Charlie's Holdings (OTCQB:CHUC) Issues Letter to Shareholders

• The Company believes Charlie's 640 PMTA products, as a stand-alone asset, have a monetary value that far exceeds Charlie's current market cap.

• Beating Juul 15:1, SBX represents the single largest, most important commercial opportunity in Charlie's history.

• When the Company is able to meet the initial listing standards of one or more national securities exchanges, Charlie's plans to uplist.

COSTA MESA, CA / ACCESS Newswire / May 29, 2025 / Charlie's Holdings, Inc. (OTCQB:CHUC) ("Charlie's" or the "Company"), an industry leader in the premium vapor products space, today reported results for the full year ended December 31, 2024, and released the following letter to shareholders:

Dear Fellow Shareholder,

Charlie's Holdings, Inc. (OTCQB:CHUC) remains a vibrant industry leader in the premium vapor products space. Since our founding in 2014, Charlie's has created hundreds of products that provide adult smokers with a viable means of abandoning cigarettes. Not coincidentally, over the last 10-15 years, e-cigarette usage in the United States has grown significantly while combustible cigarette smoking rates have dropped.

That said, the past eighteen months have been challenging for our industry, generally, and for Charlie's, particularly. Tremendous competition from illicit products, a lack of regulatory enforcement, and the FDA's de facto policy of not granting marketing orders to flavored nicotine vapor products have, combined, made the US market incredibly difficult for any company with a commitment to regulatory compliance. In this environment, Charlie's sales and profits dropped. Precipitously.

At the same time ̶ while we imposed painful corporate layoffs, executive salary reductions, and very substantial cuts in spending across the entire business ̶ Charlie's also identified opportunity... and set the stage for tremendous growth going forward. Applying investments in science, regulatory compliance, and intellectual property to more than 700 products across several of Charlie's brand families, we believe we established significant competitive advantages that will facilitate hundreds of millions of dollars in future top line revenue.

In this letter we will describe the company's current competitive position… why we believe our products provide adult consumers with a (far) better alternative to combustible cigarettes… and how we intend to grow our business, aggressively, going forward. Here are the primary strategic initiatives on which we intend to focus in 2025-26:

• Form strategic partnership(s) to monetize the Company's PMTA-submitted PACHA synthetic nicotine products. (The Company believes Charlie's 640 PMTA products, as a stand-alone asset, have a monetary value that far exceeds Charlie's current market cap.)

• Grow nicotine-free SBX vapor product sales and retail distribution through chain convenience stores in select markets across the US. (SBX represents the single largest, most important commercial opportunity in Charlie's history.)

• Develop patented age-gating technology; secure "product of merit" status with the FDA.

• Grow international sales to mitigate US regulatory risks.

Collectively, all these initiatives represent Charlie's commitment to adult smokers. Through innovation and a hyper-focus on quality, our Company strives to provide each and every one of our customers with an ultra-satisfying vaping experience. Since 2014 we have developed a family of award-winning e-liquids, an array of compact, easy-to-use disposable vaping devices, and a portfolio of extraordinary intellectual property. In order to put the value of some of these assets into context, here is a more detailed overview of our business plans and strategy:

Given that Charlie's 600+ PMTAs (primarily for flavored vapor products) remain among the fraction of 1% that are still under active review with the FDA, and given that more than 80% of adults in the United States prefer flavored vapor products over plain tobacco vapor products, we believe that Charlie's PMTA portfolio represents an important competitive advantage - of enormous monetary value.

Subsequent to the close of 2024, on April 16, 2025, Charlie's sold 12 twelve of the Company's PACHA synthetic nicotine PMTA products and related assets to one of the world's largest tobacco companies. The sale price was $5.0 million, plus a contingent payment of up to $4.2 million.

Based on Charlie's first sale of the 12 PMTA products - and on the interest other companies have expressed in Charlie's portfolio - the Company believes Charlie's 640 remaining PMTA products, as a stand-alone asset, have a monetary value that exceeds $265 million (more than 10X Charlie's current market cap). To maximize the value of this portfolio, the Company intends to form strategic partnerships with additional companies, big and small, that value regulatory compliance in the vapor products marketplace.

Over the last two years, we began to invest substantial time and resources to dramatically expand Charlie's business from nicotine products only, to a portfolio of products that includes nicotine substitute products. Charlie's nicotine substitute-based vape liquids are not made from or derived from tobacco, nor do they contain nicotine from any source. Accordingly, the Company's proprietary nicotine substitute alkaloid (patented in the United States and in China by the Company's chemical supplier) does not meet the definition of "nicotine" and therefore Charlie's nicotine substitute products are not subject to Federal regulation as "tobacco products."

This strategic hedge, and the market testing that the shift entailed, significantly reduced Company revenue in 2024. However, the Company believes that its proprietary nicotine substitute, Metatine™, in the SBX product line, now positions the Company to capture very significant future sales and market share in the vapor products marketplace.

• SBX provides adult consumers with the same satisfaction that typical nicotine disposables provide, but without nicotine. Currently available in ten award-winning flavors, SBX is most commonly described as "GREAT TASTING."

• SBX Disposables provide significantly more vape, and surprisingly better taste, than market-leading disposables. With a 20ml capacity, SBX offers 25,000 uniquely satisfying puffs and features three power modes with a brilliant LED display.

• Because Metatine is not made of, or derived from tobacco, and because Metatine does not consist of, or contain nicotine from any source, SBX is not subject to FDA PMTA requirements and is LEGAL across most of the United States.

