Turning Point Brands, Inc. 10-K

Item 8. Financial Statements and Supplementary Data TURNING POINT BRANDS, INC. CONTENTS Page Reports of KPMG LLP (PCAOB ID: 185 ) 53 Reports of RSM US LLP (PCAOB ID: 49) 55 Financial Statements: Consolidated Balance Sheets as of December 31, 2025 and 2024 56 Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 57 Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024, and 2023 58 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024, and 2023 59 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025, 2024, and 2023 61 Notes to Consolidated Financial Statements 62 52 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors Turning Point Brands, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheet of Turning Point Brands, Inc. and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders’ equity for the year ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of whether General Wireless Operations, Inc. and its distribution business were variable interest entities of the Company As discussed in Notes 2 and 12 to the consolidated financial statements, during the year ended December 31, 2025, the Company contributed 100% of its interest in South Beach Brands LLC (SBB) to General Wireless Operations, Inc. (GWO) in exchange for 49% of the issued and outstanding GWO common stock. The Company has the right to redeem the contribution of SBB from GWO at fair market value under certain circumstances and also received a purchase option with a 15-year term to acquire the remaining 51% equity interest in GWO. Subsequent to this first transaction, on August 8, 2025, SBB acquired a distribution business. In connection with this acquisition, 10233625 Canada Corp. (Turning Point Brands Canada), an indirect consolidated subsidiary of the Company, purchased an option from SBB to acquire this distribution business for fair market value less the option price. The Company evaluates whether it holds a controlling financial interest in unconsolidated entities, whether the entities are variable interest entities (VIEs) and if the Company is the primary beneficiary of any identified VIE to determine whether the Company is required to consolidate the entities. The Company performs this analysis on an ongoing basis. The Company concluded that the distribution business acquired by GWO is a VIE that the Company is not required to consolidate and, upon reconsideration, concluded GWO meets the definition of a VIE and is accounted for as an equity method investment. 53 Table of Contents Report of Independent Registered Public Accounting Firm (continued) We identified the evaluation of whether the distribution business acquired by GWO and, upon reconsideration, GWO were VIEs of the Company as a critical audit matter. Complex auditor judgment and increased extent of audit effort was required to evaluate the Company’s determination of (1) whether GWO and the distribution business acquired by GWO were VIEs and (2) the primary beneficiary of the VIEs, which required management to apply complex consolidation accounting standards and make significant judgments. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s application of the variable interest model and assessment of reconsideration events. We evaluated the reasonableness of the Company’s conclusions related to whether the distribution business acquired by GWO was a VIE of the Company. Specifically, we (1) evaluated the terms of the agreements by reading the purchase agreements and other related documents that govern the formation and activities of the entities (the Contractual Arrangements), (2) tested whether the Company appropriately determined the primary beneficiary by evaluating the Contractual Arrangements of the entities to determine if the Company has the power to direct activities that most significantly impact the economic performance of the VIE, and if the Company has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could be significant to the VIE, (3) read the terms of the option purchased by the Company, through the Canadian subsidiary, and evaluated whether the terms met the power criterion, and (4) evaluated the terms and tested whether any party has the unilateral and substantive right to terminate related agreements, including through inquiry of internal counsel. Additionally, we evaluated the Company’s assessment that the reconsideration event resulted in GWO becoming a VIE of the Company accounted for under the equity method of accounting by assessing the underlying terms and nature of agreements between the Company, GWO and its acquired distribution business. /s/ KPMG LLP We have served as the Company’s auditor since 2025. Louisville, Kentucky March 2, 2026 54 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Turning Point Brands, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Turning Point Brands, Inc. and its subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. 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 audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits 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. Our audits 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 audits 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 audits provide a reasonable basis for our opinion. /s/ RSM US LLP We served as the Company’s auditor from 2006 to 2025. Charlotte, North Carolina March 6, 2025 55 Table of Contents Turning Point Brands, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2025 and 2024 (dollars in thousands except share data) December 31, December 31, 2025 2024 ASSETS Current assets: Cash $ 222,760 $ 46,158 Accounts receivable, net of allowances of $ 206 in 2025 and $ 66 in 2024 25,726 9,624 Inventories, net 107,989 96,253 Current assets held for sale - 11,470 Other current assets 60,675 34,700 Total current assets 417,150 198,205 Property, plant, and equipment, net 36,247 26,337 Deferred income tax assets, net - 995 Right of use assets 14,480 11,610 Deferred financing costs, net 1,180 1,823 Goodwill 136,097 135,932 Other intangible assets, net 64,042 65,254 Master Settlement Agreement (MSA) escrow deposits 29,887 28,676 Noncurrent assets held for sale - 3,859 Other assets 64,667 20,662 Total assets $ 763,750 $ 493,353 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 20,420 $ 11,675 Accrued liabilities 54,587 31,096 Current liabilities held for sale - 2,049 Total current liabilities 75,007 44,820 Deferred income tax liabilities, net 8,289 - Notes payable and long-term debt 293,625 248,604 Other long-term liabilities 4,138 - Lease liabilities 10,708 9,549 Total liabilities 391,767 302,973 Commitments and contingencies Stockholders’ equity: Preferred stock; $ 0.01 par value; authorized shares 40,000,000 ; issued and outstanding shares - 0 - - - Common stock, voting, $ 0.01 par value; authorized shares, 190,000,000 ; 20,589,527 issued shares, 19,132,384 outstanding shares at December 31, 2025, and 20,200,886 issued shares, 17,729,481 outstanding shares at December 31, 2024 216 202 Common stock, nonvoting, $ 0.01 par value; authorized shares, 10,000,000 ; issued and outstanding shares - 0 - - - Additional paid-in capital 203,627 126,662 Cost of repurchased common stock ( 1,457,143 and 2,471,405 shares at December 31, 2025 and 2024) ( 47,637 ) ( 83,144 ) Accumulated other comprehensive loss ( 1,563 ) ( 2,903 ) Accumulated earnings 199,661 147,164 Non-controlling interest 17,679 2,399 Total stockholders’ equity 371,983 190,380 Total liabilities and stockholders’ equity $ 763,750 $ 493,353 The accompanying notes are an integral part of the consolidated financial statements. 56 Table of Contents Turning Point Brands, Inc. and Subsidiaries Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands except share data) For the years ended December 31, 2025 2024 2023 Net sales $ 463,062 $ 360,660 $ 325,064 Cost of sales 198,748 159,095 142,122 Gross profit 264,314 201,565 182,942 Selling, general, and administrative expenses 168,987 122,407 104,327 Other operating income - ( 1,674 ) ( 4,345 ) Operating income 95,327 80,832 82,960 Other income, net ( 6,616 ) - ( 4,000 ) Interest expense, net 17,466 13,983 14,645 Investment (gain) loss ( 1,060 ) 1,968 9,601 (Income) losses from equity method investment 1,159 ( 75 ) 2,313 Loss (gain) on extinguishment of debt 1,235 - ( 1,664 ) Income from continuing operations before income taxes 83,143 64,956 62,065 Income tax expense 14,991 16,929 23,999 Income from continuing operations 68,152 48,027 38,066 Loss from discontinued operations, net of tax - ( 7,517 ) ( 285 ) Consolidated net income 68,152 40,510 37,781 Net income (loss) attributable to non-controlling interest 9,987 701 ( 681 ) Net income attributable to Turning Point Brands, Inc. $ 58,165 $ 39,809 $ 38,462 Basic income (loss) per common share: Continuing operations $ 3.18 $ 2.67 $ 2.20 Discontinued operations - ( 0.43 ) ( 0.01 ) Basic earnings per share $ 3.18 $ 2.24 $ 2.19 Diluted income (loss) per common share: Continuing operations $ 3.11 $ 2.53 $ 2.02 Discontinued operations - ( 0.39 ) ( 0.01 ) Diluted earnings per share $ 3.11 $ 2.14 $ 2.01 Weighted average common shares outstanding: Basic 18,314,047 17,734,239 17,578,270 Diluted 18,730,635 19,362,806 20,467,406 The accompanying notes are an integral part of the consolidated financial statements. 57 Table of Contents Turning Point Brands, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands) For the years ended December 31, 2025 2024 2023 Consolidated net income $ 68,152 $ 40,510 $ 37,781 Other comprehensive income (loss), net of tax Unrealized (loss) gain on MSA investments, net of tax of $ 287 in 2025 and $ 9 in 2024 and $ 161 in 2023 1,004 ( 17 ) 542 Foreign currency translation, net of tax of $ 0 in 2025, 2024, and 2023 219 ( 197 ) ( 74 ) Unrealized (loss) gain on derivative instruments, net of tax of $ 18 in 2025, $ 54 in 2024and $ 237 in 2023 63 ( 173 ) ( 747 ) Unrealized gain on investments, net of tax of $ 48 in 2025 and $ 0 in 2024 99 50 - 1,385 ( 337 ) ( 279 ) Consolidated comprehensive income 69,537 40,173 37,502 Comprehensive income (loss) attributable to non-controlling interest 10,032 619 ( 705 ) Comprehensive income attributable to Turning Point Brands, Inc. $ 59,505 $ 39,554 $ 38,207 The accompanying notes are an integral part of the consolidated financial statements. 58 Table of Contents Turning Point Brands, Inc. and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands) For the years ended December 31, 2025 2024 2023 Cash flows from operating activities: Consolidated net income $ 68,152 $ 40,510 $ 37,781 Loss from discontinued operations, net of tax - 7,517 285 Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) on extinguishment of debt 1,235 - ( 1,664 ) Loss on sale of property, plant, and equipment 106 75 62 Gain on insurance recovery of inventory loss - - ( 15,181 ) Loss (gain) from equity method investments 1,159 ( 75 ) 2,313 (Gain) Loss on investments ( 484 ) 2,797 9,864 Depreciation and other amortization expense 6,177 4,439 2,921 Amortization of other intangible assets 1,239 1,223 1,197 Amortization of deferred financing costs 1,714 2,430 2,445 Deferred income tax expense 8,931 519 7,024 Stock compensation expense 6,974 7,243 6,561 Noncash lease income ( 1,797 ) ( 622 ) ( 72 ) Gain on MSA investments - ( 14 ) - Changes in operating assets and liabilities: Accounts receivable ( 16,114 ) 185 ( 2,625 ) Inventories ( 11,584 ) ( 4,770 ) 13,287 Other current assets ( 25,413 ) ( 1,421 ) ( 3,794 ) Other assets ( 4,835 ) ( 1,767 ) ( 4,865 ) Accounts payable 8,603 3,689 100 Accrued liabilities and other 13,311 ( 1,000 ) 601 Operating cash flows from continuing operations 57,374 60,958 56,240 Operating cash flows from discontinued operations - 6,104 10,641 Net cash provided by operating activities $ 57,374 $ 67,062 $ 66,881 Cash flows from investing activities: Capital expenditures $ ( 13,529 ) $ ( 4,623 ) $ ( 5,707 ) Purchases of investments ( 13,755 ) ( 10,857 ) ( 202 ) Proceeds from sale of investments 6,363 5,420 - Purchase of options agreement ( 8,000 ) - - Purchases of non-marketable equity investments ( 2,783 ) ( 500 ) - Proceeds on sale of property, plant and equipment - 5 3 MSA escrow deposits, net 33 46 - Investing cash flows from continuing operations ( 31,671 ) ( 10,509 ) ( 5,906 ) Investing cash flows from discontinued operations - - - Net cash used in investing activities $ ( 31,671 ) $ ( 10,509 ) $ ( 5,906 ) 59 Table of Contents Turning Point Brands, Inc. and Subsidiaries Consolidated Statements of Cash Flows (cont.) for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands) For the years ended December 31, 2025 2024 2023 Cash flows from financing activities: Convertible Senior Notes repurchased $ - $ ( 118,541 ) $ ( 41,794 ) Payment of 2026 Senior Notes ( 250,000 ) - - Proceeds from 2032 Notes 300,000 - - At the market offering proceeds 97,499 - - Interchange subscription agreement 11,000 - - Proceeds from call options - - 114 Payment of dividends ( 5,519 ) ( 4,905 ) ( 4,497 ) Payments of financing costs ( 7,285 ) ( 133 ) ( 2,437 ) Exercise of options 7,561 2,807 450 Redemption of options ( 33 ) ( 335 ) ( 346 ) Redemption of restricted stock units ( 2,324 ) ( 914 ) ( 995 ) Issuance of restricted stock units 1 - - Redemption of performance based restricted stock units ( 2,626 ) ( 1,212 ) - Issuance of performance based restricted stock units - - - Common stock repurchased - ( 5,051 ) - Financing cash flows from continuing operations 148,274 ( 128,284 ) ( 49,505 ) Financing cash flows from discontinued operations - - - Net cash provided by (used in) financing activities $ 148,274 $ ( 128,284 ) $ ( 49,505 ) Net increase (decrease) in cash $ 173,977 $ ( 71,731 ) $ 11,470 Effect of foreign currency translation on cash $ ( 205 ) $ ( 182 ) $ 13 Cash, beginning of period: Unrestricted $ 48,941 $ 117,886 $ 106,403 Restricted 1,961 4,929 4,929 Total cash at beginning of period $ 50,902 $ 122,815 $ 111,332 Cash, end of period: Unrestricted $ 222,760 $ 48,941 $ 117,886 Restricted 1,914 1,961 4,929 Total cash at end of period $ 224,674 $ 50,902 $ 122,815 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 20,451 $ 17,488 $ 18,047 Cash paid during the period for income taxes, net $ 10,384 $ 20,997 $ 12,447 Supplemental schedule of noncash investing activities: Accrued capital expenditures $ - $ 18 $ 8 Accrued consideration for acquisition of investments $ - $ - $ 248 Supplemental schedule of noncash financing activities: Dividends declared not paid $ 1,443 $ 1,588 $ 1,489 The accompanying notes are an integral part of the consolidated financial statements. 