Turning Point Brands, Inc.

Notes to Consolidated Financial Statements (Unaudited)

(dollars in thousands, except where designated and per share data)

Note1. Business 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®, FRE® and ALP®. The Company’s products are available in more than 220,000 retail outlets in North America. The Company operatestwo segments, Zig-Zag products and Stoker’s products.

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited, consolidated financial statements as of and for the year ended* December 31, 2025*. In the opinion of management, the unaudited, interim, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods presented. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods arenot necessarily indicative of results to be expected for a full year or future interim periods. The unaudited, interim, consolidated financial statements should be read in conjunction with the Company’s audited, consolidated financial statements and accompanying notes as of and for the year ended* December 31, 2025*. The accompanying interim, consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, accordingly, donot include all the disclosures required by generally accepted accounting principles in the United States (“GAAP”) with respect to annual financial statements.

Tariff Refunds

On* March 4, 2026,the U.S. Court of International Trade issued an additional ruling that importers that paid tariffs under the International Emergency Economic Powers Act ("IEEPA") are due refunds and ordered U.S. Customs and Border Protection ("CBP") to begin the refund process. Consistent with ASC450*-30 Gain contingencies, the Company doesnot recognize a tariff refund until the gain is realized or realizable – generally upon receipt of funds. The Company paid IEEPA tariffs totaling $17.9 million. In* June 2026,the Company received tariff refunds of $17.8 million from CBP related to those tariffs. Based upon the nature of the underlying tariff charges, the refund resulted in a $12.3 million reduction in cost of goods sold for inventory sold while $1.2 million reduced PPE as the payments had been capitalized for equipment purchases and $4.3 million reduced inventory as the payments had been capitalized as part of inventory and wasnot* sold at the time of refund.

Note2. Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, 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 withone 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 arenot 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.

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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.

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. ("GWO") (refer to Note7, "Other Assets") is a VIE for which the Company isnot 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 Holding Trust ("RSH Trust"), which was established by the Company and is managed by an independent trustee that votes the Company's interest in GWO in accordance with GWO's board's recommendations, holds a 49% indirect interest in the distribution business through its interests in GWO and, the Company, through Turning Point Brands Canada, has a variable interest through a purchase option to acquire the equity interests of GWO's distribution business. However, the Company doesnot 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 judgment that the distribution business is a VIE for which the Company isnot required to consolidate. See Note7 "Other Assets" for further discussion of the acquisition of the distribution business by GWO and the terms of the option on its equity interests. Turning Point Brands Canada charged a fee to the distribution business in2025 under a fee agreement. The fee agreement was terminated in thefourth quarter of2025.

Subsequent to the acquisition of the distribution business by GWO, the Company determined that the GWO equity method investment is a VIE of which we arenot 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 GWO's economic performance. Standard General, L.P’s voting rights are conveyed through an equity interest that isnot considered at risk. Based on the foregoing, management believes in its judgment that GWO is a VIE for which the Company isnot required to consolidate.

Revenue Recognition

The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”)606, Revenue from Contracts with Customers, 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 thefive-step analysis outlined in ASC606: (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 ASC606 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 Note14, “Segment Information”.

Shipping Costs

The Company records shipping costs incurred as a component of selling, general and administrative expenses. Shipping costs incurred were approximately $9.3 million and $7.7 million for thethree months ending* September 30, 2026and2025*, respectively and $27.6 million and $22.3 million for thenine months ending* September**30,* 2026 and2025, respectively.

Inventories

Inventories are stated at the lower of cost or net realizable value using thefirst-in,first-out method. Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobacco is carried longer thanone year for the purpose of curing.

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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 (Level1) and the lowest priority to unobservable inputs (Level3).

Thethree levels of the fair value hierarchy under U.S. GAAP are described below:

Derivative Instruments

From time to time, 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 ASC815, Derivatives and Hedging. Under the Company’s policy, the Company* mayhedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward periodnot* to exceed twelve months. The Company* mayalso, 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 donot* qualify for hedge accounting or arenot designated as hedges are recognized currently in income.

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 beno 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 wouldnot 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 beno assurance the Company willnot sustain losses in connection with such lawsuits and that such losses willnot have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Master Settlement Agreement (MSA)

Pursuant to the Master Settlement Agreement (the “MSA”) entered into in* November 1998by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of 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 to have funds available for certain potential tobacco-related liabilities with sub-accounts on behalf of each settling state. Such companies are entitled to direct the investment of the escrowed funds and withdraw any appreciation but cannot withdraw the principal fortwenty-five 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. The Company chose to open and fund an escrow account as its method of compliance. It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset. The Company has begun to receive deposits back from participating states commencing with the deposits from1999.* At* September 30, 2026* and* December 31, 2025*, the Company had on deposit approximately $31.7 million and $32.0 million, respectively, the fair values of which were approximately $28.9 million and $29.9 million, respectively. The Company discontinued its generic category of MYO in2019 and its Zig-Zag branded MYO cigarette smoking tobacco in2017. Thus, without a change in MSA legislation, the Company hasno remaining product lines covered by the MSA and willnot 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.