Our market research indicates that adult consumers overwhelmingly prefer "flavored" vapor products over plain tobacco products and are highly receptive to nicotine substitute products that offer the same vaping experience as that provided by conventional nicotine vapor products. SBX Disposables feature Charlie's award-winning flavors (preferred over plain tobacco vapor by more than 80% of adult consumers)!

SBX Beats Juul… 15:1

In a Company-sponsored focus group survey of adult consumers who vape, Charlie's SBX Disposables were overwhelmingly preferred over Juul tobacco-flavored vapes. Of 306 survey participants, 287 preferred SBX over Juul. "Compared to Juul SBX provides many MORE FLAVOR options, UNBEATABLE TAX ADVANTAGES, and THOUSANDS MORE PUFFS!"

SBX is a registered trademark of Charlie's Holdings, Inc. Juul is a registered trademark of its respective owner and is not affiliated in any way with either SBX or Charlie's Holdings, Inc.

Following up on encouraging early sales, we are currently test marketing SBX in mass market convenience chains. If one or more of these tests prove successful, regional and national rollouts could prove transformational for Charlie's.

The Company continues to develop intellectual property around, and to seek strategic partnerships for, technologies designed to prevent youth access to nicotine vapor products. Edward Carmines, Ph.D., a member of Charlie's Board of Directors and an accomplished scientist and regulatory affairs expert, is spearheading Charlie's development of patented "age-gating technology" for both Charlie's and potential licensees of the Company. Currently, there is a need for age-gated product technologies that can satisfy or accommodate concerns the FDA has related to under-age youth access in the ENDS market. We believe age-gating is both a responsible business practice as well as a potential future competitive advantage for Charlie's. If our age-gated e-cigarettes-in-development are recognized as "products of merit" by the FDA, Charlie's e-cigarettes could emerge among the select minority of flavored nicotine disposables able to be sold legally in the $8 billion U.S. vapor products market.

In order to further mitigate FDA regulatory risk in the domestic market and to capture what management continues to believe is a significant commercial opportunity, we have dedicated additional resources to efforts focused on growing our market share internationally. Presently, approximately 10% of our vapor product sales come from the international market. We are well-positioned to increase sales in countries where we already have presence and to capture new business in several additional overseas markets.

We foresee a very important milestone/catalyst for Charlie's

When Charlie's is able to meet the initial listing standards of one or more national securities exchanges, it is our intention to uplist. We believe this achievement will significantly improve our capital markets appeal to a broader range of investors, increase our liquidity, and ultimately, will result in a higher market cap for the Company. In the near term, we believe that success in EITHER: monetizing the Company's PMTA-submitted PACHA synthetic nicotine products, OR growing SBX sales and distribution through chain convenience stores in select markets across the United States will enable us to meet substantially all the minimum requirements for both the Nasdaq and the NYSE American exchanges.

Corporate Responsibility: A commitment to doing well... by doing good

Through all of the Company's commercial endeavors, Charlie's operates with a steadfast commitment to always doing the right thing. For our customers, for our industry partners and employees, and for our shareholders. We endeavor to provide adult smokers with better alternatives to cigarettes and we are committed to regulatory compliance and youth access prevention. We pledge to continue to develop great products, to market all Charlie's products responsibly, and to demonstrate that Charlie's nicotine containing products are "appropriate for the protection of public health," as required by the FDA.

On behalf of the Board of Directors and the Charlie's Management Team, thank you for being a part of our family of shareholders. We look forward to sharing exciting Company developments in the weeks and months to come.

Sincerely,

About Charlie's Holdings, Inc.

Charlie's Holdings, Inc. (OTCQB:CHUC) is an industry leader in the premium vapor products space. The Company's products are sold around the world to select distributors, specialty retailers, and third-party online resellers through subsidiary company Charlie's Chalk Dust, LLC has developed an extensive portfolio of brand styles, flavor profiles, and innovative product formats.

For additional information, please visit Charlie's corporate website at: Chuc.com and the Company's branded online websites: sbxvape.com, CharliesChalkDust.com, enjoypachamama.com, and Pacha.co.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding the Company's overall business, existing and anticipated markets and expectations regarding future sales and expenses. Words such as "expect," "anticipate," "should," "believe," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "could," "intend," variations of these terms or the negative of these terms, and similar expressions, are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the Company's control. The Company's actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to: the Company's ongoing ability to quote its shares on the OTCQB; whether the Company will meet the requirements to up-list to a national securities exchange in the future; the Company's ability to successfully increase sales and enter new markets; whether the Company's PMTA's for its nicotine-containing products will be authorized by the FDA, and the FDA's decisions with respect to the Company's future PMTA's for nicotine products; the Company's ability to manufacture and produce products for its customers; the Company's ability to formulate new products; the acceptance of existing and future products; the complexity, expense and time associated with compliance with government rules and regulations affecting nicotine, synthetic nicotine, products containing nicotine substitutes, and products containing cannabidiol; litigation risks from the use of the Company's products; risks of government regulations; the impact of competitive products; and the Company's ability to maintain and enhance its brands, as well as other risk factors included in the Company's most recent quarterly report on Form 10-Q, annual report on Form 10-K, and other SEC filings. These forward-looking statements are made as of the date of this press release and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in its expectations.

Investors Contact:

IR@charliesholdings.com
Phone: 949-570-0691

SOURCE: Charlie's Holdings, Inc.