60 Table of Contents Turning Point Brands, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands) Cost of Accumulated Common Additional Repurchased Other Accumulated Non- Voting Stock, Paid-In Common Comprehensive Earnings Controlling Shares Voting Capital Stock Income (Loss) (Deficit) Interest Total Beginning balance January 1, 2023 17,485,163 $ 198 $ 113,242 $ ( 78,093 ) $ ( 2,393 ) $ 78,691 $ 1,735 $ 113,380 Unrealized loss on MSA investments, net of tax of $ 161 - $ - $ - $ - $ 542 $ - $ - $ 542 Unrealized gain on derivative instruments, net of tax of $ 237 - - - - ( 747 ) - - ( 747 ) Foreign currency translation, net of tax of $ 0 - - - - ( 50 ) - ( 24 ) ( 74 ) Stock compensation expense - - 6,561 - - - - 6,561 Exercise of options 33,851 - 450 - - - - 450 Redemption of options ( 15,985 ) - ( 346 ) - - - - ( 346 ) Issuance of performance based restricted stock units 105,032 1 75 - - - - 76 Redemption of performance based restricted stock units ( 34,704 ) - ( 800 ) - - - - ( 800 ) Issuance of restricted stock units 40,910 - 2 - - - - 2 Redemption of restricted stock units ( 8,590 ) - ( 195 ) - - - - ( 195 ) Settlement of call options, net of tax of $ 28 - - 86 - - - - 86 Dividends - - - - - ( 4,710 ) - ( 4,710 ) Net income - - - - - 38,462 ( 681 ) 37,781 Ending balance December 31, 2023 17,605,677 $ 199 $ 119,075 $ ( 78,093 ) $ ( 2,648 ) $ 112,443 $ 1,030 $ 152,006 Unrealized gain on MSA investments, net of tax of $ 9 - $ - $ - $ - $ ( 17 ) $ - $ - $ ( 17 ) Unrealized loss on derivative instruments, net of tax of $ 54 - - - - ( 173 ) - - ( 173 ) Foreign currency translation, net of tax of $ 0 - - - - ( 115 ) - ( 82 ) ( 197 ) Unrealized gain on investments, net of tax of $ 0 - - - - 50 - - 50 Acquisition of non-controlling interest - - - - - - 750 750 Stock compensation expense - - 7,243 - - - - 7,243 Exercise of options 132,572 1 2,806 - - - - 2,807 Redemption of options ( 9,735 ) - ( 335 ) - - - - ( 335 ) Issuance of performance based restricted stock units 129,316 1 - - - - - 1 Redemption of performance based restricted stock units ( 48,170 ) - ( 1,212 ) - - - - ( 1,212 ) Issuance of restricted stock units 106,249 1 78 - - - - 79 Redemption of restricted stock units ( 31,483 ) - ( 993 ) - - - - ( 993 ) Cost of repurchased common stock ( 154,945 ) - - ( 5,051 ) - - - ( 5,051 ) Dividends - - - - - ( 5,088 ) - ( 5,088 ) Net income - - - - - 39,809 701 40,510 Ending balance December 31, 2024 17,729,481 $ 202 $ 126,662 $ ( 83,144 ) $ ( 2,903 ) $ 147,164 $ 2,399 $ 190,380 Unrealized loss on MSA investments, net of tax of $ 287 - $ - $ - $ - $ 1,004 $ - $ - $ 1,004 Unrealized loss on derivative instruments, net of tax of $ 18 - - - - 63 - - 63 Foreign currency translation, net of tax of $ 0 - - - - 174 - 45 219 Unrealized gain on investments, net of tax of $ 48 - - - - 99 - - 99 Stock compensation expense - - 6,974 - - - - 6,974 Exercise of options 245,855 2 7,559 - - - - 7,561 Redemption of options ( 572 ) - ( 33 ) - - - - ( 33 ) Issuance of performance based restricted stock units 104,532 - - - - - - - Redemption of performance based restricted stock units ( 34,196 ) 1 ( 2,627 ) - - - - ( 2,626 ) Issuance of restricted stock units 103,612 1 - - - - - 1 Redemption of restricted stock units ( 30,590 ) - ( 2,324 ) - - - - ( 2,324 ) Interchange subscription agreement contribution - - 5,752 - - - 5,248 11,000 Issuance of common stock in connection with the At-the-Market Offering Program, net of fees 1,014,262 10 61,664 35,507 - - - 97,181 Dividends - - - - - ( 5,668 ) - ( 5,668 ) Net income - - - - - 58,165 9,987 68,152 Ending balance December 31, 2025 19,132,384 $ 216 $ 203,627 $ ( 47,637 ) $ ( 1,563 ) $ 199,661 $ 17,679 $ 371,983 The accompanying notes are an integral part of the consolidated financial statements. 61 Table of Contents Turning Point Brands, Inc. and Subsidiaries Notes to Consolidated Financial Statements (dollars in thousands, except where designated and per share data) Note 1. Organizations and Basis of Presentation Description of Business Turning Point Brands, Inc., including its subsidiaries (collectively referred to herein as the “Company,” “we,” “our,” or “us”), is a leading manufacturer, marketer and distributor of branded consumer products. The Company sells a wide range of products to adult consumers consisting of staple products with its iconic brands Zig-Zag ® and Stoker’s ® and its next generation products to fulfill evolving consumer preferences. The Company's segments are led by its core proprietary and iconic brands: Zig-Zag ® and Stoker’s ® along with FRE ®, Beech-Nut ® and Trophy ®. The Company’s products are available in more than 220,000 retail outlets in North America. The Company operates two segments, Zig-Zag products and Stoker’s products. Discontinued Operations On January 2, 2025, the Company contributed 100 % of its interest in South Beach Brands LLC (“SBB”), the subsidiary that owned and operated the Company’s former Creative Distribution Solutions (“CDS”) reportable segment, to General Wireless Operations, Inc. (“GWO”) in exchange for 49 % of the issued and outstanding GWO common stock. GWO is majority owned by Standard General, LP. The Company established RSH Holding Trust ("RSH Trust") to hold its interest in GWO which is managed by an independent trustee that votes our interest in GWO in accordance with GWO's board's recommendation, and GWO is controlled by Standard General, L.P. As of December 31, 2024, the assets and liabilities associated with the CDS segment were classified as held for sale. Accordingly, the financial results of the CDS segment were classified as discontinued operations and reported separately for all periods presented herein until its disposition on January 2, 2025. Following the discontinued operations classification, the Company has two reportable segments, which are reflected herein. Unless otherwise noted, disclosures in the notes to these consolidated financial statements relate solely to the Company's continuing operations, comprised of the Zig-Zag and Stoker’s segments. See Note 3, "Assets and Liabilities Held for Sale and Discontinued Operations" for additional information regarding the CDS divestiture, including the assets and liabilities held for sale and the income or losses from discontinued operations. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s estimates include those affecting the valuation of goodwill and other intangible assets, the fair value of assets held for sale, deferred income tax valuation allowances, the valuation of investments, share-based payments, and the valuation of inventory, including reserves. Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented. Note 2. Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company, its subsidiaries, all of which are wholly-owned, and variable interest entities (“VIEs”) for which the Company is considered to have a controlling interest based on the voting interest entity model or the variable interest entity model. All significant intercompany transactions have been eliminated. U.S. GAAP requires the Company to identify entities for which control is achieved through means other than voting rights and to determine whether the Company is the primary beneficiary of VIEs. A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The primary beneficiary of a VIE is the entity that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The Company performs this analysis on an ongoing basis. The Company determines whether an entity is a VIE at the inception of its variable interest in the entity and upon the occurrence of certain reconsideration events. 62 Table of Contents Management of the Company has determined that Turning Point Brands Canada and ALP Supply Co, LLC (“ALP”) are VIEs for which the Company is required to consolidate and determined that the distribution business acquired by General Wireless Operations, Inc. (refer to Note 12, "Other Assets") is a VIE for which the Company is not required to consolidate. The Company has a 65 % financial interest in the equity of Turning Point Brands Canada, provides additional subordinated financing and has a distribution agreement for the sale of the Company’s products that makes up a significant portion of Turning Point Brands Canada’s business activities. The Company has a 50 % equity interest in ALP, provides additional financing, has a supply agreement to be the exclusive provider of product and is the primary beneficiary due to the power the Company has over the activities that most significantly impact the economic performance, and the right to receive benefits and the obligation to absorb losses. RSH Trust, which was established by the Company and is managed by an independent trustee that votes our interest in GWO in accordance with GWO's board's recommendations, holds 49 % indirect interest in the distribution business through its interests in General Wireless Operations, Inc. ("GWO") and, through Turning Point Brands Canada, the Company has a variable interest through a purchase option to acquire the equity interests of GWO's distribution business. However, the Company does not have the ability to direct the activities that impact the performance of the business. GWO is controlled by Standard General, L.P. Based on the foregoing, management believes in its judgement that the distribution business is a VIE for which the Company is not required to consolidate. See Note 12 "Other Assets" for further discussion of the acquisition of the distribution business by General Wireless Operations, Inc. and the terms of the option on its equity interests. Turning Point Brands Canada charged a fee to the distribution business in 2025. The agreement was terminated in the fourth quarter. Subsequent to the acquisition of the distribution business by General Wireless Operations, the Company determined that the General Wireless Operations Equity Method Investment is a VIE of which we are not the primary beneficiary. We considered the Company’s interest at risk due to a lack of power, through voting rights, to direct the activities that most significantly impact General Wireless Operations’ economic performance. Standard General, L.P’s voting rights are conveyed through an equity interest that is not considered at risk. Based on the foregoing, management believes in its judgement that General Wireless Operations is a VIE for which the Company is not required to consolidate. Revenue Recognition The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606 ), which includes excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns and incentives, upon delivery of goods to the customer – at which time the Company’s performance obligation is satisfied - at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five -step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. The Company includes in its transaction price excise taxes on smokeless tobacco, cigars or other nicotine products billed to customers, and excludes sales taxes and value-added taxes imposed at the time of sale. The Company records an allowance for sales returns, based principally on historical volume and return rates, which is included in accrued liabilities on the consolidated balance sheets. The Company records sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction in revenues (a portion of which is based on amounts estimated to be due to wholesalers, retailers and consumers at the end of the period) based principally on historical volume and utilization rates. Expected payments for sales incentives are included in accrued liabilities on the consolidated balance sheets. A further requirement of ASC 606 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company’s management views business performance through segments that closely resemble the performance of major product lines. Thus, the primary and most useful disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 21, “Segment Information”. Held for Sale and Discontinued Operations The Company classifies assets and liabilities to be sold (disposal group) as held for sale in the period when all of the applicable criteria are met, including: (i) management commits to a plan to sell, (ii) the disposal group is available to sell in its present condition, (iii) there is an active program to locate a buyer, (iv) the disposal group is being actively marketed at a reasonable price in relation to its fair value, (v) significant changes to the plan to sell are unlikely, and (vi) the sale of the disposal group is generally probable of being completed within one year. Assets and liabilities held for sale are presented separately within the Consolidated Balance Sheets with any adjustments necessary to measure the disposal group at the lower of its carrying value or fair value less costs to sell. Depreciation of property, plant and equipment and amortization of intangible and right-of-use assets are not recorded while these assets are classified as held for sale. For each period the disposal group remains classified as held for sale, its recoverability is reassessed, and any necessary adjustments are made to its carrying value. The Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that will have a major effect on its operations and financial results. The results of discontinued operations are reported as Loss from discontinued operations, net of tax in the Consolidated Statements of Income for the current and prior periods commencing in the period in which the held for sale criteria are met. Loss from discontinued operations includes direct costs attributable to the divested business and excludes any cost allocations associated with any shared or corporate functions. Loss from discontinued operations will include any gain or loss recognized upon disposition or from any adjustment of the carrying amount of the assets and liabilities of the discontinued operations to fair value less costs to sell while classified as held for sale. Derivative Instruments The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100 % of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to 100 % of its non-inventory purchases (e.g., production equipment) in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are reclassified from other comprehensive income into inventory as the related inventories are received and are transferred to net income as inventory is sold. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income. 63 Table of Contents Shipping Costs The Company records shipping costs incurred as a component of selling, general and administrative expenses. Shipping costs incurred were approximately $ 29.7 million, $ 17.9 million, and $ 16.0 million in 2025 , 2024 , and 2023 , respectively. Research and Development and Quality Assurance Costs Research and development and quality assurance costs are expensed as incurred. These expenses, classified as selling, general and administrative expenses, were approximately $ 0.9 million, $ 1.3 million, and $ 0.6 million in 2025, 2024, and 2023, respectively. Cash and Cash Equivalents The Company considers any highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. Inventories Inventories are stated at the lower of cost or net realizable value using the first -in, first -out (“FIFO”) method. Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobaccos are carried longer than one year for the purpose of curing. Property, Plant and Equipment Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation is provided using the straight-line method over the lesser of the estimated useful lives of the assets or the life of the leases for leasehold improvements ( 4 to 7 years for machinery, equipment and furniture, 10 to 15 years for leasehold improvements, and up to 15 years for buildings and building improvements). Expenditures for repairs and maintenance are charged to expense as incurred. The costs of major repairs and improvements are capitalized and depreciated over their estimated useful lives. Upon disposition of fixed assets, the costs and related accumulated depreciation amounts are relieved. Any resulting gain or loss is reflected in operations during the period of disposition. Long-lived assets are reviewed for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and Other Intangible Assets The Company follows the provisions of ASC 350, Intangibles – Goodwill and Other in accounting for goodwill and other intangible assets. Goodwill is tested for impairment annually on December 31, or more frequently if certain indicators are present. When testing goodwill for impairment, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds its fair value, limited to the amount of goodwill at the reporting unit. The Company determines fair values for each of the reporting units using a combination of the income approach and/or market approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Under the market approach, the Company selects peer sets based on close competitors and reviews the revenue and EBITDA multiples to determine the fair value. See Note 11, “Goodwill and Other Intangible Assets” for further information on goodwill. Indefinite-lived intangible assets are tested for impairment at least annually; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value. The Company’s fair value methodology is primarily based on the relief from royalty approach. Definite-lived intangible assets are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from 3.5 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Fair Value U.S. GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 ) and the lowest priority to unobservable inputs (Level 3 ). The three levels of the fair value hierarchy under U.S. GAAP are described below: • Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date. • Level 2 – Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. 64 Table of Contents Equity Investments The Company's investments include equity securities, which are accounted for at cost and under the equity method of accounting. For equity investments that do not qualify to be accounted for under the equity method of accounting and that do not have a readily determinable fair value, the Company has elected a practical expedient to record the investment at the original cost, as adjusted for impairment and observable price changes. Under the practical expedient, if a qualitative analysis indicates impairment exists, the fair value of the investment is required to be estimated and any excess of the carrying value over the estimated fair value is recognized as an impairment loss. Equity investments accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that any loss in value of the investment may be other than temporary. A loss in value of an investment is other than temporary when evidence of a loss in value indicates the absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. In the absence of observable data, the Company estimates the fair values of these investments using a market approach derived from applying market multiples of comparable public companies to the financial results of each investment. The valuation methodology and the significant assumptions used by management in estimating the fair values of each investment involve a high degree of judgment and may involve the use of third -party valuation specialists. Deferred Financing Costs Deferred financing costs are amortized over the terms of the related debt obligations using the straight-line method. Unamortized amounts are expensed upon extinguishment of the related borrowings. Deferred financing costs are presented as a direct deduction from the carrying amount of that debt liability except for deferred financing costs relating to our revolving credit facility, which are presented as an asset. Income Taxes The Company records the effects of income taxes under the liability method in which deferred income tax assets and liabilities are recognized based on the difference between the financial and tax basis of assets and liabilities using the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company assesses its ability to realize future benefits of deferred tax assets by determining if they meet the “more likely than not” criteria in ASC 740, Income Taxes. If the Company determines that future benefits do not meet the “more likely than not” criteria, a valuation allowance is recorded. Advertising and Promotion Advertising and promotion costs, including point of sale materials, are expensed as incurred and amounted to $ 29.8 million, $ 12.0 million, and $ 7.6 million for the years ended December 31, 2025, 2024, and 2023, respectively. Stock-Based Compensation The Company measures stock-based compensation costs related to its stock options on the fair value-based method under the provisions of ASC 718, Compensation – Stock Compensation. The fair value-based method requires compensation cost for stock options to be recognized over the requisite service period based on the fair value of stock options granted. The Company determined the fair value of these awards using the Black-Scholes option pricing model. The Company grants performance-based restricted stock units (“PRSU”) subject to both performance-based and service-based vesting conditions. The fair value of each PRSU is the Company’s stock price on the date of grant. For purposes of recognizing compensation expense as services are rendered in accordance with ASC 718, the Company assumes all employees involved in the PRSU grant will provide service through the end of the performance period. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the PRSU grant. The Company grants restricted stock units (“RSU”) subject to service-based vesting conditions. The fair value of each RSU is the Company’s stock price on the date of grant. The Company recognizes compensation expense as services are rendered in accordance with ASC 718. Stock compensation expense is recorded over the service period in the RSU grant. Risks and Uncertainties Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The tobacco industry is likely to continue to be heavily regulated. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. In a number of states targeted flavor bans have been proposed or enacted legislatively or by the administrative process. Depending on the number and location of such bans, that legislation or regulation could have a material adverse effect on the Company’s financial position, results of operations or cash flows. The U.S. Food and Drug Administration (“FDA”) continues to consider various restrictive regulations around our products, including targeted flavor bans; however, the details, timing, and ultimate implementation of such measures remain unclear. The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. 65 Table of Contents Master Settlement Agreement (MSA) Forty- six states, certain U.S. territories, and the District of Columbia are parties to the Master Settlement Agreement (“MSA”) and the Smokeless Tobacco Master Settlement Agreement (“STMSA”). To the Company’s knowledge, signatories to the MSA include 49 cigarette manufacturers and/or distributors. The only signatory to the STMSA is US Smokeless Tobacco Company. In the Company’s opinion, the fundamental basis for each agreement is the states’ consents to withdraw all claims for monetary, equitable, and injunctive relief against certain tobacco products manufacturers and others and, in return, the signatories have agreed to certain marketing restrictions and regulations as well as certain payment obligations. Pursuant to the MSA and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to also include make-your-own ("MYO") cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account, with sub-accounts on behalf of each settling state. The STMSA has no similar provisions. The MSA escrow accounts are governed by states’ statutes that expressly give the manufacturers the option of opening, funding, and maintaining an escrow account in lieu of becoming a signatory to the MSA. The statutes require companies who are not signatories to the MSA to deposit, on an annual basis, into qualified banks, escrow funds based on the number of cigarettes or cigarette equivalents, i.e., the pounds of MYO tobacco, sold. The purpose of these statutes is expressly stated to be to eliminate the cost disadvantage the settling manufacturers have as a result of entering into the MSA. Such companies are entitled to direct the investment of the escrowed funds and withdraw any appreciation, but cannot withdraw the principal for 25 years from the year of each annual deposit, except to withdraw funds deposited pursuant to an individual state’s escrow statute to pay a final judgment to that state’s plaintiffs in the event of such a final judgment against the company. Either option – becoming an MSA signatory or establishing an escrow account – is permissible. The Company chose to open and fund an MSA escrow account as its means of compliance. It is management’s opinion, due to the possibility of future federal or state regulations, though none have to date been enacted, that entering into one or both of the settlement agreements or establishing and maintaining an escrow account would not necessarily prevent future regulations from having a material adverse effect on the results of operations, financial position, and cash flows of the Company. Various states have enacted or proposed complementary legislation intended to curb the activity of certain manufacturers and importers of cigarettes that are selling into MSA states without signing the MSA or who have failed to properly establish and fund a qualifying escrow account. To the best of the Company’s knowledge, no such statute has been enacted which could inadvertently and negatively impact the Company, which has been, and is currently, fully compliant with all applicable laws, regulations, and statutes. However, there can be no assurance that the enactment of any such complementary legislation in the future will not have a material adverse effect on the results of operations, financial position, or cash flows of the Company. Pursuant to the MSA escrow account statutes, in order to be compliant with the MSA escrow requirements, companies selling products covered by the MSA are required to deposit such funds for each calendar year into a qualifying escrow account by April 15 of the following year. At December 31, 2025, the Company had on deposit approximately $ 32.0 million, the fair value of which was approximately $ 29.9 million. At December 31, 2024, the Company had on deposit approximately $ 32.1 million, the fair value of which was approximately $ 28.7 million. During 2025 , no monies were deposited into this qualifying escrow account. The investment vehicles available to the Company are specified in the state escrow agreements and are limited to low-risk government securities. The Company discontinued its generic category of MYO in 2019 and its Zig-Zag branded MYO cigarette smoking tobacco in 2017. Thus, pending a change in MSA legislation, the Company has no remaining product lines covered by the MSA and will not be required to make future escrow deposits. The Company has chosen to invest a portion of the MSA escrow, from time to time, in U.S. Government securities including Treasury inflation-protected securities, Treasury notes and Treasury bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; thus, any investment with an unrealized loss position will be held until the value is recovered, or until maturity. 