Charlie's Holdings Reports Revenue Growth of 34% to $5.2 Million and Operating Income of $0.4 Million for Third Quarter 2021

Rhea-AI Summary

Charlie's Holdings, Inc. (OTCQB:CHUC) reported its Q3 2021 financial results, showcasing a 34% increase in revenue to $5.2 million compared to Q3 2020. The company's gross profit rose 31% to $2.9 million, while operating income improved significantly to $0.4 million, reversing a loss of $0.9 million last year. Net income surged to $3.1 million, up from a loss of $6.8 million, aided by a gain in fair value of derivative liabilities. Management highlighted ongoing progress towards uplisting and confidence in PMTA submissions.

Positive

• Revenue rose 34% to $5.2 million.
• Gross profit increased 31% to $2.9 million.
• Operating income improved to $0.4 million from a loss of $0.9 million.
• Net income rose to $3.1 million from a loss of $6.8 million.
• Successful uplisting to OTCQB Venture Market.

Negative

• Gross margin decreased to 55.7% from 57.2% due to a higher proportion of lower-margin products.
• Net income included a $2.7 million gain in fair value of derivative warrant liabilities.

COSTA MESA, CA / ACCESSWIRE / November 15, 2021 / Charlie's Holdings, Inc. (OTCQB:CHUC) ("Charlie's" or the "Company"), an industry leader in the premium, nicotine-based, e-cigarette space, today announced the Company's financial results for the third quarter ending September 30, 2021. The Company reported an increase in revenue, gross profit and operating income as compared to the third quarter of 2020.

Key Financial Highlights for Q3 2021 (compared with Q3 2020)

• Revenue increased 34% to $5.2 million
• Gross profit increased 31% to $2.9 million
• Operating income improved by $1.3 million to $0.4 million
• Net income improved by $9.9 million to $3.1 million

Key Business Highlights during and subsequent to Q3 2021

• The Company announced Board changes in preparation for its uplist to a national securities exchange
• Charlie's best-selling e-liquids are in the select remaining PMTA submissions to the FDA that are still viable
• The Company uplisted successfully to OTCQB Venture Market

Charlie's Best-Selling E-Liquids are in the Select Remaining PMTA Submissions to the FDA that are Still Viable

As of this date, other companies have received hundreds of FDA "Marketing Denial Orders" for more than one million non-tobacco flavored electronic nicotine delivery system products, and "Refuse-to-File" letters for approximately 4.5 million other products. Charlie's PMTA's cost more than $5 million and are among the most comprehensive PMTA's in the entire industry. The Company has publicly expressed its commitment to full regulatory compliance and youth access prevention and believes its submissions to the FDA will be recognized as both distinguished and suitable for approval.

PACHAMAMA Disposables™ - For Adult Smokers Who Seek an Alternative to Cigarettes

Charlie's has also developed an extensive portfolio of synthetic nicotine brand styles, flavor profiles, and innovative product formats that are not currently subject to FDA review and that currently represent Charlie's most important, fastest-growing product category. Containing 100% tobacco-free nicotine, Pachamama Disposables™ represent a $100+ million market opportunity for Charlie's and are expected to generate the majority of the Company's near-term sales.

Management Commentary

"Charlie's has had a very productive and rewarding year thus far, as we returned to 20-30% revenue growth and operating profitability," reported Matt Montesano, Charlie's Holdings, Inc. Chief Financial Officer. "In recent weeks, our revenue growth has accelerated even more and our balance sheet continues to improve, putting us in a much better financial position."

Ryan Stump, Chief Operating Officer, stated, "we remain highly confident in Charlie's PMTA submissions. We believe our extraordinary efforts and investments over the past several years set Charlie's PMTA apart from our peers and have put us in the best possible position for success with the FDA. We are pleased to have entered the FDA's Substantive Review phase and, if the PMTA is approved, we look forward to Charlie's best-selling e-liquids being designated ‘appropriate for the protection of public health' through the all-important PMTA process."

Henry Sicignano, Charlie's President, commented, "in combination with our positive business momentum and a strengthened balance sheet, the important Board changes that Charlie's made this quarter represent significant progress toward our goal of uplisting to a national securities exchange. We look forward to reporting our progress along the way and to cementing our position in the market as America's #1 premium, vapor products company!"

