Charlie's Holdings, Inc.

Previous wording

Although Charlie’s generated net revenue of approximately $16.3 million during the year ended December 31, 2023 and $26.4 million for the year ended December 31, 2022, there can be no guarantee that the Company will grow revenue or achieve positive cash flow in the future. Cash used in operating activities was approximately $0.8 million and $1.7 million during the years ended December 31, 2023 and 2022, respectively. Generating positive cash flows in the future will depend on our ability to successfully create, sell and market nicotine, nicotine alternative and hemp-derived products. There is no guarantee that we will be able to achieve or sustain positive cash flows and profitability in the future. Our inability to successfully achieve positive cash flows and profitability will decrease our long-term viability and prospects.

Current wording

Although Charlie’s generated net revenue of approximately $8.5 million during the year ended December 31, 2024 and $16.3 million for the year ended December 31, 2023, there can be no guarantee that the Company will grow revenue or achieve positive cash flow in the future. Cash used in operating activities was approximately $1.6 million and $0.8 million during the years ended December 31, 2024 and 2023, respectively. Generating positive cash flows in the future will depend on our ability to successfully create, sell, market, and finance nicotine, nicotine alternative, and other alternative products. There is no guarantee that we will be able to achieve or sustain positive cash flows and profitability in the future. Our inability to successfully achieve positive cash flows and profitability will decrease our long-term viability and prospects.

Previous wording

As of December 31, 2023, we had working capital of approximately $0.3 million, which consisted of current assets of approximately $5.1 million and current liabilities of approximately $4.8 million. If needed, our ability to obtain additional financing will be subject to many factors, including limitations on incurring debt in with respect to our Series A convertible preferred stock (“Series A Preferred”), market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. These conditions lead the Company to conclude there is substantial doubt about our ability to continue as a going concern. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all their investment in us.

Current wording

As of December 31, 2024, we had working capital deficit of approximately $1.8 million, which consisted of current assets of approximately $3.5 million and current liabilities of approximately $5.3 million. If needed, our ability to obtain additional financing will be subject to many factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price, and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. These conditions lead the Company to conclude there is substantial doubt about our ability to continue as a going concern. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all their investment in us.

Previous wording

Our financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company operates in a rapidly changing legal and regulatory environment; new laws and regulations or changes to existing laws and regulations could significantly limit the Company’s ability to sell its products, and/or result in additional costs. Additionally, the Company was required to apply for FDA approval to continue selling and marketing its products used for the vaporization of nicotine in the United States. There was significant cost associated with the application process and there can be no assurance the FDA will approve previous and/or future application. The issuance of one or several Marketing Denial Orders (“MDO”) from the FDA would increase the potential for inventory obsolescence and uncollectable accounts receivables. These regulatory risks, as well as other industry-specific challenges and our low working capital and cash position, remain factors that lead the Company to conclude that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amount and classification of recorded assets and liabilities should the Company be unable to continue operations.

Current wording

Our financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company operates in a rapidly changing legal and regulatory environment; new laws and regulations or changes to existing laws and regulations could significantly limit the Company’s ability to sell its products, and/or result in additional costs. Additionally, the Company was required to apply for FDA approval to continue selling and marketing its products used for the vaporization of nicotine in the United States. There was significant cost associated with the application process and there can be no assurance the FDA will approve previous and/or future application. The issuance of one or several Marketing Denial Orders (“MDOs”) from the FDA would increase the potential for inventory obsolescence and uncollectable accounts receivables. These regulatory risks, as well as other industry-specific challenges and our low working capital and cash position, remain factors that lead the Company to conclude that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amount and classification of recorded assets and liabilities should the Company be unable to continue operations.

Previous wording

We currently depend on the continued services and performance of key members of our management team, particularly Ryan Stump, one of Charlie’s founders and our Chief Operating Officer, and Henry Sicignano III, our President. If we cannot call upon them or other key management personnel for any reason, our operations and development could be harmed. We have not yet developed a succession plan. Furthermore, as we grow, we will be required to hire and attract additional qualified professionals such as accounting, legal, finance, production, market and sales experts. We may not be able to locate or attract qualified individuals for such positions, which will affect our ability to grow and expand our business.

