What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2026-04-01 compared with 2025-05-29 · 224 added, 223 removed, 150 unchanged (75% of the section changed)

2 unchanged sentences

The prices of our common stock on the OTCQB Venture Marketplace represent quotations between dealers without adjustment for retail markup, markdown, or commission and may not represent actual transactions.

As of May 23, 2025, there were 257,413,570 shares of our common stock outstanding and 199 stockholders of record and 122,368 shares of our Series A Preferred outstanding held by 92 stockholders of record.

As of March 31, 2026, there were 274,203,242 shares of our common stock outstanding and 220 stockholders of record and 93,906 shares of our Series A Preferred outstanding held by 76 stockholders of record.

Transfer Agent

5 unchanged sentences

Recent Sales of Unregistered Securities

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 November 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.

Issuer Purchases of Equity Securities

25 unchanged sentences

This discussion contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of certain factors, including those set forth under “ Risk Factors Associated with Our Business ” and elsewhere in this Annual Report.

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.

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

Operational Plan

Charlie's is a leader in the premium vapor products industry.

Long known for its pioneering history and award-winning products, the Company’s mission is to provide adult smokers with better alternatives to combustible cigarettes.

To this end, Charlie’s has developed a family of proprietary e-liquids as well as an array of compact, easy-to-use disposable vaping devices.

The Company’s products are sold around the world to select distributors, specialty retailers, and third-party online resellers.

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

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

In pursuit of these targets, Charlie’s primary strategic focus is on the development of intellectual property related to product access and compliance.

The Company is investing in the development of advanced age-gating and access-control technologies designed to prevent youth access while maintaining availability for adult smokers who seek alternatives to combustible cigarettes.

The Company believes that effective age-verification mechanisms are a critical component in supporting the Charlie’s Premarket Tobacco Applications (“ PMTAs ”) for both flavored and “plain” tobacco nicotine vapor products.

In December, the Company signed a definitive licensing agreement with IKE Tech LLC (“ IKE ”) to commercialize the first-ever AI-powered blockchain-based age-gating system for vapor products in the United States.

Under this license, Charlie’s could become the first Company to demonstrate to the FDA that flavored ENDS products are “appropriate for the protection of public health.” Such a regulatory achievement could prove transformational for Charlie’s and for the entire vapor products industry.

Strategic Priorities

In today’s economic landscape, particularly within the vapor products industry, seeking and securing competitive advantage is paramount.

Unlike many competitors in our industry, Charlie’s has focused on achieving full compliance with FDA regulations – while also establishing a regulatory “hedge” through the development of alternative “zero-nicotine” product lines that are not currently subject to FDA review.

Simultaneous to undertaking these initiatives, in 2024 management took aggressive steps to “right size” the business, preserve working capital, and achieve profitability in 2025.

Our key initiatives include:

Product Innovation:

In late 2023 Charlie’s initiated a plan to dramatically expand its business from nicotine products only, to a portfolio of products that includes nicotine substitute products.

This strategic hedge, and the market testing that the shift entailed, significantly reduced Company revenue in 2024.

However, the Company believes that its nicotine substitute, Metatine™, in the SBX™ product line, will position the Company to capture very significant future sales and market share in the vapor products marketplace.

At this date, 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.

(See Note 16 - Subsequent Events)

Age-Gating Technology:

We have continued to develop intellectual property around, and to seek strategic partnerships for, technologies designed to prevent youth access to nicotine vapor products.

We believe this is both a responsible business practice as well as a potential future competitive advantage in the marketplace.

Cost Structure Optimization:

In order to right-size the Company during a time of significantly reduced revenue, we continue to reduce our overall cost structure while improving margins.

Company executives voluntarily reduced their salaries by 20-50%.

Headcount Reduction:

We have significantly reduced our headcount and associated salary expenses, focusing on maintaining a core group of key employees as we collectively right-size the business.

Sales Team Improvement:

We have upgraded, and will continue to upgrade, our sales team from a solely account management-centric team to a skilled and driven sales team to acquire new customers while maintaining excellent service with our existing customers.

Simultaneous to undertaking these initiatives, in 2025 management took aggressive steps to (i) monetize sixteen of the Company’s PMTA products, (ii) launch the SBX product line, (iii) establish a U.S.

manufacturing facility, and (iv) achieve profitability.

Charlie’s success, in all these endeavors, set the stage for continued growth, potential FDA marketing orders, and a potential uplist to a national securities exchange.

Accordingly, here are the primary strategic initiatives on which we intend to focus in 2026:

Grow sales and retail distribution through chain convenience stores in select markets across the US.

Utilize the IKE age-gating technology/license;

amass market data with age-gated SBX disposables – while simultaneously amending the Company’s PACHA PMTA’s with age-gating technology to become the first Company to demonstrate to the FDA that flavored vape products are “appropriate for the protection of public health.”

Introduce cutting edge 75K-Puff disposable devices for both the SBX and the Pachamama product lines

Form new strategic partnership(s) to monetize the Company's PMTA-submitted PACHA synthetic nicotine products.