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Fair values for the U.S. Governmental agency obligations are Level2 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.

The following shows the amount of deposits by sales year for the MSA escrow account:

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Recent Accounting Pronouncements

Issued butnot yet adopted

In* November 2024,the FASB issued ASU2024*-03, Disaggregation of Income Statement Expenses, which requires additional disclosures regarding certain expense captions presented on the income statement. The guidance is effective for annual reporting periods beginning after* December 15, 2026,and interim reporting periods beginning after December 15, 2027.*Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

In* December 2025,the FASB issued ASU2025‑12,* which makes targeted technical corrections and clarifications to several topics in the Codification, including diluted EPS, leases, and transfers of receivables. The guidance is effective for annual periods beginning after* December 15, 2026,and interim periods within those annual periods. The Company doesnot* expect adoption to have a material impact on its consolidated financial statements.

In* September 2025,the FASB issued ASU2025‑06,* which updates the accounting guidance for internal‑use software by eliminating the traditional development stage model and requiring capitalization of costs when funding is authorized and completion is probable, unless significant uncertainties exist. The standard is effective for annual reporting periods beginning after* December 15, 2027,*with early adoption permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements and disclosures.

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Note3. 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 arenot 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's2032 Notes bear interest at a rate of 7.625% per year. As of* September 30, 2026*, the fair value approximated $290.7 million, with a carrying value of $300.0 million. As of* December 31, 2025*, the fair value approximated $313.8 million, with a carrying value of $300.0 million.

See Note9, “Notes Payable and Long-Term Debt”, for further information regarding the Company’s long-term debt.

Note4. Inventories

The components of inventories are as follows:

The valuation allowance to write inventory down to its net realizable value at* September 30, 2026* and* December 31, 2025* was $16.7 million and $16.7 million, respectively.

In* December 2023,athird*-party warehouse in Tennessee used by the Company incurred significant tornado damage resulting in damage to the leaf tobacco. 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 on the consolidated balance sheets.

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Note5. Other Current Assets

Other current assets consist of:

Note6. Property, Plant, and Equipment

Property, plant, and equipment consists of:

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Note7. Other Assets

Other assets consist of:

Non-Marketable Equity Investments and Option Agreements

The Company records its non-marketable equity investments without a readily determinable fair value, that arenot 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.

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 and controlled by Standard General, LP. On January 2, 2025,the Company contributed 100% of its interest in South Beach Brands ("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 GWO purchase option includes an initial exercise price of $22.0 million, which maydecrease over time based on certain tax sharing payments made by GWO to Standard General, LP. As a result of this transaction, the Company determined that itno* 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 with a fair value 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 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 was approximately $20.0 million, of which $15.1 million has been paid and $4.9 million was included in accrued liabilities as of September**30,* 2026.

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.*

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 Julyof each year. As of September 30, 2026*, total interest of $1.4 million has been rolled into the convertible note resulting in a total investment of $10.4 million. Old Pal is a leading brand in the cannabis lifestyle space that operates a non-plant touching license model. The convertible note bears an interest rate of 3.0% per year and matures* July 31,2027. Interest and principalnot paid to date are receivable at maturity, and Old Pal has the option to extend the maturity date of the convertible note inone-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% for thenine months ended September 30, 2026and2025.* 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 werenot met as of* September 30, 2026*. 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 its Consolidated Statements of Income. The Company performs a qualitative assessment on a quarterly basis to determine if the fair value of the Old Pal investment could be less than the amortized cost basis. In addition, the Company utilizes athird-party to perform a quantitative assessment to determine fair value using a Monte Carlo simulation (Level3) when indicated, and at least bi-annually. Based upon its quantitative fair value assessment, the Company determined the fair value of Old Pal to be $7.6 million at* June 30, 2026.The Company has recorded an accrued interest receivable of $0.1 million at September 30, 2026* and* December 31, 2025* in Other Current Assets on its Consolidated Balance Sheets.

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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. Subsequent to June 30, 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,athird*-party investor subscribed for an interest in Interchange IC’s parent company for $11.0 million in proceeds, which contributed the investment to Interchange IC. Insurance reserves were $0.6 million as of* September**30,* 2026 and $0.4 million as of* December 31, 2025.As of September 30, 2026,*no policy has been underwritten for the benefit of thethird-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 arenot 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 andnot the result of credit risk.

