by the Company in 52 weekly installments of $ 31,615 .

The amendment to the Pinnacle Receivables Financing Agreement was accounted for as a debt extinguishment, which resulted a debt extinguishment loss of approximately $ 126,000 during the six months ended June 30, 2025.

The Pinnacle Receivables Financing Agreement required 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.

On January 10, 2025, the Company entered into another future receivables sale agreement (“ Amended Pinnacle Receivables Financing Agreement ”) with Pinnacle pursuant to which Pinnacle restructured the existing Pinnacle Receivables Financing Agreement as described above by amending the outstanding amount to $ 1,644,000 for gross proceeds to the Company of $ 1,188,000 , less the outstanding balance under the Pinnacle Receivables Financing Agreement of $ 591,000 , resulting in net proceeds to the Company of $ 597,000 .

The Amended Pinnacle Receivables Financing Agreement was to be repaid by the Company in 52 weekly installments of $ 31,615 .

The amendment to the Pinnacle Receivables Financing Agreement was accounted for as a debt extinguishment, which resulted in a debt extinguishment loss of approximately $ 126,000 during the nine months ended September 30, 2025.

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

2 unchanged sentences

Between July 17, 2023 and August 1, 2023, the Company issued unsecured promissory notes (the “ Notes ”) to several of its executives and employees, Ryan Stump, Henry Sicignano III, Keith Stump, and Jessica Greenwald, and to three of its largest stockholders, Brandon Stump, Red Beard Holdings LLC, and Michael King (the “ Lenders "), in the cumulative principal amount of $ 1,400,000 .

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

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

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

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.

As of June 30, 2025, approximately $ 336,000 of the Notes remained outstanding.

April 2022 Note Financing

On April 6, 2022, the Company issued a secured promissory note (the “ Note ”) to one of its large individual stockholders, Michael King (the “ Lender "), in the principal amount of $ 1,000,000 , which Note is secured by accounts receivable of the Company pursuant to the terms of a Security Agreement entered into by and between the Company and the Lender (the " Note Financing ").

On April 28, 2025, Ryan Stump and Henry Sicignano III were each paid approximately $ 75,000 of accrued interest and 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 was extended to April 28, 2026.

As of September 30, 2025, approximately $ 238,000 of the Notes remained outstanding.

Secured Promissory Notes

On April 6, 2022, the Company issued a secured promissory note (the “ Note ”) to one of its large individual stockholders, Michael King (the “ Lender "), in the principal amount of $ 1,000,000 , which Note was secured by accounts receivable of the Company pursuant to the terms of a Security Agreement entered into by and between the Company and the Lender (the " Note Financing ").

On September 28, 2022, the Company and the Lender entered into a modification to the Note to extend the maturity date to March 28, 2023 and the Company paid all accrued interest under the Note through such date.

On March 28, 2023, the Company entered into a second modification to the Note to extend the maturity date to March 28, 2025, contingent upon the payment of all interest accrued under the Note through March 28, 2023 and certain other modifications to the Note.

Principal shall be payable on the 28th day of each month in installments of $ 25,000 , commencing April 28, 2023, continuing up to and including March 28, 2025 whereby a balloon payment for the remaining principal balance will be paid.

Interest shall accrue on the aggregate outstanding principal amount at a rate equal to 20 % simple interest per annum and shall be payable on the same day as installments of principal are payable.

The Company may prepay all or any portion of the principal amount, together with all accrued but unpaid interest thereon, at any time without premium or penalty.

All outstanding principal and interest are due earlier of March 28, 2025, or a liquidity event.

Principal was to be paid on the 28th day of each month in installments of $ 25,000 , commencing April 28, 2023, continuing up to and including March 28, 2025 whereby a balloon payment for the remaining principal balance would be paid.

Interest would accrue on the aggregate outstanding principal amount at a rate equal to 20 % simple interest per annum and would be payable on the same day as the installments of principal are payable.