Current wording

We currently depend on the continued services and performance of key members of our management team, particularly Ryan Stump, one of Charlie’s founders and our Chief Operating Officer, and Henry Sicignano III, our President. If we cannot call upon them or other key management personnel for any reason, our operations and development could be harmed. We have not yet developed a succession plan. Furthermore, as we grow, we will be required to hire and attract additional qualified professionals such as accounting, legal, finance, production, marketing and sales experts. We may not be able to locate or attract qualified individuals for such positions, which will affect our ability to grow and expand our business.

Previous wording

We rely on contractual arrangements with Don Polly, our consolidated variable interest entity for our hemp-related business operations, which may not be as effective as direct ownership in providing operational control.

Current wording

We rely on contractual arrangements with Don Polly, our consolidated variable interest entity for some of ourbusiness operations, which may not be as effective as direct ownership in providing operational control.

Previous wording

We have relied and expect to continue to rely on contractual arrangements with Don Polly and its shareholder, an entity controlled by Ryan Stump, for the operation of our hemp-derived operations. These contractual arrangements may not be as effective as direct ownership in providing us with control over our consolidated variable interest entity. For example, Don Polly and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.

Current wording

We have relied and expect to continue to rely on contractual arrangements with Don Polly and its shareholder, an entity controlled by Ryan Stump, for the operation of some of our operations. These contractual arrangements may not be as effective as direct ownership in providing us with control over our consolidated variable interest entity. For example, Don Polly and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.

Previous wording

The equity interests of Don Polly, our consolidated VIE, are held by an entity controlled by Ryan Stump, the Company’s Chief Operating Officer and member of our Board of Directors. Their interests in Don Polly may differ from the interests of our company as a whole. These shareholders may breach, or cause Don Polly to breach, the existing contractual arrangements we have with them and Don Polly, which would have a material adverse effect on our ability to effectively control Don Polly and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with Don Polly to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor.

Current wording

The equity interests of Don Polly, our consolidated VIE, are held by an entity controlled by Ryan Stump, the Company’s Chief Operating Officer and a member of our Board of Directors. Their interests in Don Polly may differ from the interests of our company as a whole. These shareholders may breach, or cause Don Polly to breach, the existing contractual arrangements we have with them and Don Polly, which would have a material adverse effect on our ability to effectively control Don Polly and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with Don Polly to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor.

Previous wording

A future outbreak of COVID-19 or another pandemic could adversely affected our business.

Current wording

A future outbreak of COVID-19 or another pandemic could adversely affect our business.

Previous wording

Our current business is primarily the sale of products that contain nicotine, alternative alkaloids and/or hemp-derived ingredients. The general market in which our products are sold faces significant governmental and private sector actions, including efforts aimed at reducing the incidence of use in minors and efforts seeking to hold the makers and sellers of these products responsible for the adverse health effects associated with them. More broadly, new regulatory actions by the FDA and other federal, state or local governments or agencies, may impact the consumer acceptability of or access to our products, including regulations promulgated by the FDA which will require us to file PMTA(s) for any of our products that are identified as “Deemed Tobacco Products” by the FDA. Additionally, on January 2, 2020 the FDA issued an enforcement policy effectively banning the sale of flavored cartridge-based e-cigarettes marketed primarily by large manufacturers in the United States without prior authorization from the FDA. Any ban on flavored e-cigarettes, or similar enforcement action by the FDA, or any order by the FDA requiring us to cease selling any of our products, would have a significant adverse impact on Charlie’s products, which would, in turn, have a material adverse impact on our overall business material.

Current wording

Our current business is primarily the sale of products that contain nicotine or alternative alkaloids. The general market in which our products are sold faces significant governmental and private sector actions, including efforts aimed at reducing the incidence of use in minors and efforts seeking to hold the makers and sellers of these products responsible for the adverse health effects associated with them. More broadly, new regulatory actions by the FDA and other federal, state or local governments or agencies, may impact the consumer acceptability of or access to our products, including regulations promulgated by the FDA which will require us to file PMTA(s) for any of our products that are identified as “Deemed Tobacco Products” by the FDA. Additionally, on January 2, 2020 the FDA issued an enforcement policy effectively banning the sale of flavored cartridge-based e-cigarettes marketed primarily by large manufacturers in the United States without prior authorization from the FDA. Any ban on flavored e-cigarettes, or similar enforcement action by the FDA, or any order by the FDA requiring us to cease selling any of our products, would have a significant adverse impact on Charlie’s products, which would, in turn, have a material adverse impact on our overall business material.