66 Table of Contents Fair values for the U.S. Governmental agency obligations are Level 2 in the fair value hierarchy. The following tables show cost and estimated fair value of the assets held in the MSA account, respectively, as well as the maturities of the U.S. Governmental agency obligations held in such account for the periods indicated. As of December 31, 2025 As of December 31, 2024 Gross Gross Estimated Gross Gross Estimated Unrealized Unrealized Fair Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value Cash and cash equivalents $ 1,914 $ - $ - $ 1,914 $ 1,961 $ - $ - $ 1,961 U.S. Governmental agency obligations (unrealized position < 12 months) 298 6 - 304 4,168 11 ( 48 ) 4,131 U.S. Governmental agency obligations (unrealized position > 12 months) 29,780 84 ( 2,195 ) 27,669 25,944 95 ( 3,455 ) 22,584 Total $ 31,992 $ 90 $ ( 2,195 ) $ 29,887 $ 32,073 $ 106 $ ( 3,503 ) $ 28,676 As of December 31, 2025 Less than one year $ - One to five years 14,723 Five to ten years 13,400 Greater than ten years 1,955 Total $ 30,078 The following shows the amount of deposits by sales year for the MSA escrow account: Deposits as of December 31, Sales Year 2025 2024 1999 $ 130 $ 211 2000 1,017 1,017 2001 1,673 1,673 2002 2,271 2,271 2003 4,249 4,249 2004 3,714 3,714 2005 4,553 4,553 2006 3,847 3,847 2007 4,167 4,167 2008 3,364 3,364 2009 1,619 1,619 2010 406 406 2011 193 193 2012 199 199 2013 173 173 2014 143 143 2015 101 101 2016 91 91 2017 82 82 Total $ 31,992 $ 32,073 Concentration of Credit Risk: At December 31, 2025 and 2024 , the Company had bank deposits, including MSA escrow accounts, in excess of federally insured limits of approximately $ 221.8 million and $ 47.4 million, respectively. During 2025 and 2024 , the Company invested a portion of the MSA escrow accounts in U.S. Government securities including TIPS, Treasury notes, and Treasury bonds. The Company sells its products to distributors, retail establishments, and consumers throughout the U.S. and also sells Zig-Zag ® premium cigarette papers in Canada and some smaller quantities in other countries. For 2025, the Company did not have any customers that accounted for more than 10% of net sales. There was one customer that accounted for more than 10% of net sales for 2024 and there were no customers that accounted for more than 10% of nets sales for 2023 . The Company performs periodic credit evaluations of its customers and generally does not require collateral on trade receivables. Historically, the Company has not experienced significant credit losses. 67 Table of Contents Accounts Receivable Accounts receivable are recognized at their net realizable value. All accounts receivable are trade related, recorded at the invoiced amount, and do not bear interest. The Company maintains allowances for credit losses for estimated uncollectible invoices resulting from a customer’s inability to pay (bankruptcy, out of business, etc., i.e. “bad debt” which results in write-offs). The activity of allowance for credit losses for the years ended December 31, 2025, 2024, and 2023 is as follows: 2025 2024 2023 Balance at beginning of period $ 66 $ 78 $ 40 Additions to allowance account during period 140 23 38 Deductions of allowance account during period - ( 35 ) - Balance at end of period $ 206 $ 66 $ 78 Recent Accounting Pronouncements Recently adopted In December 2023, the FASB issued guidance which enhances income tax disclosures to require reporting entities to disclose annual income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes and to provide additional disaggregated information for individual jurisdictions under certain conditions. The guidance also requires disclosure of amounts and percentages in the annual rate reconciliation table, rather than amounts or percentages, and will eliminate certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The Company adopted ASU 2023 - 09 prospectively in the 2025. See Note 15 "Income Taxes" for new disclosures relating to 2025 only. Issued but not yet adopted In November 2024, the FASB issued guidance requiring reporting entities to disclose in the notes to the financial statements, specified information about certain categories of expenses including purchases of inventory, employee compensation, depreciation and amortization for each caption on the income statement where such expenses are included. This guidance will be effective for the Company beginning with its fiscal 2027 annual financial statements and interim periods thereafter. Early adoption is permitted, in addition to either prospective or retrospective application. The Company is currently assessing the impact and extent to which this guidance will affect its disclosures. Note 3. Assets and Liabilities Held for Sale and Discontinued Operations On January 2, 2025, the Company entered into an agreement to contribute 100 % of its interest in SBB, the subsidiary that owns and operates the Company’s CDS segment, to GWO in exchange for 49 % of the issued and outstanding GWO common stock on a fully-diluted basis. GWO is majority owned by Standard General, LP. Under certain circumstances the Company has the right to redeem the contribution of SBB from GWO at fair market value. In addition, the Company received an option with a 15 -year term to purchase the remaining 51 % of GWO at an exercise price initially set at $ 22.0 million, which decreases over time based on certain tax sharing payments to GWO. The assets and liabilities associated with the CDS business have been classified as held for sale as of December 31, 2024, and its financial results are classified as discontinued operations and reported separately for all periods presented herein. With the strategic shift of the Company's operations, as a result of this transaction, the CDS segment has been classified as discontinued operations. As a result, the Company now has two reportable segments as disclosed in Note 21, "Segment Information". Upon meeting the criteria for held for sale classification, the Company recorded a non-cash charge of $ 8.8 million with an equivalent valuation allowance against net assets held for sale to reduce the carrying value of the disposal group to fair value. Fair value of the disposal group utilized inputs within Level 3 of the fair value hierarchy, and was determined using both a market and an income approach. The Company incurred no income or loss from discontinued operations for the year ended December 31, 2025. The following table summarizes income from discontinued operations, net of tax, included in the Consolidated Statements of Income: For the years ended December 31, 2024 2023 Net sales $ 59,051 $ 80,329 Cost of sales 46,041 60,030 Gross profit 13,010 20,299 Selling, general, and administrative expenses 12,246 18,442 Loss on assets held for sale fair value adjustment 8,801 - Depreciation 236 341 Amortization of other intangible assets 1,843 1,899 Goodwill and intangible impairment loss - - Operating loss from discontinued operations ( 10,116 ) ( 383 ) Interest income ( 146 ) - Loss from discontinued operations before income taxes ( 9,970 ) ( 383 ) Income tax benefit ( 2,453 ) ( 98 ) Loss from discontinued operations $ ( 7,517 ) $ ( 285 ) 68 Table of Contents The following table summarizes the carrying amounts of assets and liabilities classified as held for sale and included in the Consolidated Balance Sheets: December 31, 2024 Current assets Cash $ 2,783 Inventories, net 5,813 Other current assets 2,874 Current assets held for sale 11,470 Noncurrent assets Right of use assets 51 Other intangible assets, net 12,609 Allowance to adjust held for sale assets to fair value ( 8,801 ) Noncurrent assets held for sale 3,859 Total assets held for sale $ 15,329 Current liabilities Accounts payable $ 532 Accrued liabilities 1,517 Current liabilities held for sale 2,049 Noncurrent liabilities Lease liabilities - Noncurrent liabilities held for sale - Total liabilities held for sale $ 2,049 Note 4. Joint Venture Agreement In September 2024, a wholly-owned subsidiary of the Company invested $ 0.8 million to acquire a 50 % ownership interest in ALP Supply Co., LLC ("ALP"). Additionally, the Company has provided ALP with a $ 10.0 million line of credit. ALP is a joint venture established between the subsidiary and Last Country Ventures, LLC for the purpose of selling and distributing tobacco-free moist nicotine pouches in various strengths. Per the joint venture agreement, the Company's subsidiary will be responsible for selling products to ALP and providing warehousing and shipping services on its behalf. The Company has determined that ALP is a VIE and that it has a controlling financial interest requiring consolidation. As a result, the assets, liabilities and result of operations of ALP have been included in the Company's consolidated financial statements. The assets and liabilities of ALP included in the consolidated balance sheet at December 31, 2025, primarily include $ 28.1 million in cash, $ 2.3 million in accounts receivable, $ 4.6 million of inventory, $ 5.1 million of other assets, $ 0.1 million of property, plant and equipment, and accounts payable and accrued liabilities of $ 18.1 million inclusive amounts payable to the Company of $ 8.1 million. The assets and liabilities of ALP included in the consolidated balance sheet at December 31, 2024 primarily included $ 5.3 million in cash, $ 0.9 million of inventory, $ 1.1 million of other assets, and accounts payable and accrued liabilities of $ 3.6 million inclusive of amounts payable to the Company of $ 3.2 million. Note 5. Derivative Instruments Foreign Currency The Company’s policy is to manage the risks associated with foreign exchange rate movements. The policy allows hedging up to 100 % of its anticipated purchases of inventory over a forward period that will not exceed 12 rolling and consecutive months. The Company may, from time to time, hedge currency for non-inventory purchases, e.g., production equipment, not to exceed 100 % of the purchase price. During 2025 , the Company did not execute any foreign currency contracts. During 2024, the Company executed various foreign exchange contracts which met hedge accounting requirements for the purchase of €3.6 million and sale of €3.6 million. At December 31, 2025 , the Company had no foreign currency contracts outstanding. At December 31, 2024, the Company had foreign currency contracts outstanding for the purchase of €2.1 million and sale of €2.1 million. The fair value of the foreign currency contracts at December 31, 2024, resulted in an asset of $ 0.0 million included in Other current assets and a liability of $ 0.1 million included in Accrued liabilities. A $ 0.1 million gain, $ 0.2 million gain and $ 0.9 million loss were reclassified from Accumulated other comprehensive loss to Cost of sales for the years ended December 31, 2025, 2024 and 2023, respectively. 69 Table of Contents Note 6. Fair Value of Financial Instruments The estimated fair value amounts have been determined by the Company using the methods and assumptions described below. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash and Cash Equivalents Cash and cash equivalents are, by definition, short-term. Thus, the carrying amount is a reasonable estimate of fair value. Accounts Receivable The fair value of accounts receivable approximates their carrying value due to their short-term nature. Long-Term Debt The Company's 2032 Notes bear interest at a rate of 7.625 % per year. As of December 31, 2025 , the fair value approximated $ 313.8 million, with a carrying value of $ 300.0 million. The Company’s 2026 Notes were retired at par on February 20, 2025. As of December 31, 2024, the fair value of the 2026 Notes approximated $ 251.2 million, with a carrying value of $ 250.0 million. See Note 14, “Notes Payable and Long-Term Debt” for further information regarding the Company’s long-term debt. Foreign Currency The fair value of the Company’s foreign currency contracts are based upon quoted market prices for similar instruments, thus leading to a Level 2 classification within the fair value hierarchy. See Note 5, "Derivative Instruments", for further information regarding the Company's foreign currency contracts. Note 7. Inventories The components of inventories, net are as follows: December 31, December 31, 2025 2024 Raw materials and work in process $ 9,715 $ 7,699 Leaf tobacco 43,747 35,622 Finished goods - Zig-Zag products 33,276 38,042 Finished goods - Stoker’s products 18,361 12,966 Other 2,890 1,924 Inventories $ 107,989 $ 96,253 The following represents the activity in the inventory valuation allowance for the years ended December 31: 2025 2024 2023 Balance at beginning of period $ ( 17,575 ) $ ( 16,927 ) $ ( 772 ) Charged to cost and expense ( 1,229 ) ( 648 ) ( 17,370 ) Deductions for inventory disposed 2,139 - 1,215 Balance at end of period $ ( 16,665 ) $ ( 17,575 ) $ ( 16,927 ) 70 Table of Contents In December 2023, a third -party warehouse in Tennessee used by the Company incurred significant tornado damage resulting in damage to the leaf tobacco. As a result, the Company recorded a $ 15.2 million inventory reserve related to its leaf tobacco inventory, which is included in Other operating income, net in the Consolidated Statement of Income for the year ended December 31, 2023. The leaf tobacco inventory is covered by the Company’s stock throughput insurance policy and the Company believes the inventory loss is probable of being fully recovered under the policy. As a result, the Company recorded a $ 15.2 million insurance recovery receivable which is included in Other current assets in the Consolidated Balance Sheets. In 2022, the Company determined that the incorrect weight had been used in calculating the amount of federal excise tax assessed and paid on its imported MYO cigar wraps during the years 2019 - 2021. As a result, the Company filed a refund claim for $ 1.7 million with the Alcohol and Tobacco Tax and Trade Bureau for the overpayment of federal excise taxes, which was approved and paid in 2024. This refund is presented in Other operating income, net on the Company’s Consolidated Statements of Income for the year ended December 31, 2023. Note 8. Other Current Assets Other current assets consists of: December 31, December 31, 2025 2024 Inventory deposits $ 28,721 $ 5,981 Prepaid taxes 7,381 3,586 Insurance recovery receivable 15,181 15,181 Other 9,392 9,952 Total $ 60,675 $ 34,700 Note 9. Property, Plant and Equipment, Net Property, plant and equipment consists of: December 31, December 31, 2025 2024 Land $ 22 $ 22 Buildings and improvements 3,839 4,216 Leasehold improvements 8,667 7,983 Machinery and equipment 41,475 31,207 Furniture and fixtures 5,460 4,723 Gross property, plant and equipment 59,463 48,151 Accumulated depreciation ( 23,216 ) ( 21,814 ) Property, plant and equipment, net $ 36,247 $ 26,337 Note 10. Deferred Financing Costs, Net Deferred financing costs consist of: December 31, December 31, 2025 2024 Deferred financing costs, net of accumulated amortization of $ 1.4 million and $ 0.7 million, respectively $ 1,180 $ 1,823 71 Table of Contents Note 11. Goodwill and Other Intangible Assets The following table summarizes goodwill by segment: Zig-Zag Stoker’s Total Balance as of December 31, 2023 $ 103,660 $ 32,590 $ 136,250 Cumulative translation adjustment ( 318 ) - ( 318 ) Balance as of December 31, 2024 $ 103,342 $ 32,590 $ 135,932 Cumulative translation adjustment 165 - 165 Balance as of December 31, 2025 $ 103,507 $ 32,590 $ 136,097 The Company tests goodwill for impairment annually as of December 31, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value. The Company performed a qualitative assessment in evaluating its Zig-Zag and Stoker’s reporting units for impairment as of December 31, 2025 . For the qualitative assessment, the Company considered macro and micro-economic indicators, changes in costs, overall financial performance and other relevant entity-specific events and noted no indications of impairment. The Company also considered the significant excess of fair values over carrying values as determined in the 2024 quantitative assessment. The underlying assumptions utilized during the 2024 quantitative assessment remained sufficiently similar in 2025 and in line with Company projections. Accordingly, such underlying assumptions on which the previous fair values were based had not sufficiently changed from 2024 to suggest a material difference in the 2025 fair value assessments and thus indicated that the fair values of the reporting units as of December 31, 2025 remained above their carrying amounts. In 2024, the Company performed a quantitative assessment in evaluating its Zig-Zag and Stoker's reporting units. As part of that assessment, the Company used a discounted cash flow model (income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions for the discount cash flow model include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company believes the current assumptions and estimates utilized in the discounted cash flow model are both reasonable and appropriate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met or if discount rates change, the Company may have to record impairment charges in future periods. Based on the analysis performed, the Company concluded that no impairment exists for its Zig-Zag or Stoker's reporting units as of December 31, 2024. The following tables summarize information about the Company’s other intangible assets. Gross carrying amounts of indefinite-lived intangible assets are shown below: December 31, 2025 December 31, 2024 Zig-Zag Stoker’s Total Zig-Zag Stoker’s Total Indefinite-lived intangible assets: Trade names $ - $ 8,500 $ 8,500 $ - $ 8,500 $ 8,500 Formulas 42,245 53 42,298 42,245 53 42,298 Total $ 42,245 $ 8,553 $ 50,798 $ 42,245 $ 8,553 $ 50,798 72 Table of Contents In 2025, the Company performed a qualitative assessment of its indefinite-lived intangible assets. As part of this assessment, the Company evaluated whether indicators of impairment were present by considering macro and micro-economic factors, along with market and other relevant company-specific events and determined that there were no indications of impairment as of December 31, 2025. In 2024, the Company performed a quantitative assessment of its indefinite-lived intangible assets and noted no indicators of impairment as of December 31, 2024. The Company’s fair value methodology for the quantitative assessment is primarily based on the relief from royalty approach. Significant assumptions in this approach include, but are not limited to, projected revenue, the weighted average cost of capital and royalty rate. Amortized intangible assets consists of: Zig-Zag Stoker’s December 31, December 31, December 31, December 31, 2025 2024 2025 2024 Gross Accumulated Gross Accumulated Gross Accumulated Gross Accumulated Carrying Amortization Carrying Amortization Carrying Amortization Carrying Amortization Amortized intangible assets: Trade names (useful life of 15 years) $ 446 $ 80 $ 437 $ 45 $ 2,372 $ 949 $ 2,372 $ 791 Formulas (useful life of 15 years) 9,972 1,994 9,972 1,330 - - - - Master distribution agreement (useful life of 15 years) 5,489 2,011 5,489 1,648 - - - - Total $ 15,907 $ 4,085 $ 15,898 $ 3,023 $ 2,372 $ 949 $ 2,372 $ 791 Annual amortization expense for the next five years is estimated to be approximately $ 1.2 million for 2026 and $4.8 million for 2027 through 2030, assuming no additional transactions occur that require the amortization of intangible assets. Note 12. Other Assets Other assets consists of: December 31, December 31, 2025 2024 Non-marketable equity investments $ 7,833 $ 1,231 Debt security investment 5,633 6,276 Capitalized software 10,133 7,409 Captive investments - available-for-sale marketable securities 14,938 5,487 Option agreements 25,963 - Other 167 259 Total $ 64,667 $ 20,662 Non-Marketable Equity Investments and Option Agreements The Company records its non-marketable equity investments without a readily determinable fair value, that are not accounted for under the equity method, at cost, with adjustments for impairment and observable price changes. Should assumptions underlying the determination of the fair values of the Company’s non-marketable equity and debt security investments change, it could result in material future impairment charges. 73 Table of Contents In December 2018, the Company acquired a minority interest in General Wireless Operations, Inc. (“GWO”) from SG Gaming LLC for $ 0.4 million. GWO is majority owned by Standard General, LP. On January 2, 2025, the Company contributed 100 % of its interest in SBB, the subsidiary that owned and operated the Company’s former CDS reportable segment, to GWO in exchange for a 49 % equity interest. The Company established RSH Trust, which is managed by an independent trustee that votes our interests in GWO in accordance with GWO's board's recommendation, to hold its interest in GWO, and GWO is controlled by Standard General, L.P. The trust also has a purchase option with a 15 -year term to acquire the remaining 51 % equity interest in GWO. The purchase option includes an initial exercise price of $ 22.0 million, which may decrease over time based on certain tax sharing payments to Standard General, LP. As a result of this transaction, the Company determined that it no longer has a controlling financial interest in SBB and, as a result, deconsolidated SBB on January 2, 2025, and accounts for its interest in GWO under the equity method of accounting. On January 2, 2025, the Company contributed net assets valued at $ 13.3 million to GWO as part of the transaction, inclusive of common shares for an amount of $ 7.7 million and freestanding instruments for an amount of $ 5.5 million recognized through the caption "Option agreements". Fair value of the Company's interest in GWO was determined utilizing the market approach and the income approach in the form of the discount cash flow method. The results of GWO are recognized through the caption "(income) losses from equity method investments" in the consolidated statements of income. On August 8, 2025, SBB acquired a distribution business. In connection with this acquisition, Turning Point Brands Canada purchased an option from SBB to acquire the distribution business for fair market value less the option price. The option becomes exercisable in March 2027. The option price is approximately $ 20.0 million with approximately $ 8.0 million paid at execution of the option and the remaining paid quarterly over 18 months beginning in February 2026. There is approximately $ 20.4 million in other assets, $ 8.0 million paid at closing, $ 8.3 million in accrued liabilities, and $ 4.1 million in other long-term liabilities as of December 31, 2025 . Turning Point Brands Canada charged a fee to the distribution business in 2025. The agreement was terminated in the fourth quarter. In August 2025, the Company and Standard General, LP amended the GWO purchase option held by the Company, delaying the Company's ability to exercise the purchase option until August 2027. In January 2024, the Company invested $ 0.8 million to acquire an 18.7 % stake in Teaza Energy, LLC (“Teaza”). Teaza is an innovative brand of flavorful oral pouch products that can be dipped or sipped, designed as a health-conscious alternative to high energy drinks and other conventional oral stimulants. The investment was comprised of $ 0.5 million in cash and a $ 0.3 million payable to be offset against the Company’s allocated portion of future profit distributions. The Company also has the option to purchase, at fair value, up to 100 % of the equity interest from February 1, 2025 through June 30, 2026. The Company accounts for its investment in Teaza using the equity method of accounting. Debt Security Investments In July 2021, the Company invested $ 8.0 million in Old Pal Holding Company, LLC (“Old Pal”), with an additional $ 1.0 million invested in July 2022. The Company invested in the form of a convertible note which includes additional follow-on investment rights. Interest on the convertible note is payable annually in arrears in July of each year. Accrued interest of $ 1.1 million was rolled into the convertible note between 2022 and 2025, resulting in a total investment of $ 10.1 million. Old Pal is a leading brand in the cannabis lifestyle space that operates a non-plant touching licensing model. The convertible note bears an interest rate of 3.0 % per year and matures July 31, 2027. Interest and principal not paid to date are receivable at maturity. Old Pal has the option to extend the maturity date of the convertible note in one -year increments. The interest rate is subject to change based on Old Pal reaching certain sales thresholds. The weighted average interest rate on the convertible note was 3.0 % as of December 31, 2025 and 2024 . Old Pal has the option to convert the note into shares once sales reach a certain threshold. The conditions required to allow Old Pal to convert the note were not met as of December 31, 2025 . Additionally, the Company has the right to convert the note into shares at any time. The Company has classified the debt security with Old Pal as available for sale. The Company reports interest income on available for sale debt securities in interest income in our Consolidated Statements of Income. The Company performs a qualitative assessment on a quarterly basis to determine if the fair value of the investment could be less than the amortized cost basis. In addition, the Company utilizes a third -party to perform a quantitative assessment to determine fair value using a Monte Carlo simulation (Level 3 ) when indicated, and at least bi-annually. Based upon a quantitative fair value assessment, the Company determined the fair value to be $ 6.5 million, $ 6.4 million and $ 6.9 million as of December 31, 2025, 2024 and 2023, respectively. The Company recorded an allowance for credit losses of $ 0.9 million, $ 0.8 million and $ 1.3 million included in investment loss for the years ended December 31, 2025, 2024 and 2023, respectively. The Company has recorded an accrued interest receivable of $ 0.1 million and $0.1 million at December 31, 2025 and 2024, respectively, in Other current assets on our Consolidated Balance Sheets. In April 2021, the Company invested in Docklight Brands, Inc. (“Docklight”). In 2023, based on Docklight’s financial results, a decline in the revenue multiples for comparable public companies, and a significant change in Docklight’s business model, the Company deemed the investment in Docklight fully impaired resulting in a loss of $ 8.7 million which was recorded in investment (gain) loss for the year ended December 31, 2023. Fair value was determined using a valuation derived from relevant revenue multiples (Level 3 ). There were no purchases of inventory from, or amounts payable to Docklight Brands, Inc. at December 31, 2025 and 2024 . In October 2020, the Company acquired a 20% stake in Wild Hempettes, LLC (“Wild Hempettes”). In 2023, based on Wild Hempettes' financial results, the Company deemed its investment in Wild Hempettes to be impaired resulting in a $ 2.2 million impairment charge included in investment loss for the year ended December 31, 2023. Fair value for the Company’s share of investment in Wild Hempettes was determined using a valuation derived from relevant revenue multiples (Level 3 ). In 2024, the Company reached an agreement to return its 20% equity stake to Wild Hempettes for no consideration resulting in an impairment charge of $ 0.3 million recorded in investment (gain) loss for the year ended December 31, 2024. The Company accounted for its 20% share of Wild Hempettes using the equity method of accounting. There were no purchases of inventory from, or amounts payable to Wild Hempettes at December 31, 2025 and 2024 . In October 2020, the Company invested in BOMANI Cold Buzz, LLC (“Bomani”). In 2024, due to market conditions in the cold brew, alcohol-infused caffeinated beverages industry, the Company has determined that the fair value of Bomani is zero, and thus recorded a $ 1.8 million impairment which is included in investment (gain) loss for the year ended December 31, 2024. There were no purchases of inventory from, or amounts payable to Bomani at December 31, 2025 and 2024 . 