The Company could prepay all or any portion of the principal amount, together with all accrued but unpaid interest thereon, at any time without premium or penalty.

All outstanding principal and interest were due the earlier of March 28, 2025, or upon a liquidity event.

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

1 unchanged sentence

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.

As of June 30, 2025, approximately $ 339,000 of the Note remained outstanding.

As of September 30, 2025, approximately $ 243,000 of the Note remained outstanding.

On August 6, 2025, the Company issued an additional secured promissory note (the “ August Note ”) to the Lender in the principal amount of $ 2,000,000 , which is secured by accounts receivable of the Company pursuant to the terms in the same Note Financing.

The August Note bears an annual interest rate of 13 % and has a term of one year.

August 2022 Note Financing – Related Party

On August 17, 2022, the Company and its Chief Operating Officer and Director, Ryan Stump (the " Stump Lender ") entered into a loan agreement (the “ Loan ”) in the principal amount of $ 300,000 .

The Loan will be due in full in 120 days or sooner if, before the end of term, the Company secures (i) new debt financing or (ii) sufficient PMTA strategic partnership funds.

The Loan bears an annual interest rate of 10 %.

The Loan was due in full in 120 days or sooner if, before the end of term, the Company secured (i) new debt financing or (ii) sufficient PMTA strategic partnership funds.

The Loan bore an annual interest rate of 10 %.

The Company also incurred an additional $ 3,000 issuance cost resulting from the payment of the Stump Lender’s legal fees.

On December 17, 2022, the Company and Stump Lender entered into a modification to the Loan to extend the maturity date to April 16, 2023, and the Company has paid all accrued interest under the Loan through such date.

On December 17, 2022, the Company and Stump Lender entered into a modification to the Loan to extend the maturity date to April 16, 2023, and the Company paid all accrued interest under the Loan through such date.

On April 13, 2023, the Company and Stump Lender entered into a second modification to the Loan to extend the maturity date to August 14, 2023.

2 unchanged sentences

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 August 21, 2024, the Company and Stump Lender entered into a nineth 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

On June 24, 2020, SBA authorized (under Section 7(b) of the Small Business Act, as amended) an Economic Injury Disaster Loan (“ EID Loan ”) to Don Polly in the amount of $ 150,000 .

On September 24, 2020, SBA authorized (under Section 7(b) of the Small Business Act, as amended) an Economic Injury Disaster Loan (“ EID Loan ”) to Don Polly in the amount of $ 150,000 .

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 June 30, 2025 ( amounts in thousands):

Six Months Ending December 31, 2025

The following summarizes the Company’s notes payable maturities as of September 30, 2025 ( amounts in thousands):

Three Months Ending December 31, 2025

Year Ending December 31, 2026

8 unchanged sentences

For the three months ended

For the six months ended

For the nine months ended

September 30,

Net income (loss) - basic and diluted

5 unchanged sentences

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

For the six months ended

For the nine months ended

September 30,

Series A convertible preferred shares

All common stock options and common stock purchase warrants outstanding as of June 30, 2025 were out of the money and were not included in net earnings per share calculation.

All common stock options outstanding as of September 30, 2025 were out of the money and were not included in net earnings per share calculation.

NOTE 11 – STOCKHOLDERS ’ EQUITY

Conversion of Series A Preferred Shares

During the six months ended June 30, 2025, the Company issued approximately 127,000 shares of Common Stock upon conversion of 564 shares of Series A Preferred.

During the nine months ended September 30, 2025, the Company issued approximately 6,465,000 shares of Common Stock upon conversion of 28,652 shares of Series A Preferred.

Common Stock Warrants

On January 7, 2025, the Company issued 3,700,000 warrants along with a promissory note to a third-party vendor to settle the outstanding accounts payable.

On January 7, 2025, the Company issued 3,700,000 warrants (the “Warrants”) along with a promissory note to a third-party vendor (the “Vendor”) to settle the outstanding accounts payable.

Each warrant entitles the holder to purchase one share of the Company’s common stock at an exercise price of $ 0.10 per share.

The warrants vest immediately, and are exercisable through December 30, 2027, and are subject to the terms and conditions of the warrant agreement.

On September 24, 2025, the Vendor exercised the Warrants entirely.

The Vendor issued the Company a $ 370,000 vendor credit as the purchase price consideration for the warrant exercise.

The Company recognized the $ 370,000 vendor credit in prepaid expenses and other current assets on the consolidated balance sheet as of September 30, 2025.

The fair value of the warrants on the issuance date was $ 148,000 and was determined using the Black-Scholes option pricing model with the following assumptions:

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Non-Qualified Stock Options

The following table summarizes stock option activities during the three months ended June 30, 2025 (all option amounts are in thousands):

The following table summarizes stock option activities during the three months ended September 30, 2025 (all option amounts are in thousands):

Stock Options

Weighted Average

Exercise Price

Weighted Average

Remaining Contractual

Life (in years)

Intrinsic Value

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Options forfeited/expired

Outstanding at June 30, 2025

Options vested and exercisable at June 30, 2025

Outstanding at September 30, 2025

Options vested and exercisable at September 30, 2025

Restricted Stock Awards

The following table summarizes restricted stock awards activities during the six months ended June 30, 2025 (all share amounts are in thousands):

The following table summarizes restricted stock awards activities during the nine months ended September 30, 2025 (all share amounts are in thousands):

Number of Shares

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Restricted stock granted

Nonvested at June 30, 2025

During the six months ended June 30, 2025, the Company granted 2,600,000 restricted stock awards (“ RSAs ”) to employees of the Company pursuant to the 2019 Plan, as amended.

Nonvested at September 30, 2025

During the nine months ended September 30, 2025, the Company granted 3,200,000 restricted stock awards (“ RSAs ”) to employees 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 $ 126,000 .

During the six months ended June 30, 2025, approximately 67,000 RSAs issued to employees were forfeited.

As of June 30, 2025, there was approximately $ 154,000 of total unrecognized compensation expense related to non-vested restricted share-based compensation arrangements granted under the 2019 Plan, as amended.

During the nine months ended September 30, 2025, approximately 83,000 RSAs issued to employees were forfeited.

As of September 30, 2025, there was approximately $ 153,000 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 2.85 years.

The Company recorded total stock-based compensation of approximately $ 79,000 and $ 117,000 during the six months ended June 30, 2025 and 2024 related to the RSAs, respectively.

The Company recorded total stock-based compensation of approximately $ 133,000 and $ 173,000 during the nine months ended September 30, 2025 and 2024 related to the RSAs, respectively.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

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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.

The Williamsville Lease has been subsequently extended for additional one-year periods, with the same terms.

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

The Williamsville Lease was evaluated and approved by the Company’s Board of Directors.

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

The total rent paid to related parties for the six months ended June 30, 2025 and 2024 was approximately $ 138,000 and $ 138,000 , respectively.

The total rent paid to related parties for the nine months ended September 30, 2025 and 2024 was approximately $ 207,000 and $ 207,000 , respectively.

Effective June 2, 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 June 30, 2025, the Company had no operating lease liabilities in the condensed consolidated balance sheet.

All leases were accounted as short-term lease.

The following table summarizes quantitative information about the Company’s operating leases for the three and six months ended June 30, 2025 and 2024 (amounts in thousands):

On August 12, 2025, the Company renewed this lease for an additional three years commencing on September 1, 2025 and ending August 31, 2028.

The renewal resulted in an additional $ 583,000 in right-of-use assets and $ 583,000 in lease liabilities.

