What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2026-04-01 compared with 2025-05-29 · 326 added, 288 removed, 690 unchanged (47% of the section changed)

34 unchanged sentences

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

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

(NYSE American:

Sicignano holds a B.A.

6 unchanged sentences

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

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

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

Prior to joining the Company, Mr.

77 unchanged sentences

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

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

Description of Securities Registered Pursuant to Section 12 filed with the Form 10-K on May 29, 2025 and incorporated herein by reference.

Certificate of Amendment dated April 4, 2023 to Series A preferred stock, incorporated by reference to Form 8-K filed on April 4, 2023.

3 unchanged sentences

Employment Agreement by and between the Company and Ryan Stump, dated June 15, 2023, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed June 20, 2023.

License Agreement by and between the Company and Don Polly, LLC, dated June 5, 2019, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed June 11, 2019.

Services Agreement by and between the Company and Don Polly, LLC, dated June 5, 2019, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed June 11, 2019.

Commercial Lease Agreement, by and between Charlie’s Chalk Dust, LLC and Brandon Stump, Ryan Stump and Keith Stump, dated November 19, 2019, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed November 22, 2019.

1 unchanged sentence

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

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

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

Amendment to 2019 Omnibus Equity Incentive Plan, incorporated by reference to the Definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on February 4, 2022

4 unchanged sentences

Amendment dated December 17, 2022 to Loan Agreement with Ryan Stump dated August 17, 2022, incorporated by reference to Form 10-K filed on April 17, 2023

Amendment dated April 13, 2023 to Loan Agreement with Ryan Stump dated August 17, 2022,

Amendment dated April 13, 2023 to Loan Agreement with Ryan Stump dated August 17, 2022, incorporated by reference to Form 10-K filed on April 17, 2023

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

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

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

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

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

Amended and Restated Promissory Notes – with Henry Sicignano III and Ryan Stump dated April 28, 2025 filed with the Form 10-K on May 29, 2025 and incorporated herein by reference.

Agreement for the Disposition of Assets, incorporated by reference to the Current Report on Form 8-K, filed April 17, 2025

Amendment to Agreement for the Disposition of Assets, incorporated by reference to the Current Report on Form 8-K, filed June 3, 2025

Amendment to Agreement for the Disposition of Assets, incorporated by reference to the Current Report on Form 8-K, filed August 11, 2025

Amended and Restated Promissory Note – with Michael King dated April 28, 2025 filed with the Form 10-K on May 29, 2025 and incorporated herein by reference.

Amendment to Amended and Restated Promissory Note – with Michael King dated March 24, 2025 (filed herewith)

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

Charlie's Holdings, Inc.

Insider Trading Policy, filed herewith.

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

Insider Trading Policy, filed with the Form 10-K on May 29, 2025 and incorporated herein by reference.

Subsidiaries of Charlie's Holdings, Inc., filed with the Form 10-K on May 29, 2025 and incorporated herein by reference..

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

Consent of Mazars USA LLP filed herewith.

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

11 unchanged sentences

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

March 31, 2026

CHARLIE’S HOLDINGS, INC.

9 unchanged sentences

(Principal Executive Officer)

March 31, 2026

/s/ Matthew P.

1 unchanged sentence

(Principal Financial and Accounting Officer)

March 31, 2026

/s/ Ryan Stump

Chief Operating Officer and Director

March 31, 2026

/s/ Scot Cohen

March 31, 2026

/s/ Jeffrey Fox

March 31, 2026

/s/ Edward Carmines

Edward Carmines

March 31, 2026

/s/ Michael King

Report of Independent Registered Public Accounting Firm

March 31, 2026

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

Opinion on the Consolidated Financial Statements

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

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

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

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

Improvements to Reportable Segment Disclosures.

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

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

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

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

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

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

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

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

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

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

(the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

17 unchanged sentences

Going Concern

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

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

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

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

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

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

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

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

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

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

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

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

Reserve for Excess and Slow-Moving Inventory

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

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

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

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

Management believes any substantial doubt has been alleviated as they expect increase revenues and profitability to continue.

Management’s plans include (i) streamlining profitable product lines (ii) focusing on the procurement of the FDA approval on the nicotine product line (iii) increasing marketing efforts.

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

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

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

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

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

The principal considerations for our determination that performing procedures relating to the Company’s liquidity and plans to meet future cash requirements is a critical audit matter are the significant judgments by management in determining future cash flows and ability to execute on its business strategy which led to a high level of auditor judgment, subjectivity and effort in performing procedures.