Previous wording

In 1986, federal legislation was enacted regulating smokeless tobacco products (including dry and moist snuff and chewing tobacco) by, among other things, requiring health warnings on smokeless tobacco packages and prohibiting the advertising of smokeless tobacco products on media subject to the jurisdiction of the Federal Communications Commission (“FCC”). Since 1986, other proposals have been made at the federal, state, and local levels for additional regulation of tobacco products. It is likely that additional proposals will be made in the coming years. For example, the Prevent All Cigarette Trafficking Act (“PACT Act”) initially prohibited the use of the U.S. Postal Service to mail cigarette and smokeless tobacco products and also amended the Jenkins Act, which established cigarette sales reporting requirements for state excise tax collection, to require individuals and businesses that make interstate sales of certain cigarette or smokeless tobacco comply with state tax laws. The PACT Act was recently amended expanding the definition of “cigarette” to include “electronic nicotine delivery systems,” “r ("”NDS"), and requires that the United States Postal Service ("”SPS") promulgate regulations clarifying the applicability of the prohibition on delivery sales of cigarettes to ENDS. This amendment to the PACT Act applies to certain products manufactured and sold by the Company, which has impacts at the federal and state levels. Failure to comply with the PACT Act could result in significant financial or criminal penalties. To the extent we are unable to respond to, or comply with, these new requirements, there could be a material adverse effect on our business, results of operations and financial condition.

Current wording

In 1986, federal legislation was enacted regulating smokeless tobacco products (including dry and moist snuff and chewing tobacco) by, among other things, requiring health warnings on smokeless tobacco packages and prohibiting the advertising of smokeless tobacco products on media subject to the jurisdiction of the Federal Communications Commission (“FCC”). Since 1986, other proposals have been made at the federal, state, and local levels for additional regulation of tobacco products. It is likely that additional proposals will be made in the coming years. For example, the Prevent All Cigarette Trafficking Act (“PACT Act”) initially prohibited the use of the U.S. Postal Service to mail cigarette and smokeless tobacco products and also amended the Jenkins Act, which established cigarette sales reporting requirements for state excise tax collection, to require individuals and businesses that make interstate sales of certain cigarette or smokeless tobacco comply with state tax laws. The PACT Act was recently amended expanding the definition of “cigarette” to include “electronic nicotine delivery systems,”(“ENDS”), and requires that the United States Postal Service (“USPS”) promulgate regulations clarifying the applicability of the prohibition on delivery sales of cigarettes to ENDS. This amendment to the PACT Act applies to certain products manufactured and sold by the Company, which has impacts at the federal and state levels. Failure to comply with the PACT Act could result in significant financial or criminal penalties. To the extent we are unable to respond to, or comply with, these new requirements, there could be a material adverse effect on our business, results of operations and financial condition.

Previous wording

On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (the “Tobacco Control Act”) granted the FDA regulatory authority over tobacco products. The Act also amended the Federal Cigarette Labeling and Advertising Act, which governs how cigarettes can be advertised and marketed, as well as the Comprehensive Smokeless Tobacco Health Education Act (“CSTHEA”), which governs how smokeless tobacco can be advertised and marketed. In addition to the FDA and FCC, we are subject to regulation by numerous other federal agencies, including the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), the U.S. Environmental Protection Agency (“EPA”), the U.S. Department of Agriculture (“USDA”), the Consumer Product Safety Commission (“CPSC”), the U.S. Customs and Border Protection (“CBP”) and the U.S. Center for Disease Control and Prevention’s (“CDC”) Office on Smoking and Health. There have also been adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry, which we believe have received widespread public attention. The FDA has, and other governmental entities have, expressed concerns about the use of flavors in tobacco products and an interest in significant regulation of such use, up to and including de facto bans in certain products. There can be no assurance as to the ultimate content, timing or effect of any regulation of tobacco products by governmental bodies, nor can there be any assurance that potential corresponding declines in demand resulting from negative media attention would not have a material adverse effect on our business, results of operations and financial condition.