74 Table of Contents Captive Investments - Available-for-Sale Marketable Securities In December 2023, the Company formed a captive insurance company, Interchange, IC, incorporated in the District of Columbia, to write a portion of its insurance coverage, including with respect to general product, and officer and director liability coverages under deductible reinsurance policies. Interchange, IC is a fully licensed captive insurance company holding a certificate of authority from the District of Columbia Department of Insurance, Securities and Banking. Interchange, IC is consolidated in the Company’s financial statements. During 2025, Interchange IC received approval from the District of Columbia Department of Insurance, Securities and Banking to operate as a group captive. On July 14, 2025, a third -party investor subscribed $ 11.0 million for an interest in Interchange IC’s parent company, which contributed the investment to Interchange IC. Insurance reserves were $ 0.4 million and $ 0.0 for December 31, 2025 and 2024, respectively. As of December 31, 2025 , no policy has been underwritten for the benefit of the third -party investor. The group captive will write policies for both companies. The Company will continue to control and consolidate the entity. The investments held within the captive are not available for operating activities and are carried at fair value on the consolidated balance sheet. They consist of money market, stocks, corporate bonds, government securities and real estate investment trusts. The Company believes any investments held with gross unrealized losses to be temporary and not the result of credit risk. The Company’s captive investments are summarized in the following table (excludes money market funds): As of December 31, 2025 As of December 31, 2024 Amortized Cost Gross Unrealized Gains (Losses) Estimated Fair Value Amortized Cost Gross Unrealized Gains (Losses) Estimated Fair Value Stocks $ 1,118 $ 447 $ 1,565 $ 1,517 $ 9 $ 1,526 Exchange traded funds 5,338 ( 16 ) 5,322 1,189 ( 5 ) 1,184 Corporate Bonds 2,837 33 2,870 2,383 50 2,433 Real estate investment trusts 377 ( 5 ) 372 343 1 344 Mutual funds 4,809 - 4,809 - - - Total $ 14,479 $ 459 $ 14,938 $ 5,432 $ 55 $ 5,487 The following table summarizes the fair value of the Company's captive investments by contractual maturity: As of December 31, 2025 Due within one year $ 1,973 Due in one to five years 897 Stocks, real estate investment trusts, mutual funds and exchange traded funds 12,068 Total investments at fair value $ 14,938 75 Table of Contents Note 13. Accrued Liabilities Accrued liabilities consists of: December 31, December 31, 2025 2024 Accrued payroll and related items $ 13,788 $ 9,564 Customer returns and allowances 5,942 5,160 Taxes payable 3,257 358 Lease liabilities 4,641 3,121 Accrued interest 6,734 5,473 Option agreement 7,448 - Other 12,777 7,420 Total $ 54,587 $ 31,096 Note 14. Notes Payable and Long-Term Debt Notes payable and long-term debt consists of the following in order of preference: December 31, December 31, 2025 2024 2032 Notes $ 300,000 $ - 2026 Notes - 250,000 Gross notes payable and long-term debt 300,000 250,000 Less deferred financing costs ( 6,375 ) ( 1,396 ) Notes payable and long-term debt $ 293,625 $ 248,604 The components of interest expense, net consists of the following: For the years ended December 31, 2025 2024 2023 Interest expense $ 25,386 $ 18,526 $ 21,028 Interest income ( 7,920 ) ( 4,543 ) ( 6,383 ) Interest expense, net $ 17,466 $ 13,983 $ 14,645 2032 Notes On February 19, 2025, the Company entered into an indenture relating to the issuance and sale of $ 300.0 million aggregate principal amount of its 7.625 % Senior Secured Notes due 2032 (the “2032 Notes”), by and among the Company, the guarantors party thereto and GLAS Trust Company LLC, as trustee and notes collateral agent. The 2032 Notes incur interest at a rate of 7.625 %, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025. Proceeds from the offering were approximately $ 293.0 million and were used to redeem the 2026 Notes (as defined below) and for general corporate purposes. The 2032 Notes are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by certain existing and future wholly-owned domestic subsidiaries of the Company (collectively, the “Guarantors” as defined in the indenture governing the 2032 Notes or the “2032 Notes Indenture”). The 2032 Notes and the related guarantees are secured by first -priority liens on substantially all of the existing and future assets of the Company and the Guarantors that do not secure the 2023 ABL Facility (as defined below), subject to certain exceptions. The 2032 Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity. These covenants are subject to several limitations and exceptions set forth in the 2032 Notes Indenture. For instance, the Company is generally permitted to make restricted payments, including the payment of dividends to shareholders, provided that, at the time of payment, or as a result of payment, the Company is not in default on its covenants; however, there are earnings and market capitalization requirements that if not met could limit the aggregate amount of quarterly dividends payable during a fiscal year. The 2032 Notes Indenture provides for customary events of default. The Company was compliance with all covenants under the 2032 Notes as of December 31, 2025. The Company incurred debt issuance costs attributable to the 2032 Notes of $ 7.3 million which are amortized to interest expense using the straight-line method over the expected life of the 2032 Notes. 76 Table of Contents 2026 Notes On February 11, 2021, the Company closed a private offering ("the Offering") of $ 250.0 million aggregate principal amount of its 5.625 % senior secured notes due 2026 (the “2026 Notes”). The 2026 Notes incurred interest at a rate of 5.625%, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021. The Company used the proceeds from the offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs and expenses and (iii) for general corporate purposes. Obligations under the 2026 Notes were guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries that guaranteed any credit facility (as defined in the indenture governing the 2026 Notes) or capital markets debt securities of the Company or Guarantors in excess of $ 15.0 million. The 2026 Notes and the related guarantees were secured by first -priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. On February 20, 2025 ( the “Redemption Date”), the Company used a portion of the proceeds from the issuance and sale of the 2032 Notes to redeem all $ 250.0 million of its outstanding 2026 Notes at a redemption price equal to 100 % of the aggregate principal amount of the 2026 Notes, plus accrued and unpaid interest thereon to, but excluding the Redemption Date. Upon redemption of the 2026 Notes, the indenture governing the 2026 Notes was satisfied and discharged in accordance with its terms. The Company incurred debt issuance costs attributable to the issuance of the 2026 Notes of $ 6.4 million, with the remaining $ 1.2 million written off to loss on debt extinguishment upon redemption of the 2026 Notes. 2021 Revolving Credit Facility In connection with the Offering, the Company also entered into a $ 25.0 million senior secured revolving credit facility (the “2021 Revolving Credit Facility”) with the lenders party thereto and Barclays Bank PLC, as administrative agent and collateral agent. On May 10, 2023, the Company and certain of its subsidiaries, as guarantors, entered into an amendment (the “Amendment”) to the 2021 Revolving Credit Facility (as amended, the “Amended Revolving Credit Facility”). The Amendment included certain modifications to the 2021 Revolving Credit Facility relating to the replacement of the London Inter-Bank Offered Rate with a Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark under the 2021 Revolving Credit Facility and adjusted certain other provisions to reflect current documentation standards and other agreed modifications. On November 7, 2023, in connection with the entry by a subsidiary of the Company into a new asset-backed revolving credit facility, the Company terminated the Amended Revolving Credit Facility. See “2023 ABL Facility” below. The Company incurred debt issuance costs attributable to the issuance of the Amended Revolving Credit Facility of $ 0.5 million, with a remaining $ 0.2 million written off to gain on debt extinguishment upon termination of the facility in 2023. 2023 ABL Facility On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $ 75.0 million asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank PLC, as administrative agent (the “Administrative Agent”) and as collateral agent and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $ 75.0 million under revolving credit loans and last-in, last-out (“LILO”) loans. The 2023 ABL Facility includes a $ 40.0 million accordion feature. In connection with the 2023 ABL Facility, the Company contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first -priority basis (subject to customary exceptions) by all assets of the ABL Borrower. The 2023 ABL Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) the lesser of ( 1 ) 85 % of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and ( 2 ) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of ( 1 )(A) or ( 1 )(B); plus (b) 85% of the face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves. The 2023 ABL Facility also includes a LILO borrowing base equal to the sum of (a) the lesser of: ( 1 ) 10 % of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and ( 2 ) 10% of the NOLV percentage of the lower of ( 1 )(A) or ( 1 )(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves. 77 Table of Contents Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25 % per annum, in the case base rate loans, and (ii) 2.25 % per annum, in the case of revolving credit loans that are SOFR Loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25 % per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent. Applicable Margin Applicable Margin Level Historical Excess Availability for SOFR Loans or Base Rate Loans I Greater than or equal to 66.66 % 1.75 % 0.75 % II Less than 66.66 %, but greater than or equal to 33.33 % 2.00 % 1.00 % III Less than 33.33 % 2.25 % 1.25 % The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability shall be less than the greater of (a) 12.5 % of the line cap and (b) $ 9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty ( 30 ) consecutive calendar days; provided that such $9.4 million level shall automatically increase in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility. The 2023 ABL Facility shall mature on the earlier of ( x ) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) shall not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of ( x ) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $ 15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith. The Company has not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $ 2.3 million outstanding under the facility and has an available balance of $ 65.8 million based on the borrowing base as of December 31, 2025 . The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $ 2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility. Convertible Senior Notes In July 2019, the Company closed an offering of $ 172.5 million in aggregate principal amount of its 2.50 % convertible senior notes due July 15, 2024 ( the “Convertible Senior Notes”). The Convertible Senior Notes were senior unsecured obligations of the Company and the remaining outstanding balance of $ 118.5 million was retired with cash on July 15, 2024. 78 Table of Contents Note 15. Income Taxes The components of income before provisions for income taxes for year ended December 31, 2025, as required by ASU 2023 - 09 is as follows: 2025 Domestic 80,974 Foreign 2,169 Total 83,143 Income tax expense (benefit) for the years ended December 31 consists of the following components: 2025 2024 2023 Current Deferred Total Current Deferred Total Current Deferred Total Federal $ 5,048 $ 7,822 $ 12,870 $ 14,005 $ 240 $ 14,245 $ 13,404 $ 4,091 $ 17,495 State and Local 922 1,109 2,031 2,405 279 2,684 3,587 2,166 5,753 Foreign 90 - 90 - - - ( 16 ) 767 751 Total $ 6,060 $ 8,931 $ 14,991 $ 16,410 $ 519 $ 16,929 $ 16,975 $ 7,024 $ 23,999 Deferred tax assets and liabilities consists of: December 31, December 31, 2025 2024 Assets Liabilities Assets Liabilities Inventory $ 4,363 $ - $ 4,802 $ - Property, plant, and equipment - 3,188 - 3,433 Goodwill and other intangible assets - 11,204 - 3,549 Foreign NOL carryforward 1,218 - 1,505 - State NOL carryforward 2,211 - 2,339 - Unrealized loss on investments 3,868 91 3,846 - Leases 3,928 3,706 3,278 3,004 Stock compensation 4,116 - 4,306 - Insurance receivable - 3,689 - 3,728 Capital loss carryforward 4,071 - 4,108 - Other 4,241 3,056 5,117 2,006 Gross deferred income taxes 28,016 24,934 29,301 15,720 Valuation allowance ( 11,371 ) - ( 12,586 ) - Net deferred income taxes $ 16,645 $ 24,934 $ 16,715 $ 15,720 At December 31, 2025 , the Company had state net operating loss (“NOL”) carryforwards for income tax purposes of approximately $ 22.2 million, which expire between 2034 and 2045, $ 27.6 million of which has an indefinite carryforward period. The Company has determined that, at December 31, 2025 and 2024 its ability to realize future benefits of its state NOL carryforwards does not meet the “more likely than not” criteria in ASC 740, Income Taxes. Therefore, a valuation allowance for state NOL carryforwards of $ 2.4 million and $ 3.1 million has been recorded at December 2025 and 2024 , respectively. The Company has determined that at December 31, 2025 and 2024, its ability to realize future benefits of its capital loss carryforward, unrealized loss on investments and foreign NOL carryforwards do not meet the “more likely than not” criteria in ASC 740, Income Taxes. Therefore, a valuation allowance for capital loss carryforward of $ 4.1 million, unrealized loss on investments of $ 3.1 million and foreign NOL carryforwards of $ 1.4 million has been recorded at December 31, 2025 and a valuation allowance for capital loss carryforward of $ 4.1 million, unrealized loss on investments of $ 3.1 million and foreign NOL carryforwards of $ 1.8 million has been recorded as of December 31, 2024. ASC 740 - 10 - 25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than- not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that they did not have any uncertain tax positions requiring recognition as a result of the provisions of ASC 740 - 10 - 25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions as part of interest expense. For the years ended December 31, 2025 , 2024 , and 2023 , no estimated interest or penalties were recognized for the uncertainty of tax positions taken. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2022. In 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Security Act (the “CARES Act”) to provide certain relief as a result of the COVID- 19 Pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”). ERC is a refundable tax credit for employers who kept employees on their payroll during the COVID- 19 Pandemic. The Company applied for the ERC in 2024. The Company considered the ERC to be a contingent gain. During the year ended December 31, 2025, the Company received and recorded an employee retention credit totaling $ 5.5 million, within the “Other income, net” in our Consolidated Statements of Income. 79 Table of Contents Reconciliation of the federal statutory rate and the effective income tax rate for the year ended December 31, 2025 as required by ASU 2023 - 09 (see New Accounting Pronouncements caption in Note 2 for more information): 2025 Amount Percent Federal statutory rate $ 17,460 21.0 % Foreign tax effects ( 320 ) ( 0.4 )% State and local income taxes, net of federal benefit (1) 2,159 2.6 % Effect of cross-boarder tax laws Global Intangible Low-Taxed Income (GILTI) 210 0.3 % Non-taxable or non-deductible items Stock Compensation ( 4,229 ) ( 5.1 )% Non-deductible compensation 2,552 3.1 % Other 68 0.1 % Tax credits Research and development (R&D) credits ( 142 ) ( 0.2 )% Foreign tax credits ( 72 ) ( 0.1 )% Noncontrolling interest in joint venture earnings ( 1,938 ) ( 2.3 )% Other ( 411 ) ( 0.5 )% Change in valuation allowance ( 346 ) ( 0.5 )% Effective income tax rate $ 14,991 18.0 % ( 1 ) State taxes in Tennessee, California, and Michigan made up the majority (greater than 50% ) of the tax effect in this category. Reconciliation of the federal statutory rate and effective income tax rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023 - 09 is as follows: 2024 2023 Federal statutory rate 21.0 % 21.0 % Foreign rate differential ( 0.1 )% ( 0.1 )% State taxes 3.4 % 4.3 % Permanent differences ( 0.6 )% ( 0.1 )% Other 0.6 % 0.0 % Valuation allowance 1.8 % 13.6 % Effective income tax rate 26.1 % 38.7 % The permanent differences for the years ended December 31, 2025, 2024 and 2023 are not significant in the aggregate. The amount of cash taxes paid by the Company for the year ended December 31, 2025, as required by ASU 2023 - 09 is as follows: 2025 Federal 8,601 State and Local 1,783 Foreign - Income taxes, net of amounts refunded 10,384 Note 16. 401 (k) Retirement Savings Plan The Company sponsors a voluntary 401 (k) retirement savings plan. Eligible employees may elect to contribute up to 15 % of their annual earnings subject to certain limitations. For the 2025 , 2024 and 2023 plan years, the Company contributed 4 % to employees who contributed 4 % or more of their annual earnings. Employees contributing less than 4 % received a 100 % match on their contributions. Additionally, for all years presented, the Company made discretionary contributions of 1 % to all employees, regardless of an employee’s contribution level. Company contributions to this plan were approximately $ 1.2 million for 2025 , $ 1.5 million for 2024 and $ 1.4 million for 2023 . Note 17. Lease Commitments The Company’s leases consist primarily of leased property for manufacturing, warehouse, corporate offices and retail space as well as vehicle leases. At lease inception, the Company recognizes a lease right of use asset and lease liability calculated as the present value of future minimum lease payments. Some leases may require payment of other components such as taxes, insurance, maintenance and operating expenses. When payments related to these other components are considered fixed, they are included in the determination of the lease liability due to the Company’s election to combine lease and non-lease components and account for them as a single lease component. Otherwise, they are recognized as variable payments, along with variable payments not based on a rate or index, in the period in which the obligation for those payments is incurred. In general, the Company does not recognize renewal periods within the lease terms as there are no significant barriers to ending the lease at the initial term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term. The components of lease expense consist of the following: For the year ended December 31, 2025 2024 2023 Operating lease cost Cost of sales $ 473 $ 502 $ 507 Selling, general and administrative 2,173 1,760 1,756 Variable lease cost 944 1,091 1,161 Short-term lease cost - - 24 Total $ 3,590 $ 3,353 $ 3,448 80 Table of Contents For the year ended December 31, 2025 2024 2023 Financing lease cost Selling, general and administrative $ 1,554 $ 860 $ 1,164 Interest expense, net 296 173 - Variable lease cost - $ 72 $ - Total $ 1,850 $ 1,105 $ 1,164 The Company's lease balances consist of the following: December 31, December 31, 2025 2024 Assets: Right of use assets - Operating $ 6,851 $ 8,338 Right of use assets - Financing 7,629 3,272 Total lease assets $ 14,480 $ 11,610 Liabilities: Current lease liabilities - Operating (1) $ 2,111 $ 2,011 Current lease liabilities - Financing (1) 2,530 1,110 Long-term lease liabilities - Operating 5,652 7,400 Long-term lease liabilities - Financing 5,056 2,149 Total lease liabilities $ 15,349 $ 12,670 ( 1 ) Reported within accrued liabilities on the balance sheet Other information related to the Company's leases consists of the following: December 31, December 31, 2025 2024 Right of use assets obtained in exchange for lease obligations: Operating leases $ 956 $ 1,209 Finance leases $ 5,907 $ 1,842 As of December 31, 2025 2024 Weighted-average remaining lease term - operating leases (years) 4.2 4.8 Weighted-average discount rate - operating leases 5.86 % 5.65 % Weighted-average remaining lease term - financing leases (years) 3.3 3.1 Weighted-average discount rate - financing leases 6.53 % 6.64 % Nearly all the lease contracts for the Company do not provide a readily determinable implicit rate. For these contracts, the Company uses a discount rate that approximates its incremental borrowing rate at the time of the lease commencement. The following table illustrates the Company's future minimum rental payments for non-cancelable leases as of December 31, 2025 : Year Operating Finance 2026 $ 2,511 $ 2,948 2027 2,467 2,500 2028 1,158 1,887 2029 1,159 1,080 2030 1,185 - Years thereafter 427 - Total lease payments 8,907 8,415 Less: Imputed interest 1,144 829 Present value of lease liabilities $ 7,763 $ 7,586 81 Table of Contents Note 18. Share Incentive Plans On March 22, 2021, the Company’s Board of Directors adopted the Turning Point Brands, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards may be granted to employees, non-employee directors, and consultants. In addition, the 2021 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2021 Plan, 1,290,000 shares, plus 100,052 shares remaining available for issuance under the 2015 Equity Incentive Plan (the “2015 Plan”), of TPB Common Stock are reserved for issuance as awards to employees, non-employee directors, and consultants as compensation for past or future services or the attainment of certain performance goals. The 2021 Plan is scheduled to terminate on March 21, 2031. The 2021 Plan is administered by the compensation committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the vesting criteria for the awards, with such criteria to be specified in the award agreement. As of December 31, 2025 , net of forfeitures, there were 437,024 Restricted Stock Units (“RSUs”), 122,570 options and 94,421 Performance Based Restricted Stock Units (“PRSUs”) granted under the 2021 Plan. There are 736,037 shares available for future grant under the 2021 Plan. On April 28, 2016, the Board of Directors of the Company adopted the 2015 Plan, pursuant to which awards could have been granted to employees, non-employee directors, and consultants. In addition, the 2015 Plan provided for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Upon adoption of the 2021 Plan, the 2015 Plan was terminated, and the Company determined no additional grants would be made under the 2015 Plan. However, all awards issued under the 2015 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2015 Plan. Stock option activity for the 2015 and 2021 Plans is summarized below: Weighted Weighted Stock Average Average Option Exercise Grant Date Shares Price Fair Value Outstanding, December 31, 2023 656,951 $ 29.79 $ 9.18 Granted 54,289 27.19 9.21 Exercised ( 132,572 ) 21.36 6.97 Forfeited ( 42,878 ) 38.11 11.94 Outstanding, December 31, 2024 535,790 $ 30.69 $ 9.51 Exercised ( 245,855 ) 30.76 9.54 Forfeited ( 2,643 ) 36.11 10.88 Outstanding, December 31, 2025 287,292 $ 30.58 $ 9.47 Under the 2015 and 2021 Plans, the total intrinsic value of options exercised during the years ended December 31, 2025 , 2024 , and 2023 , was $ 12.9 million, $ 2.6 million, and $ 0.3 million, respectively. At December 31, 2025 , under the 2015 and 2021 Plans, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model. 82 Table of Contents The following table outlines the assumptions for options granted under the 2015 Plan. May 17, March 7, March 20, March 18, February 18, 2017 2018 2019 2020 2021 Number of options granted 93,819 98,100 155,780 155,000 100,000 Options outstanding at December 31, 2025 19,569 31,370 48,880 27,513 39,600 Number exercisable at December 31, 2025 19,569 31,370 48,880 27,513 39,600 Exercise price $ 15.41 $ 21.21 $ 47.58 $ 14.85 $ 51.75 Remaining lives 1.38 2.19 3.22 4.22 5.14 Risk free interest rate 1.76 % 2.65 % 2.34 % 0.79 % 0.56 % Expected volatility 26.92 % 28.76 % 30.95 % 35.72 % 28.69 % Expected life 6.000 6.000 6.000 6.000 6.000 Dividend yield - 0.83 % 0.42 % 1.49 % 0.55 % Fair value at grant date $ 4.60 $ 6.37 $ 15.63 $ 4.41 $ 13.77 The following table outlines the assumptions for options granted under the 2021 Plan. May 17, March 14, April 29, May 12, March 11, 2021 2022 2022 2023 2024 Number of options granted 7,500 100,000 14,827 77,519 54,289 Options outstanding at December 31, 2025 350 14,929 3,273 47,519 54,289 Number exercisable at December 31, 2025 350 14,929 3,273 47,519 54,289 Exercise price $ 45.05 $ 30.46 $ 31.39 $ 20.71 $ 27.19 Remaining lives 5.38 6.21 6.33 7.37 8.20 Risk free interest rate 0.84 % 2.10 % 2.92 % 3.41 % 4.06 % Expected volatility 31.50 % 35.33 % 35.33 % 34.51 % 35.09 % Expected life 6.000 6.000 6.000 5.186 5.186 Dividend yield 0.63 % 1.01 % 0.98 % 1.61 % 1.26 % Fair value at grant date $ 13.23 $ 10.23 $ 11.07 $ 6.45 $ 9.21 The Company has recorded compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the options of approximately $ 0.0 million , $ 0.5 million and $ 0.7 million for the years ended December 31, 2025, 2024 and 2023 , respectively. At December 31, 2025 , the options have been fully expensed with zero remaining. PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of shares of TPB Common Stock a recipient will receive upon vesting of a PRSU is calculated by reference to certain performance metrics related to the Company’s performance over a five -year period. PRSUs will vest on the measurement date, which is no more than 65 days after the performance period provided the applicable service and performance conditions are satisfied. At December 31, 2025 , there were 273,098 PRSUs outstanding. The following table outlines the PRSUs granted and outstanding as of December 31, 2025 . February 18, March 14, May 4, March 1, April 1, March 1, 2021 2022 2023 2024 2024 2025 Number of PRSUs granted 100,000 49,996 133,578 111,321 8,242 41,137 PRSUs outstanding at December 31, 2025 63,340 19,617 67,511 74,899 6,594 41,137 Fair value as of grant date $ 51.75 $ 30.46 $ 22.25 $ 26.52 $ 29.12 $ 70.34 Remaining lives - 1.00 - 1.00 1.00 2.00 The Company recorded compensation expense related to the PRSUs of approximately $ 3.0 million, $ 3.4 million and $ 3.0 million in the consolidated statements of income for the years ended December 31, 2025, 2024 and 2023 , respectively, based on the probability of achieving the performance condition. Total unrecognized compensation expense related to these awards at December 31, 2025 , is $ 2.2 million, which will be expensed over the service period based on the probability of achieving the performance condition. RSUs are stock units subject to service-based vesting conditions over one to five years. At December 31, 2025 , there are 158,919 RSUs outstanding. 