The Company’s captive investments are summarized in the following table (excludes money market funds):

The following table summarizes the fair value of the Company’s captive investments by contractual maturity.

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Note8. Accrued Liabilities

Accrued liabilities consists of:

Note9. Notes Payable and Long-Term Debt

Notes payable and long-term debt consists of the following in order of preference:

The components of interest expense, net consists of the following:

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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 due2032* (the*“2032* Notes”), by and among the Company, the guarantors party thereto and GLAS Trust Company LLC, as trustee and notes collateral agent. The2032 Notes incur interest at a rate of 7.625%, payable semi-annually in arrears on* March 15and September 15of each year, commencing on September 15, 2025.Proceeds from the offering were approximately $293.0 million and were used to redeem our 5.625% senior secured notes due2026* issued on* February 11, 2021*and for general corporate purposes.

The2032 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 the2032 Notes or the*“2032* Notes Indenture”). The2032 Notes and the related guarantees are secured byfirst-priority liens on substantially all of the existing and future assets of the Company and the Guarantors that donot secure the2023 ABL Facility (as defined below), subject to certain exceptions. The2032 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 the2032 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 isnot in default on its covenants; however, there are earnings and market capitalization requirements that ifnot met could limit the aggregate amount of quarterly dividends payable during a fiscal year. The2032 Notes Indenture provides for customary events of default. The Company was in compliance with all covenants under the2032 Notes as of* September 30, 2026.*

The Company incurred debt issuance costs attributable to the2032 Notes of $7.3 million which are amortized to interest expense using the straight-line method over the expected life of the2032 Notes.

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 the2023 ABL Facility, the ABL Borrower* maydraw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) loans. The2023* ABL Facility includes a $40.0 million accordion feature. In connection with the2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The2023 ABL Facility is secured on afirst priority basis (subject to customary exceptions) by all assets of the ABL Borrower.

The2023 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 afirst infirst 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. The2023 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 afirst infirst 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.

Amounts borrowed under the2023 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 thefirst 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 secured overnight financing rate (“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 thefirst 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.

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The2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to1.00 as of the end of anyfour consecutive fiscal quarters if excess availability is 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 forthirty (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 in connection with any incremental facility.

The2023 ABL Facility matures on the earlier of (x)* November 7, 2027and (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) willnot* 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 hasnot drawn any borrowings under the2023 ABL Facility but has letters of credit of approximately $2.3 million outstanding under the facility and has an available borrowing capacity of $71.5 million based on the borrowing base as of* September 30, 2026*.

The Company incurred debt issuance costs attributable to the2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the2023 ABL Facility.

Note10. Income Taxes

The Company’s effective income tax rate for thethree andnine months ended* September 30, 2026* was 17.1% and 6.9%, respectively. The Company's effective income tax rate for thethree andnine months ended* September 30, 2025was 21.4% and 18.4%, respectively. The effective tax rate for thethree* months ended* September 30, 2026* includes permanent tax differences related to the Company's restricted stock units that were issued in thefirst six months of2026 and stock options that were exercised during thenine months ended* September 30, 2026*.

During thefirst quarter of2026, the Company concluded that it was more‑likely‑than‑not that TPBI’s separate company state net operating losses and other deferred tax assets, excluding the State*§163*(j) interest limitation carryforward, would be realizable. As a result, the Company released $2.4 million of the related valuation allowance as a discrete item in thefirst quarter.

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Note11. 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* maybe granted to employees, non-employee directors, and consultants. In addition, the2021* Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the2021 Plan,1,290,000 shares, plus 100,052 shares remaining available for issuance under the2015 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. The2021 Plan is scheduled to terminate on* March 21, 2031.The2021* 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* September 30, 2026*, net of forfeitures, there were 496,278 Restricted Stock Units (“RSUs”),122,570 options and 128,131 Performance Based Restricted Stock Units (“PRSUs”) granted under the2021 Plan. There are 643,073 shares available for future grant under the2021 Plan as of* September 30, 2026*.

On* April 28, 2016,the Board of Directors of the Company adopted the2015* Plan, pursuant to which awards could have been granted to employees, non-employee directors, and consultants. In addition, the2015 Plan provided for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Upon adoption of the2021 Plan, the2015 Plan was terminated, and the Company determinedno additional grants would be made under the2015 Plan. However, all awards issued under the2015 Plan that havenot been previously terminated or forfeited remain outstanding and continue unaffected. There areno shares available for grant under the2015 Plan.

Stock option activity for the2015 and2021 Plans is summarized below:

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Under the2015 and2021 Plans, the total intrinsic value of options exercised during thenine months ended* September 30, 2026and2025*, was $0.5 million, and $7.8 million, respectively.

At* September 30, 2026*, under the2015 and2021 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 areno longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting BulletinNo. 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.

The following table outlines the assumptions based on the number of options granted under the2015 Plan.

The following table outlines the assumptions based on the number of options granted under the2021 Plan.

The Company records compensation expense related to the options based on the provisions of ASC718 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. In2026 and2025, the Company has recordedno compensation expense related to the options, which are fully expensed.

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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 will be calculated by reference to certain performance metrics related to the Company’s performance over afive-year period. PRSUs will vest on the measurement date, which isno more than 65 days after the performance period provided the applicable service and performance conditions are satisfied. As of* September 30, 2026*, there are 137,575 PRSUs outstanding. The following table outlines the PRSUs granted and outstanding as of* September 30, 2026*.

The Company records compensation expense related to the PRSUs based on the probability of achieving the performance condition. The Company recorded compensation expense related to the PRSUs of approximately $0.0 million and $0.8 million for thethree months ended* September 30, 2026* and2025, respectively. The Company recorded compensation expense related to the PRSUs of approximately $2.0 million and $2.2 million for thenine months ended* September 30, 2026* and2025, respectively. Total unrecognized compensation expense related to these awards at* September 30, 2026*, is $2.0 million which will be expensed over the service periods based on the probability of achieving the performance condition.

The Company has granted 109,879 RSUs which are outstanding and vest overone tofive years. The following table outlines the RSUs granted and outstanding as of* September 30, 2026*.

The Company records compensation expense related to the RSUs based on the provisions of ASC718 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 $1.0 million and $1.1 million for thethree months ended* September 30, 2026and2025,* respectively. The Company recorded compensation expense related to the RSUs of approximately $4.6 million and $3.0 million for thenine months ended* September 30, 2026and2025,* respectively. Total unrecognized compensation expense related to RSUs at* September 30, 2026,*is $6.0 million, which will be expensed over 2.0 years.

Note12. Contingencies

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 potential losses associated with any such lawsuits arenot currently reasonably estimable and therefore arenot accrued.

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Note13. Income Per Share

The Company calculates earnings per share using the treasury stock method for its options and non-vested restricted stock units.

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

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Note14. Segment Information

In accordance with ASC280, Segment Reporting, the Company hastwo reportable segments, Zig-Zag products and Stoker’s products. The Zig-Zag products segment markets and distributes (i) rolling papers, tubes, and related products; (ii) finished cigars and MYO cigar wraps; and (iii) lighters and other accessories. The Stoker’s products segment (i) manufactures and markets moist snuff, (ii) contracts for and markets loose-leaf chewing tobacco products, and (iii) contracts for and markets 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 Companynot assigned toone of thetwo 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’s Chief Operating Decision Maker ("CODM") is its Chief Executive Officer who 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 arenot directly charged to thetwo reportable segments in the ordinary course of operations.

The tables below present financial information about reportable segments:

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Net Sales: D**omestic and Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers:

Note15. Dividends and Share Repurchases

A dividend of $0.08 per common share was paid on* October 9, 2026,to shareholders of record at the close of business on September 18, 2026.*

The Company currently pays a quarterly cash dividend. Dividends are considered restricted payments under the2032 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 isnot in default on its debt covenants; however, there are earnings and market capitalization requirements that ifnot met could limit the aggregate amount of restricted, quarterly dividends during a fiscal year.

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. On November 4, 2025,the Company’s Board of Directors increased the share repurchase authorization to an aggregate amount of $200.0 million. The program is subject to the ongoing discretion of the Board of Directors, and the Board of Directors has increased it periodically. For thethree* andnine months ended* September 30, 2026*, the total number of shares repurchased was 167,161 for a total cost of $10.0 million and an average price per share of $59.82. Certain of our treasury shares are held by a subsidiary. As of* September 30, 2026*there was $190.0 million remaining under the repurchase authorization.

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. The Company filed an amendment to the prospectus supplement on November 2, 2025to increase the aggregate dollar amount of shares of common stock that it maysell under the ATM Program by an additional $200.0 million. During the quarter ended June 30, 2026,the Company sold 672,884 shares of our Common Stock under the ATM Program at an average selling price of $90.30 per share for gross proceeds of $60.8 million, less sales agents' commissions and expenses of approximately $1.2 million, for net proceeds of $59.6 million. The shares were issued from repurchased common stock on afirst* infirst 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* September 30, 2026,*there was $139.2 million of capacity remaining under the ATM Program.

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