Current wording

On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (the “Tobacco Control Act”) granted the FDA regulatory authority over tobacco products. The Act also amended the Federal Cigarette Labeling and Advertising Act, which governs how cigarettes can be advertised and marketed, as well as the Comprehensive Smokeless Tobacco Health Education Act (“CSTHEA”), which governs how smokeless tobacco can be advertised and marketed. In addition to the FDA and FCC, we are subject to regulation by numerous other federal agencies, including the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), the U.S. Environmental Protection Agency (“EPA”), the U.S. Department of Agriculture (“USDA”), the Consumer Product Safety Commission (“CPSC”), the U.S. Customs and Border Protection (“CBP”) and the U.S. Center for Disease Control and Prevention’s (“CDC”) Office on Smoking and Health. There have also been adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry, which we believe have received widespread public attention. The FDA has, and other governmental entities have, expressed concerns about the use of flavors in tobacco products and an interest in significant regulation of such use, up to and includingde facto bans in certain products. There can be no assurance as to the ultimate content, timing or effect of any regulation of tobacco products by governmental bodies, nor can there be any assurance that potential corresponding declines in demand resulting from negative media attention would not have a material adverse effect on our business, results of operations and financial condition.

Previous wording

During, 2022, a new rider to the Federal Food, Drug and Cosmetic Act was passed granting the FDA authority over synthetic nicotine. These regulations make synthetic nicotine products subject to the same FDA rules as tobacco-derived nicotine products. As such, the Company filed a PMTA for its existing synthetic nicotine products marketed under the Pacha brand by May 14, 2022. If the PMTA is ultimately unsuccessful, or if the FDA issues a warning letter, or takes other action against the Company resulting in us not being able to distribute our Pacha branded products in the United States, our revenues and, thereby our financial results and condition, could be materially adversely affected.

Current wording

During, 2022, a new rider to the Federal Food, Drug and Cosmetic Act was passed granting the FDA authority over synthetic nicotine. These regulations make synthetic nicotine products subject to the same FDA rules as tobacco-derived nicotine products. As such, the Company filed a PMTA for its existing synthetic nicotine products marketed under the Pacha brand before May 14, 2022. If the PMTA is ultimately unsuccessful, or if the FDA issues a warning letter, or takes other action against the Company resulting in us not being able to distribute our Pacha branded products in the United States, our revenues and, thereby our financial results and condition, could be materially adversely affected.

Previous wording

The “Deeming Regulations” issued by the FDA in May 2016 require any e-liquid, e-cigarettes, and other vaping products considered to be Deemed Tobacco Products that were not commercially marketed as of the grandfathering date of February 15, 2007, to obtain premarket approval by the FDA before any new e-liquid or other vaping products can be marketed in the United States. However, any Deemed Tobacco Products such as certain products from our Charlie’s Chalk Dust product lines that were on the market in the United States prior to August 8, 2016 have a grace period to continue to market such products, ending on September 9, 2020 whereby a premarket application, likely though the PMTA pathway, must have been filed with the FDA. Upon submission of a PMTA, products are able to be marketed pending the FDA’s review of the submission. Without obtaining marketing authorization by the FDA prior to the September 9, 2020 deadline or having submitted a PMTA by such date, non-authorized products were be required to be removed from the market in the United States until such authorization could be obtained, although such products may continue to be sold if a PMTA was pending as of the September 9, 2020 deadline.

Current wording

The “Deeming Regulations” issued by the FDA in May 2016 require any e-liquid, e-cigarettes, and other vaping products considered to be Deemed Tobacco Products that were not commercially marketed as of the grandfathering date of February 15, 2007, to obtain premarket approval by the FDA before any new e-liquid or other vaping products can be marketed in the United States. However, any Deemed Tobacco Products such as certain products from our Charlie’s Chalk Dust product lines that were on the market in the United States prior to August 8, 2016 had a grace period to continue to market such products, that ended on September 9, 2020, whereby a premarket application, likely though the PMTA pathway, must have been filed with the FDA. Upon submission of a PMTA, products are able to be marketed pending the FDA’s review of the submission. Without obtaining marketing authorization by the FDA prior to the September 9, 2020 deadline, or having submitted a PMTA by such date, non-authorized products would be required to be removed from the market in the United States until such authorization could be obtained, although such products could continue to be sold if a PMTA was pending as of the September 9, 2020 deadline.