83 Table of Contents The following table outlines the RSUs granted and outstanding as of December 31, 2025 . March 14, April 29, May 5, March 1, April 1, March 3, March 3, May 8, July 14, 2022 2022 2023 2024 2024 2025 2025 2025 2025 Number of RSUs granted 50,004 4,522 130,873 105,257 5,495 36,843 14,921 8,464 1,341 RSUs outstanding at December 31, 2025 16,905 1,263 29,007 47,418 3,627 35,973 14,921 8,464 1,341 Fair value as of grant date $ 30.46 $ 31.39 $ 22.25 $ 26.52 $ 29.12 $ 70.34 $ 67.02 $ 75.66 $ 74.61 Remaining lives 1.00 1.00 0.25 1.25 1.25 2.25 0.25 0.50 2.69 The Company has recorded compensation expense related to the RSUs based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the RSUs on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the RSUs of approximately $ 3.9 million, $ 3.3 million and $ 2.9 million for the years ended December 31, 2025, 2024 and 2023 , respectively. Total unrecognized compensation expense related to RSUs at December 31, 2025 , is $ 2.2 million, which will be expensed over 1.6 years. Note 19. Contingencies On October 9, 2020, a purported stockholder of Turning Point Brands, Inc., Paul-Emile Berteau, filed a complaint in the Delaware Court of Chancery relating to the merger of Standard Diversified, Inc. (“SDI”) with a TPB subsidiary (“Merger Sub”) pursuant to the Agreement and Plan of Merger and Reorganization, dated as of April 7, 2020, by and among TPB, SDI and Merger Sub. The parties attended a mediation in late November 2022 where a settlement was reached. On December 12, 2023, the Court approved the settlement and dismissed the action with prejudice. As of December 31, 2023, the Company recorded a $ 4.0 million receivable in other current assets, and a corresponding gain on settlement in other income on its Consolidated Statement of Income for the year ended December 31, 2023. These funds were received in January 2024. Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and, if such a claim were brought against the Company, could have a material adverse effect on our business and results of operations. The probable losses, if any, associated with any such lawsuits are not currently reasonably estimable and therefore are not accrued. Note 20. Earnings Per Share The Company calculates earnings per share using the treasury stock method for its options and non-vested restricted stock units, and the if-converted method for its Convertible Senior Notes. The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations: December 31, 2025 December 31, 2024 December 31, 2023 Income (Loss) Shares Per Share Income (Loss) Shares Per Share Income (Loss) Shares Per Share Basic EPS: Numerator Income from continuing operations less non-controlling interest $ 58,165 $ 3.18 $ 47,326 $ 2.67 $ 38,747 $ 2.20 Loss from discontinued operations, net of tax - - ( 7,517 ) ( 0.43 ) ( 285 ) ( 0.01 ) Net income attributable to Turning Point Brands, Inc. $ 58,165 $ 3.18 $ 39,809 $ 2.24 $ 38,462 $ 2.19 Denominator Weighted average 18,314,047 17,734,239 17,578,270 Diluted EPS: Numerator Income from continuing operations less non-controlling interest $ 58,165 $ 47,326 $ 38,747 Interest expense related to Convertible Senior Notes, net of tax - 1,597 2,667 Diluted income from continuing operations $ 58,165 $ 3.11 $ 48,923 $ 2.53 $ 41,414 $ 2.02 Loss from discontinued operations, net of tax - - ( 7,517 ) ( 0.39 ) ( 285 ) ( 0.01 ) Diluted net income $ 58,165 $ 3.11 $ 41,406 $ 2.14 $ 41,129 $ 2.01 Denominator Basic weighted average 18,314,047 17,734,239 17,578,270 Convertible Senior Notes (1) - 1,192,597 2,533,201 Stock options and restricted stock units (2) 416,588 435,970 355,935 18,730,635 19,362,806 20,467,406 ( 1 ) There were 0.0 million, 0.2 million and 0.2 million outstanding stock options not included in the computation of diluted earnings per share for the years ended December 31, 2025, 2024 and 2023, respectively, because the effect would have been antidilutive. 84 Table of Contents Note 21. Segment Information In accordance with ASC 280, Segment Reporting, the Company has two reportable segments, Zig-Zag products and Stoker’s products. The Zig-Zag products segment markets and distributes (a) rolling papers, tubes, and related products; (b) finished cigars and MYO cigar wraps; and (c) lighters and other accessories. The Stoker’s products segment (a) manufactures and markets moist snuff, (b) contracts for and markets loose-leaf chewing tobacco products, and (c) FRE, its modern oral product. The Company's products are distributed primarily through wholesale distributors in the U.S. and Canada. Corporate unallocated includes the costs and assets of the Company not assigned to one of the two reportable segments and includes corporate overhead expense, including executive management, finance, legal and information technology salaries, and professional services such as audit, external legal costs and information technology services, as well as costs related to the FDA premarket tobacco product application. The Company did not have any customers that accounted for more than 10% of net sales in 2025. The Company had one customer that accounted for 10.2 % of net sales in 2024, of which 54 % was in the Stoker's product segment and 46 % was in the Zig-Zag products segment in 2024. There were no customers that accounted for more than 10% of net sales in 2023. The Company’s CODM is its President and Chief Executive Officer and uses segment operating income as the measure of earnings to evaluate the performance of each segment and to make decisions about allocating resources, including employees, property, plant and equipment, as well as financial and capital resources. On a quarterly basis, the CODM reviews segment operating income budget-to-actual variances to assess segment performance and make resource allocation decisions. For both reportable segments, cost of sales is the significant segment expense that is regularly provided to the CODM. The accounting policies of these segments are the same as those of the Company. Corporate costs are not directly charged to the two reportable segments in the ordinary course of operations. The tables below present financial information about reportable segments: For the years ended December 31, 2025 2024 2023 Net sales Zig-Zag products $ 178,478 $ 192,394 $ 180,455 Stoker’s products 284,584 168,266 144,609 Total $ 463,062 $ 360,660 $ 325,064 Cost of sales Zig-Zag products $ 82,577 $ 85,809 $ 79,400 Stoker’s products 116,171 73,286 62,722 Total $ 198,748 $ 159,095 $ 142,122 Gross profit Zig-Zag products $ 95,901 $ 106,585 $ 101,055 Stoker’s products 168,413 94,980 81,887 Total $ 264,314 $ 201,565 $ 182,942 Other segment items (1) Zig-Zag products $ 36,960 $ 39,888 $ 32,775 Stoker’s products 59,308 26,708 19,679 Total $ 96,268 $ 66,596 $ 52,454 Operating income (loss) Zig-Zag products $ 58,941 $ 66,697 $ 68,280 Stoker’s products 109,105 68,272 62,208 Total segment operating income 168,046 134,969 130,488 Corporate unallocated (2)(3) ( 72,719 ) ( 54,137 ) ( 47,528 ) Total $ 95,327 $ 80,832 $ 82,960 Other income ( 6,616 ) - ( 4,000 ) Interest expense, net 17,466 13,983 14,645 Investment (gain) loss ( 1,060 ) 1,968 9,601 (Income) losses from equity investments 1,159 ( 75 ) 2,313 Loss (gain) on extinguishment of debt 1,235 - ( 1,664 ) Income from continuing operations before income taxes $ 83,143 $ 64,956 $ 62,065 Capital expenditures Zig-Zag products $ 348 $ 2,342 $ 1,112 Stoker’s products 13,181 2,271 4,595 Total $ 13,529 $ 4,613 $ 5,707 Depreciation and amortization Zig-Zag products $ 1,011 $ 1,469 $ 1,077 Stoker’s products 6,405 4,193 3,041 Total $ 7,416 $ 5,662 $ 4,118 ( 1 ) Includes primarily selling and marketing costs ( 2 ) Includes corporate costs that are not allocated to any of the two reportable segments ( 3 ) Includes costs related to PMTA of $ 4.8 million, $ 3.6 million and $ 2.1 million in 2025 , 2024 , and 2023 , respectively. 85 Table of Contents December 31, December 31, 2025 2024 Assets Zig-Zag products $ 256,762 $ 224,052 Stoker’s products 268,305 197,038 Assets held for sale - 15,329 Corporate unallocated (1) 238,683 56,934 Total $ 763,750 $ 493,353 ( 1 ) Includes assets not assigned to the two reportable segments. All goodwill has been allocated to the reportable segments. Net Sales: Domestic and Foreign The following table shows a breakdown of consolidated net sales between domestic and foreign. For the years ended December 31, 2025 2024 2023 Domestic $ 427,385 $ 330,690 $ 294,296 Foreign 35,677 29,970 30,768 Total $ 463,062 $ 360,660 $ 325,064 86 Table of Contents Note 22. Dividends, Share Issuances and Share Repurchases The Company currently pays a quarterly cash dividend. Dividends are considered restricted payments under the Senior Secured Notes Indenture. The Company is generally permitted to make restricted payments provided that, at the time of payment, or as a result of payment, the Company is not in default on its covenants; however, there are earnings and market capitalization requirements that if not met could limit the aggregate amount of restricted, quarterly dividends during a fiscal year. During the years ended December 31, 2025, 2024 and 2023, the Company paid cash dividends of $ 0.30 per common share for $ 5.5 million, $ 0.28 per common share for $ 4.9 million and $ 0.26 per common share for $ 4.5 million, respectively. On February 25, 2020, the Company’s Board of Directors approved a $ 50.0 million share repurchase program which is intended for opportunistic execution based upon a variety of factors including market dynamics. The program is subject to the ongoing discretion of the Board of Directors. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $ 30.7 million, and by an additional $ 24.6 million on February 24, 2022. On November 6, 2024, the Board of Directors of the Company increased the Company’s share repurchase authorization by $ 77.9 million to an aggregate amount of $ 100.0 million. On November 4, 2025, the Company's Board of Directors increased the share repurchase authorization by $ 100.0 million to an aggregate amount of $ 200.0 million. For the year ended December 31, 2025, there were no repurchases under the share repurchase program. As of December 31, 2025, $ 200.0 million remains available for share repurchases under the program. The total number of shares repurchased for the year ended December 31, 2024 was 154,945 shares for a total cost of $ 5.1 million and an average price per share of $ 32.60 . There were no shares repurchased for the year ended December 31, 2023. The Company entered into an at-the-market offering program (the "ATM Program") on December 13, 2024, with B. Riley Securities Inc. and Barclays Capital Inc. Between August 15, 2025, and September 11, 2025, the Company sold 1,014,262 shares of our Common Stock under the ATM Program at an average selling price of $ 98.59 per share for gross proceeds of $ 100.0 million, less underwriter's commission and expenses of approximately $ 2.5 million, for net proceeds of $ 97.5 million. The shares were issued from repurchased common stock on a first in first out basis. The Company recorded the gain, corresponding to the difference in between the reacquisition cost of treasury stock and the value of treasury stock reissued, into APIC within the Consolidated Statements of Changes in Stockholders' Equity. As of December 31, 2025, there was $ 200 million of capacity remaining under the ATM Program. Note 23. Subsequent Events As a result of the U.S. trade policies beginning in 2025, we incurred tariff charges on certain products we import from overseas manufacturers. Certain of these tariffs were imposed by the administration utilizing the International Emergency Economic Powers Act(IEEPA). In February 2026, the United States Supreme Court held that the International Emergency Economic Powers Act does not authorize the president to impose tariffs and the government immediately ceased collecting such tariffs. While this ruling prohibits the imposition of tariffs under IEEPA it does not provide for a refund mechanism, and we cannot assure as to when or how much of the tariffs the Company previously paid under IEEPA will be refunded. In addition, the ruling does not prohibit the imposition of tariffs pursuant to other statutes. For instance, in response to the ruling the administration imposed a blanket 10% on all products importers pursuant to section 122 of the Trade Act of 1974. 87 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.