Financial Results for the Three Months Ended September 30, 2021:

• Revenue: For the three months ended September 30, 2021, revenue was $5.2 million, an increase of $1.3 million, or 34%, compared with $3.9 million for the three months ended September 30, 2020. This increase was primarily due to nicotine-based vapor product sales and the launch of Pachamama Disposables, Charlie's first-ever entrant into the rapidly expanding U.S. disposable e-cigarette market.
• Gross Profit: For the three months ended September 30, 2021, gross profit was $2.9 million, an increase of $0.7 million, or 31%, compared with $2.2 million for the three months ended September 30, 2020. The resulting gross margin was 55.7%, compared with 57.2% for the same quarter last year. The decrease in gross margin is primarily due to an evolving sales mix that includes a greater percentage of the Company's Pachamama Disposable products, which carry a lower margin per unit.
• Total Operating Expenses: For the three months ended September 30, 2021, total operating expenses, including general and administrative, sales and marketing and research and development costs, were $2.5 million, a decrease of $0.6 million, or 20%, compared with $3.1 million for the same quarter last year. Operating expenses as a percentage of revenue decreased to 48% from 81% for the quarter just ended, reflecting the Company's focus on increasing revenue, reducing expenses, and performing more efficiently. Management believes this ratio will decrease going forward as revenues continue to grow at a higher rate than operating expenses.
• Operating Income: For the three months ended September 30, 2021, operating income was $0.4 million, an improvement of $1.3 million, compared with an operating loss of $0.9 million for the same quarter last year.
• Net Income: For the three months ended September 30, 2021, net income was $3.1 million, compared with a net loss of $6.8 million, for the three months ended September 30, 2020. Of note, net income for the three months ended September 30, 2021 included a $2.7 million gain in fair value of derivative warrant liabilities.
• EPS: For the three months ended September 30, 2021, diluted earnings per share was $0.00, compared with a net loss per share of ($0.04), for the three months ended September 30, 2020.
• Cash: Cash and cash equivalents totaled $1.3 million as of September 30, 2021.

Financial Results for the Nine Months Ended September 30, 2021:

• Revenue: For the nine months ended September 30, 2021, revenue was $15.0 million, an increase of $2.6 million, or 21%, compared with $12.5 million for the same period last year.
• Gross Profit: For the nine months ended September 30, 2021, gross profit was $8.0 million, an increase of $0.9 million, or 12%, compared with $7.1 million for the same period last year. The resulting gross margin was 53.1%, compared with 57.0% for the same period last year. The decrease in gross margin is primarily due to a an evolving sales mix that includes a greater percentage of the Company's Pachamama Disposable products, which carry a lower margin per unit.
• Total Operating Expenses: For the nine months ended September 30, 2021, total operating expenses, including general and administrative, sales and marketing and research and development costs, were $8.0 million, a decrease of $5.1 million, or 39%, compared with $13.1 million for the same period last year. Operating expenses as a percentage of revenue decreased to 53% from 105% for the periods compared. This was primarily due to costs incurred during 2020 associated with the Company's PMTA submissions to the FDA as well as comparably higher non-cash stock-based compensation.
• Operating Loss: For the nine months ended September 30, 2021, operating loss was $0.0 million, an improvement of $6.0 million, compared with an operating loss of $6.0 million for the same period last year. Of note, certain non-cash general and administrative expenses that contributed to the loss from operations including a $0.6 million expense related to stock-based compensation.
• Net Income: For the nine months ended September 30, 2021, net income was $2.7 million, compared with net loss of $11.4 million for the same period last year. Of note, net income for the nine months ended September 30, 2021 included a $1.9 million gain in fair value of derivative liabilities and $0.9 million gain on debt extinguishment.
• EPS: For the nine months ended September 30, 2021, diluted earnings per share was $0.01, compared with a net loss per share of ($0.06), for the nine months ended September 30, 2020.

About Charlie's Holdings, Inc.

Charlie's Holdings, Inc. (OTCQB:CHUC) is an industry leader in the premium, nicotine-based, 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 our corporate website at: CharliesHoldings.com and our branded online websites: CharliesChalkDust.com and PachamamaCBD.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 onto 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 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 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.

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FAQ

What were Charlie's Holdings, Inc. revenue figures for Q3 2021?

Charlie's Holdings reported revenue of $5.2 million for Q3 2021.

How much did Charlie's Holdings net income improve in Q3 2021?

Net income improved to $3.1 million in Q3 2021, up from a net loss of $6.8 million in Q3 2020.

What is the stock symbol for Charlie's Holdings, Inc.?

Charlie's Holdings is traded under the stock symbol CHUC.

What were the key financial results for Charlie's Holdings for the nine months ended September 30, 2021?

Total revenue for the nine months ended September 30, 2021, was $15 million, up 21% year-over-year.

What are Charlie's Holdings plans regarding PMTA submissions?

The company is confident in its PMTA submissions to the FDA and has entered the Substantive Review phase.