Previous wording

As at the date of this Report, we have submitted PMTAs for certain of our nicotine vapor products, including, but not limited to menthol and/or tobacco products with the assistance of Avail, pursuant to the terms of the Avail Agreement, as well other vendors to assist with our May 13, 2022 submissions. The costs to date associated with these PMTAs are approximately $5.1 million in total. We are also evaluating the potential market perception and clinical studies that may be required in connection with each PMTA. If we do not submit a PMTA for any Charlie’s products considered to be Deemed Tobacco Products prior to the lapse of the grace period or if any PMTA submitted by the Company is denied, we will be required to cease the marketing and distribution of such Charlie’s products, which, in turn, would have a material adverse effect on the Company’s business, results of operations and financial condition. Furthermore, there can be no assurance that if the Company were to complete a PMTA for any of the affected Charlie’s products, that any application would be approved by the FDA and any non-approval would require us to remove products from the marketplace, which would have an adverse impact on our business.

Current wording

As at the date of this Report, we have submitted PMTAs for certain of our nicotine vapor products, including, but not limited to menthol and/or tobacco products with the assistance of Avail, pursuant to the terms of the Avail Agreement, as well other vendors to assist with our May 13, 2022 submissions. The costs to date associated with these PMTAs are approximately $6.5 million in total. If any PMTA submitted by the Company is denied, we will be required to cease the marketing and distribution of such Charlie’s products, which, in turn, would have a material adverse effect on the Company’s business, results of operations and financial condition. Furthermore, there can be no assurance that if the Company were to complete a PMTA for any of the affected Charlie’s products, that any application would be approved by the FDA and any non-approval would require us to remove products from the marketplace, which would have an adverse impact on our business.

Previous wording

The regulation of SPREE BAR by the FDA or others could materially adversely affect us.

Current wording

The regulation of SBX by the FDA or others could materially adversely affect us.

Previous wording

We recently launched new disposable vape products, under the “SPREE BAR™” brand, that we expect will (i) replace most of our legacy products and (ii) become the single largest, most important commercial opportunity our history. As SPREE BAR is not made from or derived from tobacco, we believe that SPREE BAR products are not subject to regulation as “tobacco products” under 21 U.S.C. § 321(rr). In the event that our SPREE BAR products were to be deemed by the FDA to be “tobacco products” or if the FDA or another regulatory authority were to otherwise assume regulatory control of such products, we could be required to cease selling such products (including recalling existing products), subject to an enforcement action or otherwise be required to comply with various regulations that could be expensive. More generally, FDA’s regulatory initiatives and enforcement authority regarding our products are unpredictable and continue to evolve and we cannot predict whether FDA’s priorities and/or potential jurisdiction over our products will require us to remove our products from the market and to cease selling them. As a result, any regulation over SPREE BAR could material adversely affect us.

Current wording

We recently launched new disposable vape products, under the “SBX™” brand, that we expect will (i) replace most of our legacy products and (ii) become the single largest, most important commercial opportunity our history. As SBX is not made from or derived from tobacco, we believe that SBX products are not subject to regulation as “tobacco products” under 21 U.S.C. § 321(rr). In the event that our SBX products were to be deemed by the FDA to be “tobacco products” or if the FDA or another regulatory authority were to otherwise assume regulatory control of such products, we could be required to cease selling such products (including recalling existing products), subject to an enforcement action or otherwise be required to comply with various regulations that could be expensive. More generally, FDA’s regulatory initiatives and enforcement authority regarding our products are unpredictable and continue to evolve and we cannot predict whether FDA’s priorities and/or potential jurisdiction over our products will require us to remove our products from the market and to cease selling them. As a result, any regulation over SBX could material adversely affect us.