Grow international sales to mitigate US regulatory risks.

Uplist to a National Securities Exchange

As the business returns to growth, and as soon as we are able to meet listing requirements, we plan to uplist from the OTCQB exchange to a national securities exchange.

An uplist will increase Charlie’s market visibility, liquidity, and access to capital.

Such a shift could lead to new strategic opportunities and, potentially, to a substantially higher market cap.

Management believes that these initiatives will enhance Charlie’s competitive position in the marketplace, significantly reduce costs, help accelerate the Company’s path to profitability, support business growth, and, ultimately, allow the Company to achieve greater liquidity and visibility through an uplist to a national securities exchange.

Considering industry-specific hurdles, as well as the potential for future regulatory changes, management has prioritized several principal initiatives as opportunities for growth:

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

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

We believe adult consumers will enjoy Metatine alternative alkaloid vapor products in much the same way that they enjoy traditional vapor products.

Notably, because Metatine is not made or derived from tobacco, and because Metatine does not consist of or contain nicotine from any source, the FDA's Center for Tobacco Products does not have jurisdiction to regulate Metatine.

Accordingly, if the Company is successful utilizing Metatine in a viable commercial product, such a product will allow us additional flexibility in offering both flavored and non-flavored vapor products to adult consumers looking to transition away from traditional combustible and smokeless tobacco products.

In 2024, to test consumer acceptance of nicotine substitute vapor products in the marketplace, we launched the SPREE BAR disposable flavor pod system (with Metatine inside) in select markets across the US.

This initiative demonstrated that adult consumers:

(i) overwhelmingly prefer “flavored” vapor products over plain tobacco products;

(ii) are highly receptive to nicotine substitute products that offer the same vaping experience as that provided by conventional nicotine vapor products;

and, surprisingly (iii) are not particularly interested in the cost savings that SPREE BAR flavor pods (with reusable batteries) represent vs.

conventional disposable vapes (with single use batteries).

Applying these findings to our ongoing product development initiatives, by the end of 2024 Charlie’s unveiled the Company’s second-generation Metatine product line:

SBX Disposables.

SBX Disposables feature:

(i) the modern disposable product format (with digital display) that consumers overwhelmingly prefer over pod system vapes;

(ii) award-winning flavors (preferred over plain tobacco vapor by more than 80% of adult consumers);

and, most significantly, for regional and national convenience store chains that are our largest potential customers, (iii) Charlie’s proprietary nicotine substitute that makes SBX legal across most of the United States (without FDA PMTA review).

In a Company-sponsored focus group survey of adult consumers who vape, Charlie's SBX Disposables were overwhelming preferred over Juul tobacco-flavored vapes.

Collectively, all these initiatives represent Charlie's commitment to adult smokers.

Through innovation and a hyper-focus on quality, our Company strives to provide our customers with an exceptionally satisfying vaping experience.

In order to put the value of some of these initiatives into context, here is a more detailed overview of our business plans and strategy:

Grow Charlie ’ s sales and retail distribution

Grow SBX sales and distribution through chain convenience stores in select markets across the United States

Our market research indicates that adult consumers overwhelmingly prefer "flavored" vapor products over plain tobacco products and are highly receptive to nicotine substitute products that offer the same vaping experience as that provided by conventional nicotine vapor products.

SBX Disposables feature Charlie's award-winning flavors (preferred over plain tobacco vapor by more than 80% of adult consumers).

SBX nicotine analogue-based vape liquids are not made from or derived from tobacco, nor do they contain nicotine from any source.

Accordingly, the Company's proprietary nicotine substitute alkaloid (patented in the United States and in China by the Company's chemical supplier) does not meet the definition of "nicotine" and therefore SBX products are not subject to FDA PMTA requirements and are LEGAL across most of the United States.

SBX Beats Juul … 15:1

In a Company-sponsored focus group survey of adult consumers who vape, Charlie's SBX Disposables were overwhelmingly preferred over Juul tobacco-flavored vapes.

Of 306 survey participants, 287 preferred SBX over Juul.

In Company marketing materials, SBX advantages are highlighted:

"Compared to mass-market vapes offered by Big Tobacco ̶ namely Juul ̶ SBX provides many MORE FLAVOR options, UNBEATABLE TAX ADVANTAGES, and THOUSANDS MORE PUFFS!”

Following up on these encouraging early results, we are currently test marketing SBX in mass market convenience chains.

If one or more of these tests prove successful, regional and national rollouts could prove transformational for Charlie’s.

Further, we have recently begun test-marketing Metatine-based e-liquids under the PACHAMAMA PLUS+ trademark.

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

We do, however, recognize the challenges in marketing non-nicotine-based alternative alkaloid products in a market that is saturated with traditional nicotine products;

accordingly, we are committed to continuous improvement of our Metatine-based products in order to satisfy the ever-evolving demands of US adult consumers.

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

Not coincidentally, over the last 10-15 years e-cigarette usage in the United States has grown significantly, and cigarette smoking rates have dropped.

Accordingly, tobacco and synthetically derived nicotine vapor products continue to provide significant growth opportunities for Charlie’s.