Understood the process used to develop the Company’s expected cash inflows and outflows based upon recent operating results and evaluating the cash flow projections;

Reviewed management plans for future events and conditions;

Performed testing procedures such as analytical procedures to identify conditions and events;

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

/s/ Urish Popeck & Co., LLC

1 unchanged sentence

Pittsburgh, Pennsylvania

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Consolidated Financial Statements

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

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

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

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

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

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

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

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

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

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

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

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

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

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

/s/ Mazars USA LLP

Fort Washington, PA

April 15, 2024

March 31, 2026

CHARLIE ’ S HOLDINGS, INC.

5 unchanged sentences

Prepaid expenses and other current assets

Current assets in discontinued operations

Total current assets

8 unchanged sentences

Notes payable - related parties

Derivative liability

Lease liabilities

Deferred revenue

Current liabilities in discontinued operations

Total current liabilities

1 unchanged sentence

Note payable, net of current portion

Note payable, net - related party, net of current portion

Lease liabilities, net of current portion

Non-current liabilities in discontinued operations

Total non-current liabilities

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES (see Note 12)

Stockholders' deficit:

Stockholders' equity (deficit):

Convertible preferred stock ($ 0.001 par value);

9 unchanged sentences

Accumulated deficit

Total stockholders' deficit

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

Total stockholders' equity (deficit)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

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

4 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 gain (loss)

Change in fair value of derivative liabilities

Total other (loss) income

Net loss per share

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)

Net earnings (loss) per share:

Income (loss) from continuing operations, basic

Income (loss) from discontinued operations, basic

Net earnings (loss) per share, basic

Net earnings (loss) per share:

Income (loss) from continuing operations, diluted

Income (loss) from discontinued operations, diluted

Net earnings (loss) per share, diluted

Weighted average number of common shares outstanding

4 unchanged sentences

Convertible Preferred Stock

Stockholders'

Total Stockholders'

Paid-in Capital

Equity (Deficit)

Balance at January 1, 2024

Issuance of common shares for cash

Issuance of common shares from debt redemption

Conversion of Series A convertible preferred stock

2 unchanged sentences

Balance at December 31, 2024

Issuance of common shares for cash

Issuance of common shares from debt redemption

Conversion of Series A convertible preferred stock

Forfeiture of restricted stock awards

Warrants exercised for vendor credit

Stock compensation

Forfeiture of restricted stock awards

Issuance of warrant in connection with a settlement of accounts payable

Balance at December 31, 2025

5 unchanged sentences

Cash Flows from Operating Activities:

Net income (loss)

income (loss) from discontinued operations, net of tax

Net income (loss) from continuing operations

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

3 unchanged sentences

Change in fair value of derivative liabilities

Debt extinguishment loss (gain)

Debt extinguishment loss

Amortization of operating lease right-of-use asset

Stock based compensation

Gain on sale of intellectual property

Subtotal of non-cash charges

5 unchanged sentences

Lease liabilities

Net cash used in operating activities - continuing operations

Net cash provided by operating activities - discontinued operations

Net cash used in operating activities

Cash Flows from Investing Activities:

Proceeds from sale of intellectual property

Purchase of property, plant and equipment

Net cash provided by investing activities

Cash Flows from Financing Activities:

4 unchanged sentences

Repayment of notes payable to related party

Net cash provided by financing activities

Net (decrease) increase in cash

Net cash (used in) provided by financing activities

Net increase (decrease) in cash

Cash, beginning of the year

6 unchanged sentences

Conversion of Series A convertible preferred stock

Exchange accounts payable with a note payable

Issuance of common shares from debt redemption

Warrants exercised for vendor credit

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

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

3 unchanged sentences

Description of the Business

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

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

4 unchanged sentences

Generally Accepted Accounting Principles (“ GAAP ”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “ SEC ”).

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

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 .

Cash used in operations was 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 potentially require us to remove products from circulation.

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

Our plans and growth depend on our ability to increase revenues, procure cost-effective financing, and continue our business development efforts, including the expenditure of approximately $ 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.

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.

See Note 7 for additional information.

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.

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.

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.

Risks and Uncertainties

2 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.

11 unchanged sentences

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

The Company intends to pursue an administrative appeal with FDA regarding its refusal to accept certain of the PMTAs Charlie’s submitted for our synthetic nicotine products, and in parallel the Company intends to resubmit PMTAs for, and to continue to sell, the affected products while the administrative appeal process is pending.

There can be no guarantee that FDA will grant our administrative appeal, and 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.