Previous wording

Certain of our products contain nicotine, a chemical found in cigarettes, e-cigarettes, certain other vapor products and other tobacco products, which is considered to be highly addictive. The Family Smoking Prevention and Tobacco Control Act empowers the FDA to regulate the amount of nicotine found in vapor products, but may not require the reduction of nicotine yields of a vapor product to zero. Any FDA regulation may require us to reformulate, recall and or discontinue certain of the products we may sell from time to time, which may have a material adverse effect on our ability to market our products and have a material adverse effect on our business, financial condition, results of operations, cash flows and or future prospects.

Current wording

Certain of our products contain nicotine or Metatine, chemicals found in cigarettes, e-cigarettes, certain other vapor products and other tobacco products, which are considered to be highly addictive. Though the FDA does not currently have regulatory jurisdiction over Metatine, the Family Smoking Prevention and Tobacco Control Act empowers the FDA to regulate the amount of nicotine found in vapor products. Any new FDA regulation over nicotine may require us to reformulate, recall, and/or discontinue certain of the products we may sell from time to time, which may have a material adverse effect on our ability to market our products and have a material adverse effect on our business, financial condition, results of operations, cash flows and or future prospects.

Previous wording

Due to recent expansion into the CBD industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability.

Current wording

Due to our operations in several highly regulated industries, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability.

Previous wording

Insurance that is otherwise readily available, such as general liability, and directors and officer’s insurance, may become more difficult for us to find, and more expensive, due to our recent launch of certain products containing hemp-derived CBD. There are no guarantees that we will be able to find such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances, it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and financial liabilities.

Current wording

Insurance that is otherwise readily available, such as general liability, and directors and officer’s insurance, may become more difficult for us to find, and more expensive, due to our operations in highly regulated industries. There are no guarantees that we will be able to find such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances, it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and financial liabilities.

Previous wording

We face intense competition from numerous resellers, manufacturers and wholesalers of vapor products similar to those developed and sold by us, from both retail and online providers. We face competition from direct and indirect competitors, which arguably includes “big tobacco”, “big pharma”, and other known and established or yet to be formed vapor product manufacturing companies, each of whom pose a competitive threat to our current business and future prospects. We compete against “big tobacco”, who offers not only conventional tobacco cigarettes and electronic cigarettes, but also smokeless tobacco products such as “snus” (a form of moist ground smokeless tobacco that is usually sold in sachet form that resembles small tea bags), chewing tobacco and snuff. “Big tobacco” has nearly limitless resources, global distribution networks in place and a customer base that is fiercely loyal to their brands. Furthermore, we believe that “big tobacco” is likely to devote more attention and resources to developing and offering electronic cigarettes or other vapor products as the market for electronic cigarettes grows. Because of their well-established sales and distribution channels, marketing depth, financial resources, and proven expertise navigating complex regulatory landscapes, “big tobacco” is better positioned than small competitors like us to capture a larger share of the vapor markets. We also face competition from companies in the vapor market that are much larger, better funded, and more established than us.

Current wording

We face intense competition from numerous resellers, manufacturers and wholesalers of vapor products similar to those developed and sold by us, from both retail and online providers. We face competition from direct and indirect competitors, which arguably includes “big tobacco,” “big pharma,” and other known and established or yet to be formed vapor product manufacturing companies, each of whom pose a competitive threat to our current business and future prospects. We compete against “big tobacco”, who offers not only conventional tobacco cigarettes and electronic cigarettes, but also smokeless tobacco products such as “snus” (a form of moist ground smokeless tobacco that is usually sold in sachet form that resembles small tea bags), chewing tobacco and snuff. “Big tobacco” has nearly limitless resources, global distribution networks in place and a customer base that is fiercely loyal to their brands. Furthermore, we believe that “big tobacco” is likely to devote more attention and resources to developing and offering electronic cigarettes or other vapor products as the market for electronic cigarettes grows. Because of their well-established sales and distribution channels, marketing depth, financial resources, and proven expertise navigating complex regulatory landscapes, “big tobacco” is better positioned than small competitors like us to capture a larger share of the vapor markets. We also face competition from companies in the vapor market that are much larger, better funded, and more established than we are.

Previous wording

There is limited availability of clinical studies related to hemp-based products.

Current wording

There is limited availability of clinical studies related to many of our products.