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.

(See Note 16 - Subsequent Events)

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.

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.

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

Edward Carmines, Ph.D., a member of Charlie’s Board of Directors and an accomplished scientist and regulatory affairs expert, is spearheading Charlie's development of patented "age-gating technology" for both Charlie's and potential licensees of the Company.

Currently, there is a need for age-gated product technologies that can satisfy or accommodate concerns the FDA has related to under-age youth access in the ENDS market.

Because no flavored ENDS product is legal to be sold under the current FDA PMTA framework and because there is little enforcement in the marketplace, there is widespread availability of illicit flavored ENDS products across the United States.

The FDA Center for Tobacco Products estimates that more than half of the U.S.

e-cigarette market is illicit.

In this environment, some states have begun passing legislation to ban certain flavored products.

In these select states, where flavored nicotine products are now beginning to face significant regulatory restrictions, we are focusing our SBX sales initiatives.

We believe that the list of states that give SBX a “regulatory advantage” will grow.

Grow Pachamama/PACHA sales and distribution in select markets across the United States

Distinguished by award-winning flavors and by Charlie’s commitment to regulatory compliance, PACHA and Pachamama are well-known brands that are positioned to grow significantly in 2026.

The Company plans to leverage the brands’ emerging and distinct competitive advantages:

Pachamama is the ONLY vapor products brand that has been on the market for more than a decade and is now fully compliant with Texas domestic manufacturing requirements;

Pachamama will be one of the select brands that is fully compliant with Indiana’s “foreign adversary prohibited” manufacturing legislation (going into effective July 1, 2026);

PACHA Virginia Tobacco 12mL, 8mL, and 4mL Disposables were all approved in March 2026 for inclusion on the State of California’s Unflavored Tobacco List (“ UTL ”).

This designation means that PACHA Virginia Tobacco Disposables are legal to sell in all smoke shops, gas stations, and c-stores throughout the State of California.

PACHA flavored 12mL, 8mL, and 4mL Disposables, as well as the Company’s PACHA e-liquids, have all been approved for inclusion on the Nebraska State Directory.

PACHA flavored 4mL and 8mL Disposables are among the select few flavored disposables that have been approved by the state of Louisiana

With growing number of states instituting state registries each year, we believe that Pachamama, and PACHA (and non-nicotine SBX) will expect to see continued (and growing) success in the marketplace and that Charlie’s competitive advantages will expand significantly.

Utilize the IKE Age-Gating technology to secure unprecedented Regulatory Competitive Advantages

Currently, there is a need for age-gated product technologies that can satisfy or accommodate concerns the FDA has related to under-age youth access.

We believe age-gating is both a responsible business practice as well as a potential future competitive advantage for Charlie's.

If our age-gated e-cigarettes-in-development are recognized as "products of merit" by the FDA, Charlie's e-cigarettes could emerge among the select minority of flavored nicotine disposables able to be sold legally in the $8 billion U.S.

vapor products market.

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

Reynolds, three of the largest competitors in our industry.

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

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

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

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

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

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

Presently, approximately 10% of our vapor product sales come from the international market and we are well positioned to increase sales in countries where we already have presence and, in additional overseas markets, as we have already built an international distribution platform.

Risks and Uncertainties and Ability to Continue as a Going Concern

Utilizing the Company’s licensing agreement with IKE for the first-ever AI-powered blockchain-based age-gating system for vapor products in the United States, in Q2 2026 Charlie’s plans to test-market the patented IKE age-gating system with a special line of the Company’s popular SBX nicotine analogue product;

simultaneously, Charlie’s intends to amend certain of its existing Premarket Tobacco Applications (PMTAs) with the FDA for PACHA brand ENDS with the IKE system.

SBX Nicotine Analogue Products – not subject to FDA PMTA Review

New tobacco products (those containing either plant-derived nicotine or synthetic nicotine) are required to submit a PMTA to the FDA to obtain a marketing order prior to their sale in the United States.

The SBX product line does contain nicotine from any source, and instead utilizes Charlie’s proprietary nicotine substitute, Metatine™.

Accordingly, SBX is not subject to FDA PMTA requirements and Charlie ’ s will be able to introduce age-gated, flavored SBX devices almost immediately.

It is the Company’s intention to test market age-gated SBX Disposables in 200-300 compliance-minded retail stores in Q2 2026.

PACHA brand Electronic Nicotine Delivery Systems (ENDS) with FDA PMTA ’ s

In order to legally sell flavored nicotine products in the United States, Charlie’s intends to collect market data from sales of its non-nicotine SBX age-gated disposables which it will use to amend the Company’s existing PMTAs with the FDA to include age-gating provisions for certain of the Charlie’s PACHA brand nicotine disposables.

There is a large un-met need for technologies that can satisfy or accommodate concerns the FDA has related to youth access, which means there is an enormous market opportunity for flavored vapes that are inoperable for underage individuals.

By amassing market data with age-gated SBX disposables – while simultaneously amending the Company’s PACHA PMTA’s with age-gating technology – we believe Charlie’s could become the first Company to demonstrate to the FDA that flavored vape products are “appropriate for the protection of public health.” The Company believes that such a success would not only be game-changing for Charlie’s, but would also transformational for the entire industry.

