Charlie’s Holdings Reports First Quarter 2024 Results

Rhea-AI Summary

Charlie's Holdings (OTCQB: CHUC) reported its Q1 2024 financial results, showing a 24% revenue decrease to $3.1 million compared to Q1 2023. Despite this, gross profit increased by 6% to $0.9 million, and operating expenses decreased by 22% to $1.9 million. This led to a reduction in operating loss by 38% to $0.9 million, and net loss decreased by 25% to $1.0 million. Key initiatives include the development and launch of the SPREE BAR product line, using the new Metatine nicotine substitute. The company is focusing on increasing market awareness and preparing for further product launches in the second half of 2024.

Positive

• Gross profit increased by 6% to $0.9 million.
• Operating expenses decreased by 22% to $1.9 million.
• Operating loss decreased by 38% to $0.9 million.
• Net loss decreased by 25% to $1.0 million.
• SPREE BAR with Metatine is not subject to FDA premarket tobacco application review.
• Development and launch of SPREE BAR product line and Metatine-based e-liquids.
• Potential for significant market share in the vapor products marketplace.
• Preparation for customer education campaigns and commercial launch in the second half of 2024.

Negative

• Revenue decreased by 24% to $3.1 million.
• Sales of nicotine-based vapor products declined by $0.7 million.
• Sales of hemp-derived products decreased by $0.3 million.
• First half of 2024 not profitable.
• Increased competition from low-priced Chinese products.
• Uncertainty surrounding FDA's marketing denial orders and refuse-to-file designations.

Increasing Awareness and Market Share of SPREE BAR™ - with Proprietary Metatine™ Inside - Throughout 2024

COSTA MESA, CA / ACCESSWIRE / May 20, 2024 / 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 three months ended March 31, 2024, and provided an update on recent business highlights.

Key Financial Highlights for Q1 2024 (compared with Q1 2023)

• Revenue decreased 24% to $3.1 million
• Gross profit increased 6% to $0.9 million
• Operating expenses decreased 22% to $1.9 million
• Operating loss decreased 38% to $0.9 million
• Net loss decreased 25% to $1.0 million

Recent Business Highlights

• Developed, tested, and trademarked Metatine nicotine substitute alkaloid; launched SPREE BAR disposable pod system product line.
• Initiated "Metatine awareness campaign" to educate the trade and adult consumers in select markets across the United States about Metatine's key selling points; presented keynote session "Creating Great Products in an Increasingly Regulated Market" at the 2024 Total Products Exposition in Las Vegas.
• Initiated development efforts on (i) a second-generation SPREE BAR disposable device, and (ii) Metatine-based e-liquids. Both products are slated for launch in the summer of 2024.

Management Commentary

Ryan Stump, Charlie's Chief Operating Officer, explained, "In the first quarter of 2024 we invested working capital and the bulk of management's attention to the introduction and test marketing of our SPREE BAR line of nicotine substitute vapor products. We believe that the market for alternative alkaloid products, such as SPREE BAR, offers an enormous opportunity for growth. As market awareness increases, and as we continue to test and roll-out the SPREE BAR product line, we believe nicotine substitute products will become the single largest, most important commercial opportunity in Charlie's history."

"During the first quarter of 2024, we continued to significantly reduce our cash burn and deployment of resources toward the development and test marketing of the SPREE BAR product line," stated Matt Montesano, Charlie's Holdings, Inc. Interim Chief Financial Officer. "We are preparing for customer education campaigns and the commercial launch of Charlie's nicotine substitute products ̶ in disposable vape format ̶ in the second half of 2024."

Henry Sicignano III, Charlie's President, commented, "With the development of Metatine and through the launch of SPREE BAR, we have positioned Charlie's for a return to growth in the second half of 2024. Though we are disappointed that the first half of the year will not be profitable, we believe that sales of the SPREE BAR line, combined with increased sales of our Pacha disposables - which remain in substantive review with the FDA - could position Charlie's for an uplist to a national securities exchange. It is our plan to do everything possible to affect these achievements."

SPREE BAR

During the first quarter of 2024 the Company continued its initial launch/test marketing phase of new disposable vape products, under the "SPREE BAR" brand. The Company and its attorneys believe SPREE BAR products with Metatine™ inside, are not subject to FDA Premarket Tobacco Application ("PMTA") review. In short, the Company's SPREE BAR vape liquids are not made or derived from tobacco, nor do they contain nicotine from any source. Based on the information provided by the Company's contracted chemical suppliers and its consultants, the proprietary Metatine alkaloid (patented in the United States and in China by the Company's chemical supplier) does not meet the definition of nicotine set forth in 21 U.S.C. § 387(12) and therefore Charlie's products that contain Metatine as their active ingredient are not subject to regulation as "tobacco products" under 21 U.S.C. § 321(rr).

In late 2023 and in Q1 2024 the Company began shipping its new Metatine-based, SPREE BAR disposable vape products to master distributors. Charlie's believes that its transition to Metatine-based products will give the Company an extraordinary opportunity to capture significant sales and market share in the vapor products marketplace in late 2024 and beyond.