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

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

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

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, 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

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 100 % wholly owned subsidiary, Charlie’s Chalk Dust, LLC and Don Polly, LLC, a consolidated variable interest for which the Company is the primary beneficiary.

The consolidated financial statements include the accounts of the Company and its 100 % wholly owned subsidiary, Charlie’s Chalk Dust, LLC.

All inter-company balances and transactions have been eliminated in consolidation.

36 unchanged sentences

Accounts receivable are recorded at the invoiced amount and do not bear interest.

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

We determine the credit losses by regularly evaluating historical customer information and individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and establish 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.

41 unchanged sentences

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

Recently Issued Accounting Standards Not Yet Adopted

Induced Conversions of Convertible Debt Instruments

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

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

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

Disaggregation of Income Statement Expenses

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

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

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

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

Scope Applications of Profits Interests and Similar Awards

In March 2024, the FASB issued ASU No.

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

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

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

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

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

Discontinued Operations

The Company evaluates all disposal transactions to determine whether such disposal qualifies for reporting as discontinued operations in accordance with ASC Topic 205-20, “ Discontinued Operations .” A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results when the following occurs:

(1) a component (or group of components) meets the criteria to be classified as held for sale;

(2) the component or group of components is disposed of by sale;

or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off).

For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statement of operations for all prior periods presented.

The Company also reports assets and liabilities associated with discontinued operations as separate line items on the consolidated balance sheet for prior periods.

Recently Adopted Accounting Standards

Improvements to Income Tax Disclosures

6 unchanged sentences

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

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

The Company adopted this standard as of January 1, 2025.

The adoption of this ASU did not have any material impact on the Company’s consolidated financial statements.

Scope Applications of Profits Interests and Similar Awards

In March 2024, the FASB issued ASU No.

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

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

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

The Company adopted this standard as of January 1, 2025.

The adoption of ASU 2024-01 has no material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

Interim Reporting

In December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270).

The ASU improves the navigability of the required interim disclosures and clarifies when the guidance is applicable, as well as provides additional guidance on what disclosures should be provided in interim reporting periods.

The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods beginning after December 15, 2028.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements which is not expected to have a material impact.

Accounting for Government Grants Received by Business Entities

In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities .

This ASU establishes the accounting and presentation for government grants received by a business entity under Government Grants (Topic 832).

This ASU is effective for fiscal years beginning after December 15, 2028 and interim reporting periods within those annual reporting periods, with early adoption permitted.

The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

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 consolidated financial statements and disclosures.

Induced Conversions of Convertible Debt Instruments

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

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

Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).

In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date to clarify the effective date of ASU 2024-03.

The amendments require disclosure of additional information about specific expense categories in the notes to the financial statements.

This standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The amendments are to be applied either prospectively to financial statements issued for reporting periods after the effective date of this Update or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating the impact that the adoption of this standard will have on the consolidated financial statements.

NOTE 3 – FAIR VALUE MEASUREMENTS

6 unchanged sentences

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

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

Fair Value at December 31, 2024

Derivative liability - Warrants

Total liabilities

Fair Value at December 31, 2023

Derivative liability - Warrants

Total liabilities

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2024 and 2023.

The following table presents changes in Level 3 liabilities measured at fair value for the years ended December 31, 2024 and 2023.

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

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

Balance at January 1, 2023

Change in fair value

Balance at December 31, 2023

Change in fair value

Balance at December 31, 2024

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

Exercise price

Contractual term (years)

Volatility (annual)

Risk-free rate

Dividend yield (per share)

On April 26, 2019 (the “ Closing Date ”), the Company entered into a Securities Exchange Agreement (“ Share Exchange ”) with each of the former members (“ Members ”) of Charlie’s, and certain direct investors in the Company (“ Direct Investors ”), pursuant to which the Company acquired all outstanding membership interests of Charlie’s beneficially owned by the Members in exchange for the issuance by the Company of units.

Immediately prior to, and in connection with, the Share Exchange, Charlie’s consummated a private offering of membership interests that resulted in net proceeds to Charlie’s of approximately $ 27.5 million (the “ Charlie ’ s Financing ”).

In conjunction with the Share Exchange, the Company issued to holders of its Series A Convertible Preferred Stock (“ Series A Preferred ”) warrants to purchase an aggregate of 31,028,996 shares of Common Stock (the “ Investor Warrants ”) and to its placement agent Katalyst Securities LLC warrants to purchase an aggregate of 9,308,699 shares of Common Stock (the “ Placement Agent Warrants ”).

Both the Investor Warrants and Placement Agent Warrants have a five-year term and a strike price of $ 0.44313 per share.

Due to the exercise features of these warrants, they are not considered to be indexed to the Company’s own stock and are therefore not afforded equity treatment in accordance with ASC Topic 815, Derivatives and Hedging (“ ASC 815 ”).

In accordance with ASC 815, the Company has recorded the Investor Warrants and Placement Agent Warrants as derivative instruments on its consolidated balance sheet.

ASC 815 requires derivatives to be recorded on the balance sheet as an asset or liability and to be measured at fair value.

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

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

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are measured and reported on a fair value basis.

At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

The valuation of assets and liabilities recognized in business combinations are considered level 3 fair value measurements on the closing date of the acquisition.

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

As of December 31, 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

19 unchanged sentences

During the year ended December 31, 2025, purchases from three vendors represented 76 % of total inventory purchases.

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

Vendor C is an international vendor.

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

During the year ended December 31, 2024, purchases from two vendors represented 58 % of total inventory purchases As of December 31, 2025 and 2024, amounts owed to these vendors totaled $ 2,229,000 and $ 266,000 respectively, which are included in accounts payable in the accompanying condensed consolidated balance sheets.

Accounts Receivable

1 unchanged sentence

For the years ended December 31,

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

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

NOTE 7 – DON POLLY, LLC.

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

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

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

Under ASC 810-10-15, Variable Interest Entities, a VIE is an entity that:

(1) has an insufficient amount of equity investment at risk to permit the entity to finance its activities without additional subordinated financial support by other parties;

(2) the equity investors are unable to make significant decisions about the entity’s activities through voting rights or similar rights;

or (3) the equity investors do not have the obligation to absorb expected losses or the right to receive residual returns of the entity.

The Company is required to consolidate a VIE if it is determined to be the primary beneficiary, that is, the enterprise has both (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE.

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

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

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

There are no non-controlling interests recorded.

Four customers made up more than 10% of net accounts receivable at December 31, 2025, and four customers made up more than 10% of net accounts receivable as of December 31, 2024.

For the year ended December 31, 2025, one customer accounted for approximately 17 %, of the Company’s total net sales.

For the year ended December 31, 2024, no customers exceeded 10% of total net sales

NOTE 7 – DISCONTINUED OPERATIONS - DON POLLY, LLC.

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

Don Polly markets and distributes third-party product lines.

On December 31, 2025, Don Polly entered into the Assignment Agreement, pursuant to which 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 Company received no cash consideration related to the assignment.

The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations of Don Polly in the consolidated balance sheet as of December 31, 2024 (amount in thousands):

Accounts receivable, net

Inventory, net

Prepaid expenses and other current assets

Total current assets in discontinued operations

Total assets in discontinued operations

Accounts payable

Deferred revenue

Total current liabilities in discontinued operations

Total non-current liabilities in discontinued operations

Total liabilities in discontinued operations

The following information presents the major classes of line items constituting the loss from discontinued operations of Don Polly in the consolidated statements of operations for the years ended December 31, 2025 and 2024 (amount in thousands):

For the Years Ended

Product revenue, net

Cost of goods sold - product revenue

Operating expenses:

General and administrative

Sales and marketing

Research and development

Total operating expenses

Loss from operations

Interest expense

Loss from discontinued operations, before income tax

Income tax provision

Income (loss) from discontinued operations, net of tax

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

6 unchanged sentences

NOTE 9 – NOTES PAYABLE

February 2025 Short-Term Loan – Related Party

On February 27, 2025, the Company entered into a two-month short-term loan agreement (the “Loan”) with the Company’s President, Henry Sicignano III for principal amount of $ 100,000 which bears interest at the rate of 10 % per annum.

The Loan was fully repaid in April 2025.

January 2025 Chemular Secured Promissory Note

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

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

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

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

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

September 2024 Pinnacle Receivables Financing

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

(“ 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 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 December 31, 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 year ended December 31, 2025.

As part of the closing of the Asset Purchase Agreement on April 16, 2025, the Buyer wired directly to Chemular approximately $ 319,000 to satisfy the Chemular Note in full.

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 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.

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

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

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

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 year ended December 31, 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.

By satisfying the balance in full prior to April 16, 2025, the Company was able to secure a discount of approximately $ 99,000 , which was recognized as a gain from debt extinguishment.

January 2024 Note Financing

10 unchanged sentences

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

2023 Receivables Financing

On January 19, 2023 the Company entered into a future receivables sale agreement (“ Receivables Financing ” or “ Receivables Financing Agreement ”) with Austin Business Finance (“ Austin Purchaser ”) by which Austin Purchaser purchases from the Company, its future accounts and contract rights arising from the sale of goods or rendition of services to the Company’s customers.

The purchase price, as defined by the Receivables Financing Agreement, was $ 650,000 which was paid to the Company on January 19, 2023, net of a 3 % origination fee.

The Receivables Financing Agreement required twenty-six equal payments of $ 29,500 to be paid weekly for a total repayment of $ 760,500 over the term of the agreement.

As of December 31, 2023, the Company had fully repaid the outstanding principal balance and accrued interest totaling $ 760,250 on its Receivables Financing Agreement.

On December 13, 2023 the Company entered into a second future receivables sale agreement (“ Second Receivables Financing ” or “ Receivables Financing Agreement ”) with Austin Business Finance (“ Austin Purchaser ”) by which Austin Purchaser purchases from the Company, its future accounts and contract rights arising from the sale of goods or rendition of services to the Company’s customers.

The purchase price, as defined by the Second Receivables Financing Agreement, was $ 750,000 which was paid to the Company on December 13, 2023, net of a 3 % origination fee.

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

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

April 2022 Note Financing

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 ").

As of December 31, 2025, approximately $ 138,000 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 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.

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 April 28, 2024, or a liquidity event.

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 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.

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 May 31, 2024, as part of the May 2024 capital raise, 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.

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 Company also incurred 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.

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 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.

8 unchanged sentences

Year Ending December 31, 2030

Debt discount

NOTE 10 – LOSS PER SHARE BASIC AND FULLY DILUTED

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period.

Diluted loss per common share is computed similar to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

Basic earnings (loss) per common share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period.

Diluted earnings (loss) per common share is computed similar to basic earnings (loss) per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

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

The following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net loss per share (in thousands):

For the years ended

Income (loss) from continuing operations after income taxes

Income (loss) from discontinued operations, net of tax

Net income (loss) - basic and diluted

Weighted average shares outstanding - basic

Diluted preferred shares

Weighted average shares outstanding - diluted

Net earnings (loss) per share:

Income (loss) from continuing operations, basic

Income (loss) from discontinued operations, basic

Net earnings (loss) per share, basic

Net earnings (loss) per share:

Income (loss) from continuing operations, diluted

Income (loss) from discontinued operations, diluted

Net earnings (loss) per share, diluted

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

1 unchanged sentence

Series A convertible preferred shares

All common stock options outstanding as of December 31, 2025 were out of the money and were not included in net earnings per share calculation.

NOTE 11 – STOCKHOLDERS ’ EQUITY

1 unchanged sentence

For the year ended December 31, 2023, the Company issued approximately 1,183,000 shares of Common Stock upon conversion of 29,027 shares of Series A Preferred.

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

Common Stock Warrants

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 December 31, 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:

Exercise price

Contractual term (years)

Volatility (annual)

Risk-free rate

Dividend yield (per share)

November 2024 Capital Raise

21 unchanged sentences

Weighted Average

Contractual Life (in

Aggregate Intrinsic

Remaining Contractual

Life (in years)

Intrinsic Value

Outstanding at January 1, 2024

16 unchanged sentences

Nonvested at December 31, 2025

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

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

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

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

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

During the years ended December 31, 2025 and 2024, the Company granted 3,200,000 and 525,000 restricted stock awards (“ RSAs ”) to employees and contractors of the Company pursuant to the 2019 Plan, as amended, respectively.

The grant date fair value was approximately $ 585,000 .

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

The grant date fair value for the years ended December 31, 2025 and 2024 was approximately $ 126,000 and $ 77,000 , respectively.

During the years ended December 31, 2025 and 2024, approximately 83,000 and 209,000 RSAs issued to employees were forfeited, respectively.

As of December 31, 2025, there was approximately $ 101,000 of total unrecognized compensation expense related to non-vested restricted share-based compensation arrangements granted under the 2019 Plan, as amended.

24 unchanged sentences

The Company leases office space under agreements classified as operating leases that expire on various dates through 2028.

All of the Company’s lease liabilities result from the lease of its headquarters in Costa Mesa, California, which expires in 2024, its warehouse in Santa Ana, California, which was renewed in May 2022 and expires May 2025, its office and warehouse in Denver, Colorado, which expired in May 2022, and its warehouse space in Huntington Beach, California, which was renewed in June 2022.

All of the Company’s lease liabilities result from the lease of its headquarters in Costa Mesa, California, which expired on September 30, 2024, and effective October 1, 2024, the lease will be on a month-to-month basis, and its warehouse in Huntington Beach, California, which was renewed in August 2025 and expires May 2028.

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

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

The Williamsville Lease 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, 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 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.

4 unchanged sentences

The Company does not act as a lessor or have any leases classified as financing leases.

The Company excludes short-term leases having initial terms of 12 months or less from Topic 842 as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

The Company excludes short-term leases having initial terms of 12 months or less from ASC Topic 842, “ Leases ”, as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

The Company entered into a commercial lease for the Company’s corporate headquarters (the “ Lease ”) in Costa Mesa, California with Brandon Stump, the Company’s former Chief Executive Officer, Ryan Stump, the Company’s Chief Operating Officer, and Keith Stump, a former member of the Company’s Board of Directors.

1 unchanged sentence

The Lease, which was effective as of September 1, 2019, on a month-to-month basis, was then formalized on November 1, 2019 to have a term of five years and a base rent rate of $ 22,940 per month, which rate is subject to annual adjustments based on the consumer price index, as may be mutually agreed upon by the parties to the Lease.

The terms of the Lease were negotiated and approved by the independent members of the Board, and executed by Mr.

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

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

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

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

The total rent paid to related parties for the years ended December 31, 2025 and 2024 was approximately $ 275,000 and $ 275,000 , 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.

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.

In September 2025, the Company entered into a lease agreement commencing on October 1, 2025 (the “ October Lease ”), pursuant to which the Company leases certain premises located at 15902-06 Manufacture Lane, Huntington Beach, CA for purposes of filling and assembling certain of its nicotine and alternative alkaloid vapor products.

The October Lease has a term of 1.5 years concluding March 31, 2027.

The Company recognized $ 123,000 in right-of-use assets and $ 123,000 in lease liabilities on the consolidated balance sheet as of the commencement date.

At December 31, 2025, the Company had operating lease liabilities of approximately $ 636,000 and right of use assets of approximately $ 632,000 which were included in the consolidated balance sheet.

8 unchanged sentences

For the years ended

Right of use assets exchanged for new operating lease liabilities

Operating cash flows from operating leases

2 unchanged sentences

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

Year Ending December 31, 2025

Year ended December 31, 2026

Year ended December 31, 2027

Year ended December 31, 2028

Less present value discount

21 unchanged sentences

As of December 31,

Total current (benefit) provision

Total deferred (benefit) provision

Total (benefit) provision for income taxes

Total current provision

Total deferred provision

Total provision for income taxes

The tax effects of temporary differences and tax loss carryovers that give rise to significant portions of deferred tax assets and liabilities at December 31, 2025 and 2024 are comprised of the following (in thousands):

34 unchanged sentences

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

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

A reconciliation of the statutory income tax rates and the Company's effective tax rate for the years ended December 31, 2025 and 2024, are as follows (dollars in thousands):

December 31, 2025

December 31, 2024

Statutory federal income tax rate

Non-taxed loss from VIE

Research credits

State taxes, net of federal tax benefit

Research credits

Nontaxable or Nondeductible Items

Stock compensation

Permanent Items

Section 382 NOL Adjustments

Return to provision adjustments

Other permanent items

Other Adjustments

Change in valuation allowance

Total effective tax rate

* The following state and local tax jurisdictions make up the majority of the effect of the state and local income tax line item:

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

16 unchanged sentences

NOTE 16 - SUBSEQUENT EVENTS

January 2025 Chemular Secured Promissory Note

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

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

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

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

Entry into a Material Definitive Agreement for the Disposition of Assets

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

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

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

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

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

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

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

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

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

Repayment of Pinnacle Receivables Financing Agreement

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

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

Modification of Ryan Stump and Henry Sicignano III Promissory Notes

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

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

(Exhibit 10.15)

Repayment of August 17, 2022 Loan From Ryan Stump

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

Modification of April 22, 2022 Loan From Michael King

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

(Exhibit 10.17)

The Company has evaluated subsequent events for recognition and disclosure through the date these financial statements were issued, in accordance with ASC 855, Subsequent Events.

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, President:

250,000 shares

Matthew Montesano, Chief Financial Officer:

100,000 shares

Amended Promissory Note With Michael King

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 balloon principal payment due on maturity with interest only paid monthly until maturity.

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

What changed 10-K

Item 9A. Controls and Procedures