Introduce cutting edge 75K Puff disposable devices for both the SBX and the Pachamama product lines

Specifically designed with consumer needs and preferences in mind, Charlie’s new generation of 75K Disposables feature an impressive Dual Mesh Coil and provide significantly more vape… and surprisingly better taste… than market-leading disposables.

With a large tank capacity, SBX and Pachamama 75K Disposables offer 75,000 uniquely satisfying puffs and feature a transparent shell for accurate liquid measurement, easy-to-use button control, and low-key LED indicators.

Both brands feature three power modes, allowing users to select "ECO MODE," "BOOST MODE," or "X MODE"… while simultaneously providing adjustable airflow settings that range from "tight and very enjoyable," to "the standard experience," to "no restrictions." SBX and Pachamama 75K Disposables each offer fourteen of Charlie's most popular award-winning flavors.

Initial orders will ship in Q2 2026.

Form new strategic partnership(s) to monetize the Company's PMTA-submitted PACHA synthetic nicotine products.

In 2025, in three separate transactions, Charlie's sold sixteen of the Company's PACHA synthetic nicotine PMTA products and related assets for $7.5MM cash plus a contingent one-time payment of up to $4.2 million.

In the last of the three transactions, the buyer purchased a single Charlie’s PMTA product for $1MM.

Based on these sales, taking into account the fact that Charlie’s continues to own 674 PMTA products, and considering the interest other companies have expressed in Charlie's portfolio, the Company believes Charlie's remaining PMTA products, as a stand-alone asset, could have a significant monetary value .

To maximize the value of this portfolio, the Company intends to (i) continue to amend and strengthen Charlie’s PMTAs with new scientific data, (ii) add age-gating functionality to certain of our PMTAs, and (iii) explore new strategic partnerships with industry competitors, big and small, that value regulatory compliance in the vapor products marketplace.

Grow International Sales to mitigate US regulatory risks

In order to further 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.

Presently, approximately 8% of our vapor product sales come from the international market.

We are well-positioned to increase sales in countries where we already have presence and to capture new business in several additional overseas markets.

Uplist to a National Securities Exchange

We believe that upon a successful uplisting to a national securities exchange, we believe we will significantly improve our capital markets appeal to a broader range of investors, increase our liquidity, and ultimately, achieve a higher market cap for the Company.

Risks and Uncertainties

The Company operates in an environment that is subject to rapid changes and developments in laws and regulations that could have a significant impact on the Company’s ability to sell its products.

1 unchanged sentence

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.

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 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.

The Company recently launched new alternative alkaloid Metatine-based disposable vape products, under the “SBX™” brand, that the Company expects will (i) replace a significant portion of its legacy products and (ii) become the single largest, most important commercial opportunity in Charlie’s history.

4 unchanged sentences

The documentary support for these facts, including a Certificate of Analysis (COA) for the Metatine used in the Company’s alternative alkaloid 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, Metatine-based 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, Metatine-based 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.

As discussed below, our financial statements and working capital raise substantial doubt about the Company’s ability to continue as a going concern.

Our 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.

See Liquidity and Capital Resources below for additional information.

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.

Recent Developments

Expiration of Warrants

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

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.

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 $1.6 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.

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.

November 2024 Capital Raise

The November 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.

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 a buyer (the “ Buyer ”) pursuant to which the Buyer purchased 12 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.

On May 29, 2025, the Company amended the Agreement with the Buyer pursuant to which the Buyer purchased three additional PACHA synthetic products and related assets (the “ May Additional Assets ”) that are covered by a PMTA first submitted by the Company in 2022, bringing the total purchased by the Buyer, to date, to 15 products.

The purchase price for the May Additional Assets was $1.5 million paid at closing.

On August 8, 2025, the Company entered into and closed on another Amendment to the Agreement with the Buyer pursuant to which the Buyer purchased one additional PACHA synthetic product and related asset (the “ August Additional Assets ”) that are covered by a PMTA first submitted by the Company in 2022, bringing the total purchased by the Buyer to sixteen.

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

$2.0 Million Credit Facility with Independent Board Member

In order to facilitate increased SBX inventory purchases and to fuel the Company's growth in the mass market convenience store channel, on August 26, 2025 the Company announced that, it signed a $2 million credit facility with Michael D.

King, one of the independent members of Charlie's Board of Directors.

King agreed to loan the Company up to $2,000,000 (in three separate tranches) at an interest rate of 13% for a period of 12 months per tranche, with a balloon payment for interest and principal to be paid at the one-year anniversary of each tranche.

Accordingly, with an initial $1 million loan, and two subsequent $500,000 tranches, this debt/credit facility gave the Company the discretion to borrow funds, as needed, as demand continues to grow for the SBX product line.

This credit facility is not convertible to equity, does not include warrants, and is exceptionally "company friendly.”

On March 24, 2026, we entered into an amendment to the loan to extend the maturity date of the loan to June 1, 2027 with a ballon principal payment due on maturity with interest only paid monthly until maturity.