Previous wording

Although hemp plants have a long history of human consumption, there is little long-term experience with human consumption of certain of these innovative product ingredients or combinations thereof in concentrated form. Although we perform research and/or tests the formulation and production of our products, there is limited clinical data regarding the safety and benefits of ingesting industrial hemp-based products. Any instance of illness or negative side effects of ingesting industrial hemp-based products would have a material adverse effect on our business and operations.

Current wording

There is little long-term experience with human consumption of certain of the innovative product ingredients or combinations that we utilize in our products. Although we perform research and/or tests the formulation and production of our products, there is limited clinical data regarding the safety and benefits of ingesting certain of our products. Any instance of illness or negative side effects of using or ingesting our products would have a material adverse effect on our business and operations.

Previous wording

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time. These sales, or the perception that such sales may occur, may adversely impact the price of our Common Stock, even if there is no relationship between such sales and the performance of our business. As of December 31, 2023, we had 228,535,886 shares of Common Stock outstanding, as well as outstanding options to purchase an aggregate of 5,271,637 shares of our Common Stock at a weighted average exercise price of $0.58 per share, up to 28,926,313 shares of Common Stock issuable upon conversion of outstanding shares of Series A Preferred and outstanding warrants to purchase up to an aggregate of 40,424,136 shares of our Common Stock at a weighted average exercise price of $0.44313 per share that expire on April 26, 2024 unless exercised. The exercise and/or conversion of such outstanding derivative securities may result in further dilution to our stockholders.

Current wording

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time. These sales, or the perception that such sales may occur, may adversely impact the price of our Common Stock, even if there is no relationship between such sales and the performance of our business. As of December 31, 2024, we had 257,286,631 shares of Common Stock outstanding, as well as outstanding options to purchase an aggregate of 4,647,814 shares of our Common Stock at a weighted average exercise price of $0.46 per share, up to 27,741,333 shares of Common Stock issuable upon conversion of outstanding shares of Series A Preferred. The exercise and/or conversion of such outstanding derivative securities may result in further dilution to our stockholders.

Previous wording

Our Charter currently authorizes the issuance of up to 500.0 million shares of Common Stock, of which approximately 228.8 million shares are issued and outstanding as of March 31, 2024. In addition, we have reserved approximately 74.0 million shares for issuance upon conversion and/or exercise of our outstanding shares of Series A Preferred, warrants and stock options, as well as for issuance as awards under our 2019 Omnibus Incentive Plan. The issuance of any additional shares of our Common Stock, including those shares issuable upon conversion and/or exercise of our outstanding derivative securities, will result in significant dilution to our stockholders and a reduction in value of our outstanding Common Stock. Further, any such issuance may result in a change of control of our corporation.

Current wording

Our Charter currently authorizes the issuance of up to 500.0 million shares of Common Stock, of which approximately 257.3 million shares are issued and outstanding as of March 31, 2025. In addition, we have reserved approximately 32.0 million shares for issuance upon conversion and/or exercise of our outstanding shares of Series A Preferred, warrants and stock options, as well as for issuance as awards under our 2019 Omnibus Incentive Plan. The issuance of any additional shares of our Common Stock, including those shares issuable upon conversion and/or exercise of our outstanding derivative securities, will result in significant dilution to our stockholders and a reduction in value of our outstanding Common Stock. Further, any such issuance may result in a change of control of our corporation.

Previous wording

In the case of publicly traded companies, it is common for a broker to hold securities on your behalf, in “street name” (meaning the broker is shown as the holder on the issuer’s records and then you show up on the broker’s records as the person the broker is holding for). Due to regulatory uncertainties, certain brokers may not agree to hold securities of companies whose products include hemp-derived CBD for their customers, meaning that you may not be able to take advantage of the convenience of having all your holdings reflected in one place.

Current wording

In the case of publicly traded companies, it is common for a broker to hold securities on your behalf, in “street name” (meaning the broker is shown as the holder on the issuer’s records and then you show up on the broker’s records as the person the broker is holding for). Due to regulatory uncertainties, certain brokers may not agree to hold securities of our Company, meaning that you may not be able to take advantage of the convenience of having all your holdings reflected in one place.