At September 30, 2025, the Company had operating lease liabilities of approximately $ 570,000 and right of use assets of approximately $ 569,000 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 nine months ended September 30, 2025 and 2024 (amounts in thousands):

For the three months ended

For the six months ended

For the nine months ended

September 30,

Operating leases

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Total rent expense

Maturities of our operating leases as of June 30, 2025, excluding short-term leases, are as follows (amounts in thousands):

For the six months ended

Maturities of our operating leases as of September 30, 2025, excluding short-term leases, are as follows (amounts in thousands):

For the nine months ended

September 30,

Right of use assets exchanged for new operating lease liabilities

Operating cash flows from operating leases

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New Executive Employment Agreement

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

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

Pursuant to the New Agreement, Mr.

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NOTE 14 – INCOME TAXES

Income taxes for the three months ended June 30, 2025 and June 30, 2024 have been calculated based on an estimated annual effective tax rate.

For the three months ended June 30, 2025, the Company recorded a tax expense of approximately $ 426,000 .

The Company’s income tax expense for the three months ended June 30, 2025 was related to current year projected income that is not eligible to be offset with prior year tax attribute carryovers.

The Company’s income tax expense for the three months ended June 30, 2024 was determined not to be significant and therefore no expense was recorded in the Company's condensed consolidated financial statements and related disclosures.

Income taxes for the three months ended September 30, 2025 and September 30, 2024 have been calculated based on an estimated annual effective tax rate.

For the three months ended September 30, 2025, the Company did not record an income tax expense.

The Company’s income tax expense for the three months ended September 30, 2025 was related to current year projected income that is not eligible to be offset with prior year tax attribute carryovers.

Income tax expense is comprised of domestic (US federal and state) income taxes at the applicable tax rates, adjusted for non-deductible expenses, stock compensation expenses, and other permanent differences.

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However, due to the full valuation allowance on our deferred tax assets, the net impact to our overall income tax expense is limited.

For the six months ended June 30, 2025, we recorded a tax expense of approximately $ 426,000 .

The Company’s income tax expense for the six months ended June 30, 2025 was related to current year projected income that is not eligible to be offset with prior year tax attribute carryovers.

For the six months ended June 30, 2024, our tax expense was determined not to be significant and therefore wasn't included in the Company's condensed financial statements and related disclosures.

For the nine months ended September 30, 2025, we recorded a tax expense of approximately $ 426,000 .

The Company’s income tax expense for the nine months ended September 30, 2025 was related to current year projected income that is not eligible to be offset with prior year tax attribute carryovers.

For the nine months ended September 30, 2024, our tax expense was determined not to be significant and therefore wasn't included in the Company's condensed financial statements and related disclosures.

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage points (by value) in the ownership of its equity over a three-year period), the corporation’s ability to use its pre-change tax attributes to offset its post change income may be limited.

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NOTE 15 – SUBSEQUENT EVENTS

Completion of Acquisition or Disposition of Assets

On August 8, 2025, Charlie's Holdings, Inc.

(the "Company" ) entered into and closed on an Amendment to the Asset Purchase Agreement (the “ Amendment ”) with R.

Reynolds Vapor Company (the “ Buyer ”) pursuant to which the Buyer purchased one additional PACHA synthetic product and related asset (the “ Additional Assets ”) that are covered by a premarket tobacco application (“ PMTA ”) first submitted by the Company in 2022, bringing the total purchased by the Buyer to sixteen.

The purchase price for the Additional Assets was $ 1.0 million paid at closing.

Discontinuation of Don Polly Business Operations

On October 7, 2025, the Company’s Board of Directors unanimously approved a resolution to wind down and close permanently the Don Polly division, the Company’s variable interest entity.

Company Secures More Than $6MM in Sales During NACS Show;

$4.4 million SBX purchase is the single largest sale in Charlie's history

On October 23, 2025, we reported that the Company secured more than $ 6 million in purchase orders during the National Association of Convenience Stores ("NACS") National Show in Chicago;

one customer placed a cash deposit with a $ 4.4 million SBX purchase order.

This is the single largest sale in Charlie's history.

SBX is greatly expanding Charlie's retail distribution through chain convenience stores that wish to carry flavored disposable vapes that are not in violation of the FDA's PMTA review process.

Early SBX sales continue to exceed Company expectations.

Marketing Denial Orders and Court-granted Administrative Stay on Certain Premarket Tobacco Applications

On October 28, 2025, we received a Marketing Denial Order (“MDO”) from the U.S.

Food and Drug Administration with respect to certain of our timely-submitted Premarket Tobacco Product Applications (“PMTAs”).

On November 5, 2025, we filed a motion for a temporary administrative stay with the United States Court of Appeals for the Fifth Circuit.

On November 10, 2025, the Court granted our opposed motion for a temporary administrative stay pending resolution of our forthcoming stay motion.

We intend to promptly seek a preliminary injunction to remain in effect during the pendency of the litigation.

Though a very small percentage of our current sales are related to our affected PMTA Products, we plan to vigorously defend our PMTAs and pursue all available legal remedies.

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

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The Company’s objective is to become a leader in two broad product categories:

(i) non-combustible nicotine-related products, and (ii) alternative alkaloid vapor products.

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

(i) non-combustible nicotine-related products, and (ii) alternative alkaloid (non-nicotine) vapor products.

Through our Charlie’s subsidiary, we formulate, market, and distribute premium, nicotine-based and alternative alkaloid (non-nicotine) 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 in select international markets.

In Q4 2025 the Company intends to begin manufacturing certain of its products in a Company operated facility located in the United States.

Operational Plan

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By investing an additional $1.2 million in Q4 2024 to amend and enhance certain of our 2022 PMTA submissions, we maintained our commitment to full regulatory compliance, and we enhanced the strategic value of our PMTA portfolio.

On October 28, 2025, we received a Marketing Denial Order (“MDO”) from the U.S.

Food and Drug Administration with respect to CERTAIN OF our timely-submitted Premarket Tobacco Product Applications (“PMTAs”).

On November 5, 2025, we filed a motion for a temporary administrative stay with the United States Court of Appeals for the Fifth Circuit.

On November 10, 2025, the Court granted our opposed motion for a temporary administrative stay pending resolution of our forthcoming stay motion.

We intend to promptly seek a preliminary injunction to remain in effect during the pendency of the litigation.

Though a very small percentage of our current sales are related to our affected PMTA Products, we plan to vigorously defend our PMTAs and pursue all available legal remedies.

The Company believes Charlie’s 650+ PMTAs, as a stand-alone asset, have a monetary value that far exceeds Charlie’s current market cap.

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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 develop new distribution partnerships in order to grow our nicotine disposable business in 2025.

We believe that our substantial investments in FDA regulatory compliance make Charlie’s an attractive partner in this space.

Charlie's has received FDA Acceptance Filings for more than 650 PMTAs.

By investing an additional $1.2 million in Q4 2024 to amend and enhance certain of our 2022 PMTA submissions, we maintained our commitment to full regulatory compliance and we enhanced the strategic value of our PMTA portfolio.

The Company believes Charlie’s 650+ PMTAs, as a stand-alone asset, have a monetary value that far exceeds Charlie’s current market cap.

In total, Charlie’s has invested more than $6.5 million on the submission of Premarket Tobacco Applications (“ PMTAs ”) and subsequent amendments to these applications to the FDA.

We engaged a team of more than 200 professionals, including doctors, scientists, biostatisticians, data analysts, and numerous contract research organizations to create Charlie’s comprehensive PMTA submissions.

Notwithstanding Charlie’s meaningful and costly regulatory initiatives – and even though hundreds of other companies across the United States invested hundreds of millions of dollars to submit more than 26 million PMTAs – to date, the FDA has authorized only 34 tobacco-flavored (and a handful of menthol) e-cigarette products and devices.

Accordingly, even though former FDA Commissioner Dr.