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.

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

On October 28, 2025, we received Marketing Denial Orders (“ MDOs ”) from the U.S.

Food and Drug Administration (“ FDA ”) 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, which the Court granted on November 10, 2025.

On December 24, 2025, a Fifth Circuit panel granted our motion to stay the MDOs pending judicial review.

As a result of the stay, the affected PMTAs revert to pending status and continue to be treated as timely filed (May 2022) while the case is litigated on the merits.

Accordingly, the subject products remain eligible, where permitted by state law, for listing on state vapor products directories (e.g.

Louisiana) that allow the sale of products associated with timely submitted synthetic nicotine PMTAs that are pending FDA’s review, subject to satisfaction of all other applicable state requirements.

Though only a very small percentage of our current sales are related to our affected PMTA Products, we plan to vigorously defend our PMTAs on the merits while also continuing to amend our applications with the latest science.

Company opens US Manufacturing Facility

On December 1, 2025 we reported that the Company opened its first US-manufacturing facility in Huntington Beach, California.

Effective September 1, 2025, Texas implemented a new law 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 that are fully compliant in these markets, Charlie's became one of the first companies to launch a US-filled vapor product line.

The Company's popular Pachamama 25K line now meets the domestic manufacturing requirements of the state of Texas and enables Charlie's premium products to appeal, broadly, to adult consumers who prefer "Made in America" products.

Age Gating Partnership with IKE Tech, LLC

On December 18, 2025, Charlie’s Holdings, Inc.

entered into a Master Hardware, Software, and Cloud Subscription Agreement with IKE Tech LLC to integrate IKE’s age-verification technology into certain of the Company’s nicotine analogue and electronic nicotine delivery system (“ ENDS ”) products.

Under the agreement, IKE Tech will supply proprietary Bluetooth Low Energy (“ BLE ”) chips designed to be embedded in the Company’s devices and enable wireless communication with a cloud-based software platform that supports device authentication, age-gating, and age-verification functionality prior to device activation.

The agreement also provides for access to a subscription-based software platform and related development services, including the potential creation of a customized, white-labeled application.

The Company believes the technologies contemplated by the agreement may support its efforts to enhance product-level age verification and compliance capabilities as regulatory requirements for nicotine products continue to evolve.

Discontinued Operations

During the year ended December 31, 2025, in preparation for an uplist to a national securities exchange, Charlie's Board of Directors unanimously approved a resolution to discontinue sales of all hemp/CBD-related products and to wind down and close permanently its Don Polly division.

Accordingly, in 2025, the Company discontinued the operations of Don Polly LLC and no longer sells any of Don Polly’s CBD/hemp branded products.

The disposal represented a strategic shift that had a material effect on the Company’s operations and financial results and therefore met the criteria for discontinued operations under ASC 205-20.

Accordingly, the operating results of Don Polly LLC have been classified as income (loss) from discontinued operations and more than $3MM in top-top line revenue is not reported, as such, in the accompanying consolidated financial statements.

Private Placement – February 13, 2026

On February 13, 2026, the Company completed a private placement of 3,550,000 shares of its common stock at a purchase price of $0.20 per share, resulting in aggregate consideration of $710,000.

Of the total consideration, $510,000 was received in cash and $200,000 was satisfied through the forgiveness of certain outstanding indebtedness owed by the Company.

The issuance of shares increased the Company’s liquidity and reduced a portion of its outstanding debt obligations.

Charlie’s management and directors purchased 1,350,000 shares of the 3,550,000 total shares that were sold, as follows:

Michael King, Independent Director:

500,000 shares

Ed Carmines, Independent Director:

250,000 shares

Ryan Stump, Director and Chief Operating Officer:

250,000 shares

Henry Sicignano III, President:

250,000 shares

Matthew Montesano, Chief Financial Officer:

100,000 shares

Basis of Presentation

1 unchanged sentence

In the opinion of the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the interim period have been included.

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.

On December 31, 2025, Don Polly entered into a Bill of Sale And Assignment Agreement (the “ Assignment Agreement ”) with Charlie’s.

Pursuant to the Assignment Agreement, Don Polly transferred ownership of all of its right, title, and interest in, as well as custody and control of, its assets to Charlie’s.

The results of operations of Don Polly are reported as discontinued operations for the years ended December 31, 2025 and 2024.

Certain reclassifications have been made to the prior period financial information to reflect discontinued operations presentation.

Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate solely to continuing operations and exclude all discontinued operations.

Results of Operations for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

2 unchanged sentences

Product revenue, net

Total revenues

Operating costs and expenses:

Cost of goods sold - product revenue

Operating costs and expenses:

General and administrative

5 unchanged sentences

Interest expense

Debt extinguishment (loss) gain

Debt extinguishment loss

Change in fair value of derivative liabilities

Total other (loss) income

Revenue for the year ended December 31, 2024, decreased approximately $7,756,000, or 47.7%, to approximately $8,494,000, as compared to approximately $16,250,000 for the year ended December 31, 2023, due to a $6,481,000 decrease in our nicotine-based product sales, and a $1,275,000 decrease in sales of our hemp-derived products.