• SPREE BAR, with Metatine, is indistinguishable from a conventional disposable vape; SPREE BAR provides adult consumers with the same satisfaction that typical nicotine disposables provide, but without nicotine.
• Because Metatine is not made or derived from tobacco, and because Metatine does not consist of or contain nicotine from any source, SPREE BAR is not subject to FDA Pre-Market Tobacco Application requirements.

PMTA Update

As of March 31, 2024, Charlie's 2020 PMTA remains among the select minority of applications submitted to the FDA for a tobacco-derived nicotine Electronic Nicotine Delivery System ("ENDS") product that has not received a Marketing Denial Order ("MDO") or Refuse-to-File designation.

Charlie's filed new PMTAs, for its synthetic Pacha products on May 13, 2022. On November 3, 2022 FDA accepted for scientific review certain of the Company's PMTAs for synthetic nicotine products and, on November 4, 2022, FDA refused to accept certain other PMTAs for these products. The Company submitted an administrative appeal with the FDA regarding its refusal to accept certain of the PMTAs. The administrative appeal was granted on October 30, 2023 and the Pacha products were accepted to move forward in the PMTA review process. Charlie's continues to sell the affected synthetic nicotine products while the PMTA review process continues.

Financial Results for the Three Months Ended March 31, 2024:

• Revenue: For the three months ended March 31, 2024, revenue was $3.1 million, a decrease of $1.0 million, or 24%, compared with $4.0 million for the three months ended March 31, 2023. The decrease in revenue was primarily due to a $0.7 million decrease in Charlie's nicotine-based vapor product sales and a $0.3 million decrease in hemp-derived products.

The decrease in Charlie's nicotine-based vapor product sales was related to a decline in sales of the Pacha Disposable line as well as periodic, voluntary stockouts of the Company's e-liquid products. The Pacha Disposable line has faced challenges including increased competition from low-priced Chinese products, the requirement for synthetic nicotine products to obtain marketing authorization from the FDA, and continued uncertainty surrounding the FDA's issuance of MDO's and Refuse-to-File designations. The launch of the Company's SPREE BAR line of nicotine substitute vapor products required enhanced focus and resource allocation in order to support sales and marketing efforts, which ultimately affected the sales performance of other product categories.

The decrease in sales for Charlie's hemp-derived products business during the quarter was directly related to the diversion of working capital and other resources towards the ramp up of our SPREE BAR line of nicotine substitute vapor products.

• Gross Profit: For the three months ended March 31, 2024, gross profit was $0.9 million, an increase of $0.1 million, or 6%, compared with $0.9 million for the three months ended March 31, 2023. The resulting gross margin for the three months ended March 31, 2024 was 30.9%, compared with 22.1% for the three months ended March 31, 2023. Gross margin increased compared to last year due to a reduced inventory obsolescence expense related to both nicotine and hemp-derived products.
• Total Operating Expenses: For the three months ended March 31, 2024, total operating expenses, including general and administrative, sales and marketing and research and development costs, were $1.9 million, a decrease of $0.5 million, or 22%, compared with $2.4 million for the three months ended March 31, 2023.
• Operating Loss: For the three months ended March 31, 2024, operating loss was $0.9 million, a decrease of $0.6 million, or 38%, compared with $1.5 million for the three months ended March 31, 2023.
• Net Loss: For the three months ended March 31, 2024, net loss was $1.0 million, a decrease of $0.3 million, or 25%, compared with $1.4 million for the three months ended March 31, 2023.
• EPS: For the three months ended March 31, 2024, diluted earnings loss per share was ($0.00), compared with diluted earnings loss per share of ($0.01), for the three months ended March 31, 2023.

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 companies Charlie's Chalk Dust, LLC and Don Polly, LLC. Charlie's Chalk Dust, LLC has developed an extensive portfolio of brand styles, flavor profiles, and innovative product formats. Don Polly, LLC creates innovative hemp-derived products and brands.

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

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 uplist 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 will be approved by the FDA, and the FDA's decisions with respect to the Company's future PMTA's; 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, and products containing cannabidiol; litigation risks from the use of the Company's products; risks of government regulations, including recent regulation of synthetic nicotine; the impact of competitive products; and the Company's ability to maintain and enhance its brand, 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 were 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.

View the original press release on accesswire.com

FAQ

What were Charlie's Holdings' Q1 2024 financial results?

Charlie's Holdings reported a 24% decrease in revenue to $3.1 million, a 6% increase in gross profit to $0.9 million, and a 38% decrease in operating loss to $0.9 million for Q1 2024.

What is the significance of the SPREE BAR product line for Charlie's Holdings?

The SPREE BAR product line, featuring the Metatine nicotine substitute, aims to capture significant market share in the vapor products market, offering a potential for growth in the second half of 2024.

How did the development of SPREE BAR affect Charlie's Holdings' other product sales?

The focus and resource allocation towards SPREE BAR's development and marketing led to a decrease in sales of Charlie's nicotine-based vapor products and hemp-derived products in Q1 2024.

Is the Metatine-based SPREE BAR subject to FDA review?

No, the SPREE BAR with Metatine is not subject to FDA premarket tobacco application review because it is not made or derived from tobacco and does not contain nicotine from any source.

What are Charlie's Holdings' plans for the second half of 2024?

Charlie's Holdings plans to launch customer education campaigns and commercially launch the SPREE BAR product line and Metatine-based e-liquids, aiming for a return to growth.