Scott Gottlieb described e-cigarettes as far lower on the “continuum of risk” than combustible cigarettes, fewer than 1% of the PMTA’s for e-cigarette products and devices have survived FDA’s regulatory gauntlet.

These innovative product formats continue to represent an important product category for Charlie’s and we intend to develop new distribution partnerships in order to grow our nicotine disposable business in 2025-26.

As evidenced by our PMTA Products sales for $7.5 million plus $4.2 million in contingent payments with one of the world’s largest “Big Tobacco” companies, we believe that our substantial investments in FDA regulatory compliance make Charlie’s an attractive partner in this space.

Charlie's received FDA Acceptance Filings for more than 650 PMTAs.

By investing an additional $1.2 million in Q4 2024 to amend and enhance certain of our 2022 PMTA submissions, we maintained our commitment to full regulatory compliance.

On October 28, 2025, we received a Marketing Denial Order (“MDO”) from the U.S.

Food and Drug Administration with respect to certain of our timely-submitted PMTAs.

On November 5, 2025, we filed a motion for a temporary administrative stay with the United States Court of Appeals for the Fifth Circuit.

On November 10, 2025, the Court granted our opposed motion for a temporary administrative stay pending resolution of our forthcoming stay motion.

We intend to promptly seek a preliminary injunction to remain in effect during the pendency of the litigation.

Though a very small percentage of our current sales are related to our affected PMTA Products, we plan to vigorously defend our PMTAs and pursue all available legal remedies.

The Company continues to believe Charlie’s 650+ PMTAs, as a stand-alone asset, have a monetary value that far exceeds Charlie’s current market cap.

Nonetheless, we are continuing to seek FDA marketing authorization for certain of both our nicotine vapor products and our synthetic nicotine vapor products.

Obtaining one or more marketing orders from the FDA could, we believe, help to remediate perceived health issues related to vaping, and further position the Company as a trusted industry leader.

While we continue in the FDA review process, we are also beginning to seek out strategic partners to monetize our PMTAs;

given that Charlie’s 650+ PMTAs (primarily for flavored vapor products) remain among the fraction of 1% that are still under active review with the FDA, and given that more than 80% of adults in the United States prefer flavored vapor products over plain tobacco vapor products, we believe that Charlie’s PMTA portfolio represents an important competitive advantage – of significant monetary value.

More than 80% of adults in the United States prefer flavored vapor products over plain tobacco vapor products, Accordingly, while we continue in the FDA review process, we are continuing to seek out strategic partners to monetize our PMTAs .

We believe that Charlie’s PMTA portfolio represents an asset of significant strategic and monetary value.

The Company continues to develop intellectual property around, and to seek strategic partnerships for, technologies designed to prevent youth access to nicotine vapor products.

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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.

We are in the process of launching a U.S.-filled product line to meet domestic manufacturing requirements of large states.

Most notably, Texas implemented a new law, Senate Bill 2024, effective September 1, 2025, that bans the sale and possession of certain vape products, including those manufactured or marketed as coming from China or certain other "adversary countries." Tennessee and other states have similar legislation pending.

To sell and distribute products in these markets, Charlie's plans to launch a U.S.-filled vapor product line in Q4 2025.

The Company's new line will meet new domestic manufacturing requirements and will appeal, broadly, to adult consumers who prefer "Made in America" products.

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.

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In addition, in June 2022, the FDA announced a plan to reduce nicotine levels in cigarettes to minimally or non-addictive levels.

In addition, in September 2022, the FDA announced a plan to reduce nicotine levels in cigarettes to minimally or non-addictive levels.

The application of any new laws or regulations that may be adopted in the future, at a federal, state, or local level, directly or indirectly implicating nicotine, flavored e-cigarette liquid, and other electronic nicotine delivery system (“ ENDS ”) products, could significantly limit the Company’s ability to sell such products, result in additional compliance expenses, and/or require the Company to change its labeling and/or methods of distribution.