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

The launch of the Company’s SPREE BAR nicotine substitute vapor products did not meet performance expectations, resulting in further development efforts and ultimately the release our Metatine-based, SBX line of disposable vapor products.

Gain on sale of intellectual property

Total other income (loss)

Income (loss) before provision for income taxes

Income tax provision

Income (loss) from continuing operations after income taxes

Discontinued operations:

Income (loss) from discontinued operations, net of tax

Net income (loss)

Revenue for the year ended December 31, 2025, increased approximately $13,151,000, or 169.4%, to approximately $20,916,000, as compared to approximately $7,765,000 for the year ended December 31, 2024, which is all due to the increase in our nicotine-based product and nicotine alternative products sales.

Sales of SBX, a non-nicotine, disposable vapor product which is not subject to FDA review, experienced a significant increase during the year ended December 31, 2025.

Revenue does not include $3MM in Don Polly sales as the Don Polly LLC division was closed permanently in 2026.

The operating results of Don Polly LLC have been classified as income (loss) from discontinued operations.

Cost of Revenue

Cost of revenue, which consists of direct costs of materials, direct labor, third party subcontractor services, and other overhead costs decreased approximately $4,603,000 or 45.1%, to approximately $5,603,000, or 66.0% of revenue, for the year ended December 31, 2024, as compared to approximately $10,206,000, or 62.8% of revenue, for the year ended December 31, 2023.

This cost, as a percent of revenue, increased compared to last year due a combination of lower fixed cost absorption resulting from reduced sales performance as well as overall margin compression across most product categories.

Cost of revenue, which consists of direct costs of materials, direct labor, third party subcontractor services, and other overhead costs increased by approximately $10,373,000 or 212.2%, to approximately $15,261,000, or 73% of revenue, for the year ended December 31, 2025, as compared to approximately $4,888,000, or 62.9% of revenue, for the same period in 2024.

This cost increased compared to last year due primarily to an increase in the volume of products sold during the period.

General and Administrative Expense

For the year ended December 31, 2024, total general and administrative expense decreased approximately $1,252,000 to approximately $5,718,000, or 67.3% of revenue, as compared to approximately $6,970,000, or 42.9% of revenue, for the year ended December 31, 2023.

This decrease was primarily comprised of reductions of approximately $762,000 of non-commission wages and benefits, $60,000 of professional fees, $139,000 of information systems costs, as well as $291,000 in other general and administrative expenses.

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

The decrease in professional fees is largely due to reduced legal and consulting costs.

Decreased information systems costs were the result of a company-wide cost-cutting effort during the period.

The reduction in other general and administrative expenses largely consisted of decreases in bad debt, insurance costs and merchant processing costs.

For the year ended December 31, 2025, total general and administrative expenses increased by approximately $763,000 to $6,374,000 as compared to approximately $5,611,000 for the same period in 2024.

This change was primarily due to decreases of approximately $88,000 in certain professional fees and $59,000 of bad debt expense, and offset by an increase of $748,000 in non-commission wages and benefits and $162,000 of other general and administrative costs.

The decrease in professional fees was primarily the result of reductions in legal and audit costs as well as fees paid to members of our Board of Directors.

The increase in payroll and benefits costs was primarily driven by bonuses awarded to certain key employees during the period.

Sales and Marketing Expense

For the year ended December 31, 2024, total sales and marketing expense decreased to approximately $693,000 as compared to approximately $1,107,000 for the year ended December 31, 2023, which was primarily due to lower sales commissions paid as well as a significant reduction in tradeshow and customer event related costs.

Commissions decreased due to reduced sales activity during the year.

For the year ended December 31, 2025, total sales and marketing expense increased by approximately $689,000 to approximately $1,327,000 as compared to approximately $638,000 for the same period in 2024.

The increase was primarily due to increased sales commissions paid and display costs for “first-order” sales of the Company’s SBX product as roll-out continued during the year ended December 31, 2025.

The Company continues to evaluate its spending on advertising, promotional and tradeshow related expenses as it aims to increase sales of its new SBX Disposable vapor products.

Research and Development Expense

For the year ended December 31, 2024, we had income from research and development of approximately $68,000 as compared to approximately $169,000 expense for the year ended December 31, 2023.

The decrease of approximately $237,000 was primarily due to reduced costs associated with the development of new technologies and product formats as well as a vendor refund of approximately $136,000.

For the year ended December 31, 2025, research and development expense was approximately $119,000 as compared to approximately $68,000 of income for the year ended December 31, 2024.

The increase of approximately $187,000 was primarily due to costs associated with the Company’s ongoing development and testing related to active PMTA filings with the FDA.

Loss from Operations

We incurred a loss from operations of approximately $3,452,000 for the year ended December 31, 2024, as compared to loss from operations of approximately $2,202,000 for the year ended December 31, 2023, due primarily to lower sales and gross profit.

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

Change in fair value of derivative liabilities.

For the years ended December 31, 2024 and 2023, the gain in fair value of derivative liabilities was approximately $79,000 and $550,000, respectively.

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

The gain for the year ended December 31, 2024 was due to the expiration of the warrants in April 2024, which resulted in the warrant liability being written off.

We incurred a loss from operations of approximately $2,165,000 for the year ended December 31, 2025, as compared to loss from operations of approximately $3,304,000 for the year ended December 31, 2024.

The decreased in loss from operations is due primarily to increased sales and gross profit.

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

Gain on sale of PMTA assets.

For the year ended December 31, 2025, we recorded a $7,500,000 gain related to the sales agreement entered with a global tobacco company.

Interest Expense.

For the years ended December 31, 2025 and 2024, we recorded interest expense related to notes payable of $692,000 and $703,000, respectively.

The increase was primarily due to an increase of outstanding notes payable.

The decrease was primarily due to an increase of outstanding notes payable.

Debt Extinguishment (Loss) Gain.

For the years ended December 31, 2024 and 2023, we recorded approximately $75,000 of loss from debt extinguishment, which was related to our May 2024 Capital Raise (see Note 11).

The gain of approximately $36,000 in 2023 resulted from a modification to the promissory note issued to Michael King, a significant shareholder and member of the Company’s Board of Directors, which extended the maturity date to March 2025.

Income Taxes (Benefit)

The Company did not record income tax for the years ended December 31, 2024 and 2023.

For the years ended December 31, 2024, and 2023, we had a net loss of $4,159,000 and $2,093,000, respectively.

For the years ended December 31, 2025 and 2024, we recorded approximately $50,000 and $75,000 debt extinguishment related to various debt amendments, respectively.

Change in fair value of derivative liabilities.

For the years ended December 31, 2024, the gain in fair value of derivative liabilities was approximately $79,000 The gain for the year ended December 31, 2024 was due to the expiration of the warrants in April 2024 which resulted the warrant liability being written off.

Income Taxes Provision

For the year ended December 31, 2025, the Company recorded an income tax provision of approximately $275,000.

The Company did not record income tax for the year ended December 31, 2024.

Net Income (Loss) from Continuing Operations

For the years ended December 31, 2025, and 2024, we had a net income from continuing operations of $4,318,000 and net loss of $4,003,000, respectively.

Effects of Inflation

1 unchanged sentence

Liquidity and Capital Resources

As of December 31, 2024, we had working capital deficit of approximately $1,855,000, which consisted of current assets of approximately $3,720,000 and current liabilities of approximately $5,575,000, as compared to working capital of approximately $332,000 at December 31, 2023.

The current liabilities include approximately $3,396,000 of accounts payable and accrued expenses, notes payable of $520,000, note payable from related parties of $1,488,000, approximately $98,000 of deferred revenue associated with product shipped but not yet received by customers, approximately $73,000 of current lease liabilities.

As of December 31, 2025, we had working capital of approximately $3,137,000, which consisted of current assets of approximately $10,767,000 and current liabilities of approximately $7,630,000, as compared to working capital deficit of approximately $1,855,000 at December 31, 2024.

The current liabilities include approximately $5,037,000 of accounts payable and accrued expenses, notes payable from related parties of $2,280,000, $275,000 of lease liabilities and approximately $38,000 of deferred revenue associated with product shipped but not yet received by customers.

Our cash and cash equivalents balance at December 31, 2025 was approximately $1,320,000.

The Company believes its balances of cash and cash equivalents as of December 31, 2025, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

As of December 31, 2025, we had the following notes outstanding:

July 2023 Note Financing.

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

As of December 31, 2024, $400,000, plus accrued interest, remained outstanding 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.

April 2022 Note Financing .

On April 6, 2022, the Company issued a secured promissory note (the “ Note ”) to one of its individual stockholders, and a member of the Company’s Board of Directors since June 13, 2023, 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" ).

The Note initially required the payment of principal in full and guaranteed interest in an amount the greater of 18% per annum, or $90,000, on or before the earlier date of (i) a Liquidity Event, as defined under the terms of the Note;

or (ii) September 28, 2022.

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 April 28, 2024, 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 April 28, 2024 whereby a balloon payment for the remaining principal balance will be paid.

Immediately following the second modification, the Company entered into a third modification agreement to further extend the maturity date to March 28, 2025.

The third modification agreement was effective on March 28, 2023 and superseded the second modification.

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.

The third modification was recognized as a debt extinguishment, resulting in a gain on debt extinguishment of approximately $35,000.

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

As of December 31, 2024, approximately $793,000 of principal remained outstanding.

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 .

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

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.

September 2024 Pinnacle Receivables Financing.

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.

January 2024 Note Financing.

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

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

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

For the year ended December 31, 2024, net cash used in operating activities was approximately $1,621,000, resulting from a net loss of $4,159,000, offset by a change in operating assets and liabilities of $1,427,000 and a net non-cash activity of $1,111,000.

For the year ended December 31, 2023, net cash used in operating activities was approximately $783,000, resulting from a net loss of $2,093,000 and a change in operating assets and liabilities of $811,000, offset by net non-cash activity of $499,000.

For the year ended December 31, 2024 and 2023, we did not incur any expenditures for investment activities.

For the year ended December 31, 2024, we generated approximately $1,465,000 in cash from financing activities which was comprised of the issuance of common shares of $1,580,000, notes payable of $742,000, and notes payable to a related party of $500,000 as well as the repayment of $1,357,000 in notes payable, including $85,000 to a related party.

For the year ended December 31, 2023, we generated approximately $893,000 cash from financing activities, resulting from the issuance of $2,769,000 notes payable and offset by repayment $1,876,000 of certain notes.

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

August 2025 Notes.

As of December 31, 2025, $2,000,000 notes payable plus accrued interest held by Michael King remained outstanding.

July 2023 Notes.

As of December 31, 2025, $138,000 notes payable plus accrued interest held by Ryan Stump and Henry Sicignano III remained outstanding and the maturity dates of the outstanding notes had been extended to April 28, 2026.

April 2022 Note.

As of December 31, 2025, approximately $143,000 of principal plus accrued interest held by Michael King remained outstanding and the maturity dates of the outstanding notes had been extended to April 28, 2026.

For the year ended December 31, 2025, net cash used in continuing operating activities was approximately $6,314,000, resulting from a net income from continuing operations of $4,499,000, offset by a change in operating assets and liabilities of $4,034,000 and a net non-cash activity of $6,598,000.

For the year ended December 31, 2024, net cash used in continuing operating activities was approximately $1,982,000, resulting from a net loss from continuing operations of $4,003,000 and offset by a change in operating assets and liabilities of $913,000 and net non-cash activity of $1,108,000.

For the year ended December 31, 2025, cash provided by investing activities included $7,500,000 in proceeds from the sale of intellectual property related to certain of our PMTA products.

For the year ended December 31, 2025, we used approximately $590,000 cash in financing activities related to the issuance of notes payable of $546,000, notes payable to related parties of $2,100,000 and the repayment of $3,237,000 in notes payable, including $1,312,000 to related parties.

For the year ended December 31, 2024, we generated approximately $1,465,000 in cash from financing activities related to the issuance of common shares of $1,580,000, notes payable of $742,000, notes payable to a related party of $500,000 and the repayment of $1,357,000 in notes payable, including $85,000 to a related party.

Going Concern Regarding the Legal and Regulatory Environment, Liquidity and Management ’ s Plan of Operation

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.

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 apply for FDA approval to continue selling and marketing its products used for the vaporization of nicotine in the United States.

Currently, a substantial portion of the Company’s sales are derived from products that are subject to approval by the FDA.

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

For the year ended December 31, 2024, the Company’s revenue declined, the Company generated a loss from operations of approximately $3,452,000, and a consolidated net loss of approximately $4,159,000 and used cash from operations of approximately $1,621,000.

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

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 the removal of certain products for sale.

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

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including cumulative expenditures of approximately $6,500,000 as of December 31, 2024, to support our PMTA process for the Company’s submissions to the FDA.

The Company has undergone cost-cutting measures including salary reductions of up to 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.

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.

The financial statements do not include any adjustments to the carrying amount and classification of recorded assets and liabilities should the Company be unable to continue operations.

If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all their investment in us.

For the year ended December 31, 2025, the Company’s revenue increased, the Company incurred a loss from operations of approximately $2,165,000, and a net income from continuing operations of approximately $4,318,000.

Net cash used in continuing operating activities was approximately $6,314,000.

The Company had a stockholders’ equity of $3,423,000 at December 31, 2025.

During the year ended December 31, 2025, the Company’s working capital was increased to $3,137,000 from a deficit of $1,855,000 as of December 31, 2024.

Management evaluated whether these conditions could raise a substantial doubt about the Company’s ability to continue as a going concern.

During the year ended December 31, 2025, the Company entered into and closed an Asset Purchase Agreement (the “ Agreement ”) and subsequent amendment with one of the world’s largest tobacco companies (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, 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.

The proceeds from these transactions have significantly improved the Company’s liquidity position, reduced outstanding obligations, and strengthened working capital.

In addition, management has implemented and continues to execute on initiatives designed to enhance operating performance and liquidity, including (i) focusing on growth in the Company’s non-combustible, alternative alkaloid (non-nicotine) products, (ii) advancing regulatory approval efforts for the Company’s nicotine product portfolio, and (iii) the continued development of intellectual property related to product access and compliance.

The Company is also pursuing additional strategic transactions, including potential PMTA-related asset sales, which may provide incremental liquidity.

Based on these factors, management believes the Company is adequately capitalized to support its operations and meet its obligations as they come due for at least the next twelve months.

Off-Balance Sheet Arrangements

30 unchanged sentences

Accounts receivable is recorded at the invoiced amount and does not bear interest.

We determine the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and set up an allowance for doubtful accounts when collection is uncertain.

We determine the credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and set up an allowance for doubtful accounts when collection is uncertain.

Customers’ accounts are written off against the allowance when all attempts to collect have been exhausted.

18 unchanged sentences

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity