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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to help the reader understand the results of operations and financial condition of the Company. The discussion is provided as a supplement to, and should be read in conjunction with our historical consolidated financial statements and accompanying notes, which are included elsewhere in this Annual Report on Form 10-K and incorporated herein by reference. In addition, this discussion includes forward-looking statements subject to risks and uncertainties that may result in actual results differing from statements we make. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause actual results to differ include those risks and uncertainties discussed in Item 1A “Risk Factors.”

The following discussion relates to the audited financial statements of Turning Point Brands, Inc., included elsewhere in this Annual Report on Form 10-K. In this discussion, unless the context requires otherwise, references to “the Company”“we,”“our,” or “us” refer to Turning Point Brands, Inc., and its consolidated subsidiaries. References to “TPB” refer to Turning Point Brands, Inc., without any of its subsidiaries. We were incorporated in 2004 under the name North Atlantic Holding Company, Inc. On November 4, 2015, we changed our name to Turning Point Brands, Inc. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation.

Overview

Turning Point Brands, Inc. is a leading manufacturer, marketer and distributor of branded consumer products. We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag® and Stoker’s® and our next-generation products to fulfill evolving consumer preferences. Among other markets, we compete in the alternative smoking accessories and Other Tobacco Products (“OTP”) industries. The alternative smoking accessories market is a dynamic market experiencing robust secular growth driven by cannabinoid legalization in the U.S. and Canada and positively evolving consumer perception and acceptance in North America. The OTP industry, which consists of non-cigarette tobacco products, exhibited flat consumer unit annualized growth during the full year period ended 2025 as reported by MSAi a third-party analytics and information company. Our segments are led by our core proprietary and iconic brands: Zig-Zag® in the Zig-Zag products segment and Stoker’s® along with FRE®, Beech-Nut® and Trophy® in the Stoker’s products segment. Our businesses generate solid cash flow which we use to invest in our business, finance acquisitions, increase brand support, expand our distribution infrastructure, and strengthen our capital position. We currently ship to approximately 900 distributors with an additional 600 secondary, indirect wholesalers in the U.S. that carry and sell our products. Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions and acquisitions while concurrently improving operational efficiency.

We believe there are meaningful opportunities to expand through investing in organic growth via acquisitions and joint ventures across all product categories. Our products are currently available in approximately 220,000 retail locations in North America. Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.

Recent Developments

As a result of the U.S. trade policies beginning in 2025, we incurred tariff charges on certain products we import from overseas manufacturers. Certain of these tariffs were imposed by the administration utilizing the International Emergency Economic Powers Act(IEEPA). In February 2026, the United States Supreme Court held that the International Emergency Economic Powers Act does not authorize the president to impose tariffs and the government immediately ceased collecting such tariffs. While this ruling prohibits the imposition of tariffs under IEEPA it does not provide for a refund mechanism, and we cannot assure as to when or how much of the tariffs the Company previously paid under IEEPA will be refunded.

In addition, the ruling does not prohibit the imposition of tariffs pursuant to other statutes. For instance, in response to the ruling the administration imposed a blanket 10% on all products importers pursuant to section 122 of the Trade Act of 1974.

Products

We operate in two segments: Zig-Zag products and Stoker’s products segments. In our Zig-Zag products segment, we principally market and distribute (i) rolling papers, tubes, and related products; (ii) finished cigars and make-your-own (“MYO”) cigar wraps; and (iii) lighters and other accessories. In addition, we have a majority stake in Turning Point Brands Canada which is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories. In our Stoker’s products segment, we (i) manufacture and market moist snuff tobacco (“MST”) and (ii) contract for and market FRE®, our modern oral product; and (iii) contract for and market loose-leaf chewing tobacco products.

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Our portfolio of brands includes some of the most widely recognized names in the alternative smoking accessories and OTP industries such as Zig-Zag® and Stoker’s®. The following table sets forth the market share and category rank of our core products and demonstrates their industry positions within measured distribution channels:

Brand Product TPB Segment Market Share(1) Category Rank(1)

Zig-Zag® Cigarette Papers Zig-Zag Products 32.7 % #1 premium, #1 overall

Zig-Zag® MYO Cigar Wraps Zig-Zag Products 34.3 % #1 overall

Stoker’s® Moist Snuff Stoker’s Products 8.1 % #2 discount, #5 overall

Stoker’s® Chewing Tobacco Stoker’s Products 34.1 % #1 discount, #1 overall

We subscribe to a sales tracking system from MSAi that records all OTP product shipments (ours as well as those of our competitors) from approximately 600 wholesalers to over 265,000 traditional retail stores in the U.S. This system enables us to understand individual product share and volume trends across multiple categories down to the individual retail store level, allowing us to allocate field salesforce coverage to the highest opportunity stores. Our sales and marketing group of approximately 257 professionals utilize the MSAi system to efficiently target markets and sales channels with the highest sales potential.

Our Zig-Zag products and Stoker’s products segments primarily generate revenues from the sale of our products to wholesale distributors who, in turn, resell the products to retail operations. Our net sales, which include federal excise taxes, consist of gross sales net of cash discounts, returns, and selling and marketing allowances.

We rely on long-standing relationships with high-quality, established manufacturers to provide the majority of our produced products. Approximately 75% of our production, as measured by net sales, is outsourced to suppliers. The remaining production consists primarily of our moist snuff tobacco operations located in Dresden, Tennessee, and Louisville, Kentucky. Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel.

Key Factors Affecting Our Results of Operations

We consider the following to be the key factors affecting our results of operations:

• Our ability to further penetrate markets with our existing products;

• Decreasing interest in some tobacco products among consumers;

• Competition;

• Price sensitivity in our end-markets;

• Marketing and promotional initiatives, which cause variability in our results;

• Labor and production costs;

• Changes to U.S. trade policies, especially related to import tariffs;

• Counterfeit and other illegal products in our end-markets;

• Currency fluctuations;

• Our ability to identify attractive acquisition opportunities; and

• Our ability to successfully integrate acquisitions.

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Results of Operations

Summary

The table and discussion set forth below relates to our consolidated results of continuing operations for the years ended:

(in thousands) For the years ended December 31,

Consolidated Results of Operations Data:

Net sales

Gross profit

Other operating income - (1,674 ) -100.0 %

Operating income

(Income) losses from equity method investment 1,159 (75 ) -1645.3 %

Loss on extinguishment of debt 1,235 - 100.0 %

Income from continuing operations before income taxes 83,143 64,956 28.0 %

Consolidated net income from continuing operations 68,152 48,027 41.9 %

Net income attributable to non-controlling interest 9,987 701 1324.7 %

Comparison of Year Ended December 31, 2025, to Year Ended December 31, 2024

Net Sales: For the year ended December 31, 2025, consolidated net sales increased $102.4 million, or 28.4%, compared to the prior year period, primarily driven by an increase in net sales in the Stoker's segment mainly relating to modern oral growth.

For the year ended December 31, 2025, net sales in the Zig-Zag products segment decreased $13.9 million, or 7.2%, compared to the prior year period. The decrease in net sales was driven primarily by $15.2 million decline in U.S. papers, wraps, as well as $1.7 million decline in cigars, which was anticipated with expected opportunity costs associated with our focus on oral expansion. This decline was partially offset by $2.9 million of growth in our Canadian business.

For the year ended December 31, 2025, net sales in the Stoker’s products segment increased $116.3 million, or 69.1%, compared to the prior year period. The increase in net sales was driven primarily by $107.7 million of growth in modern oral products while the remaining growth is attributable to MST and loose-leaf chewing tobacco.

Gross Profit: For the year ended December 31, 2025, consolidated gross profit increased $62.7 million, or 31.1%, compared to the prior year period. Gross profit as a percentage of net sales increased to 57.1% of net sales for the year ended December 31, 2025, from 55.9% of net sales for the year ended December 31, 2024. The overall increase in gross profit margin was driven primarily by improved margin contribution from modern oral products and MST in the Stoker’s products segment.

For the year ended December 31, 2025, gross profit in the Zig-Zag products segment decreased $10.7 million, or 10.0%, compared to the prior year period. Gross profit as a percentage of net sales decreased to 53.7% of net sales for the year ended December 31, 2025, from 55.4% of net sales for the year ended December 31, 2024, driven primarily by Zig-Zag cigar wraps margins due to imposed tariffs and a shift in product mix with an increase in products with lower margins in the segment.

For the year ended December 31, 2025, gross profit in the Stoker’s products segment increased $73.4 million, or 77.3%, compared to the prior year period. Gross profit as a percentage of net sales increased to 59.2% of net sales for the year ended December 31, 2025 from 56.4% of net sales for the year ended December 31, 2024, driven primarily by the growth in net sales of modern oral products generating higher margin contributions than the previous year.

Selling, General and Administrative Expenses: For the year ended December 31, 2025, selling, general and administrative expenses increased $46.6 million, or 38.1%, compared to the prior year period primarily due to increased shipping and selling costs related to the increase in modern oral sales in the period compared to prior period. Selling, general and administrative expenses for the year ended December 31, 2025, included $6.9 million of stock options, restricted stock and incentives expense, $1.2 million of expense related to corporate restructuring, $4.8 million of expense related to PMTA, a $0.8 million increase in non-recurring outbound freight costs related to our ERP transition, $0.9 million of legal expenses incurred in connection with litigation related to an insurance claim for the tobacco damaged in a tornado, $2.0 million related to transaction costs and $0.2 million of expense related to the implementation of the new ERP and CRM systems. Selling, general and administrative expenses for the year ended December 31, 2024, included $7.2 million of stock options, restricted stock and incentives expense, $4.6 million of expense related to corporate restructuring, $3.6 million of expense related to PMTA, $2.1 million related to transaction costs and $0.9 million of expense related to the implementation of the new ERP and CRM systems.

Other Operating Income: For the year ended December 31, 2025, other operating income decreased $1.7 million compared to the prior year period due to a federal excise tax refund of $1.7 million received in 2024.

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Operating Income: For the year ended December 31, 2025, consolidated operating income increased $14.5 million, or 17.9%, compared to the prior year period. Operating income as a percentage of net sales decreased to 20.6% of net sales for the year ended December 31, 2025 from 22.4% of net sales for the year ended December 31, 2024, primarily due to an increase in unallocated corporate expenses.

For the year ended December 31, 2025, operating income in the Zig-Zag products segment decreased $7.8 million, or 11.6%, compared to the prior year period. Operating income as a percentage of net sales decreased to 33.0% of net sales for the year ended December 31, 2025 from 34.7% of net sales for the year ended December 31, 2024, primarily due to a federal excise tax refund of $1.7 million received in 2024 which increased operating income which did not recur in 2025.

For the year ended December 31, 2025, operating income in the Stoker’s products segment increased $40.8 million, or 59.8%, compared to the prior year period. Operating income as a percentage of net sales decreased to 38.3% of net sales for the year December 31, 2025 from 40.6% of net sales for the year ended December 31, 2024, primarily from increased sales and marketing expenses for the segment relating to modern oral growth.

Included in consolidated operating income are costs of the Company which are not assigned to one of the two reportable segments and includes: (i) 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 (ii) costs related to the FDA premarket tobacco product application. For the year ended December 31, 2025, unallocated costs were $72.7 million compared to $54.1 million in the prior year period, an increase of $18.6 million or 34.3%, primarily driven by joint venture related expenses.

Other Income: For the year ended December 31, 2025, other income was $6.6 million stemming from a $5.5 million employee retention credit refund received and $1.8 million received for management fees in the current year. We recognized no other income in 2024.

Interest Expense, net: For the year ended December 31, 2025, interest expense, net increased $3.5 million compared to the prior year period as a result of the issuance of the 2032 Notes in February 2025 which bear interest at a higher rate and have a higher outstanding principal amount than the 2026 Notes which were repaid with proceeds from the issuance of the 2032 Notes partially offset by interest income generated by the employee retention credit received in the current year.

(Income) Losses from Equity Method Investment: For the year ended December 31, 2025, (income) losses from investments in equity method investments decreased $1.2 million compared to the prior year period as a result of a $5.5 million loss from GWO partially offset by $4.2 million of net income from its distribution business.

Investment (Income) Loss: For the year ended December 31, 2025, investment (income) loss increased to $1.1 million income compared to $2.0 million loss for the year ended December 31, 2024. The change is primarily the result of impairment charges recognized on our investment in Old Pal for $0.9 million for the year ended December 31, 2025 that were offset by gains on marketable available-for-sale securities of $1.4 million, compared to impairment charges recognized on our investments in Bomani for $1.8 million and Old Pal for $0.8 million for the year ended December 31, 2024.

Loss on Extinguishment of Debt: For the year ended December 31, 2025, loss on extinguishment of debt was $1.2 million as a result of the redemption of the 2026 Notes in February 2025. We had no loss on extinguishment of debt in 2024.

Income Tax Expense: The Company’s income tax expense was $15.0 million, or 18.0% of income from continuing operations before income taxes for the year ended December 31, 2025. The Company's income tax expense was $16.9 million, or 26.1% of income from continuing operations before income taxes for the year ended December 31, 2024. The decrease in tax rate compared to the prior year is due to the inclusion of permanent tax differences related to the Company's restricted stock units that were issued and stock options that were exercised in the year ended December 31, 2025.

Net Income Attributable to Non-Controlling Interest: Net income attributable to non-controlling interest was $10.0 million for the year ended December 31, 2025, compared to a net loss of $0.7 million for the year ended December 31, 2024. The increase in income from non-controlling interest compared to the prior year period is due to the consolidation of a joint venture starting in December 2024.

Net Income from Continuing Operations Attributable to Turning Point Brands, Inc.:Due to the factors described above, net income from continuing operations attributable to Turning Point Brands, Inc. for the years ended December 31, 2025 and 2024, was $58.2 million and $47.3 million, respectively.

Comparison of Year Ended December 31, 2024, to Year Ended December 31, 2023

For a discussion of the comparison of the year ended December 31, 2024 to the year ended December 31, 2023, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Loss from Discontinued Operations, net of tax

On January 2, 2025, the Company contributed 100% of its interest in SBB, the subsidiary that owned and operated the Company’s CDS segment, to GWO in exchange for 49% of the issued and outstanding GWO common stock on a fully-diluted basis. GWO is majority owned by Standard General, LP. The assets and liabilities associated with the CDS business were classified as held for sale as of December 31, 2024, and its financial results are classified as discontinued operations and reported separately for all periods presented herein. Upon meeting the criteria for held for sale classification, the Company recorded a non-cash charge of $8.8 million with an equivalent valuation allowance against net assets held for sale to reduce the carrying value of the disposal group to fair value.

Loss from discontinued operations, net of tax for the years ended December 31 are as follows:

(in thousands) For the years ended December 31,

Loss from discontinued operations, net of tax $ - $ (7,517 )

Comparison of Year Ended December 31, 2025, to Year Ended December 31, 2024

For the year ended December 31, 2025, net loss from discontinued operations was $0, compared to a loss of $7.5 million for the year ended December 31, 2024. This prior year loss related to operations that were classified as discontinued in 2024 and no such activity occurred in 2025.

Comparison of Year Ended December 31, 2024, to Year Ended December 31, 2023

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EBITDA and Adjusted EBITDA

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures including EBITDA and Adjusted EBITDA. We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA is used by management to compare our performance to that of prior periods for trend analyses and planning purposes and is presented to our Board of Directors. We believe that EBITDA and Adjusted EBITDA are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to operating performance. In addition, our debt instruments contain covenants which use Adjusted EBITDA calculations.

We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, and amortization. We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, amortization, other non-cash items, and other items we do not consider the ordinary course in our evaluation of ongoing operating performance noted in the reconciliation below. Among other items that we adjust Adjusted EBITDA for is FDA PMTA expense. The Company believes it is appropriate to adjust for this spend as the costs are incurred in connection with what it views as a non-traditional regulatory process that requires applications be submitted for covered products that are already on the market. As a result, Company’s management believes it is most appropriate to assess the performance of the Company’s business – the sale of its various products - without regard to these costs and believes that adjusting for these costs provides investors and the public markets with the most meaningful metrics to assess performance of the business.

Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. Adjusted EBITDA excludes significant expenses required to be recorded in our financial statements by U.S. GAAP and is subject to inherent limitations. Other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. The tables below provide reconciliations between net income and Adjusted EBITDA.

(in thousands) Years ended December 31,

Net income attributable to Turning Point Brands, Inc. $ 58,165 $ 39,809 $ 38,462

Loss from discontinued operations, net of tax - 7,517 285

Add:

Loss (Gain) on extinguishment of debt 1,235 - (1,664 )

Components of Adjusted EBITDA

Transactional expenses and strategic initiatives (d) 2,004 2,107 165

Non-recurring freight (e) 837 - -

Non-recurring legal (f) 941 - -

Mark-to-market gain on Canadian inter-company note (h) (513 ) 942 -

Gain on investment (j) (1,392 ) - -

ERC refund (k) (5,451 ) - -

Honorarium (l) 318 - -

Manufacturing start-up costs (m) 642 - -

Tariff adjustment (n) 1,991 - -

Legal settlement (p) - - (4,000 )

(d) Represents fees incurred for transaction expenses.

(i) Represents impairment of goodwill, intangible and investment assets.

(j) Represents gain on investments.

(l) Represents an honorarium gift included in other income, net.

(o) Represents a federal excise tax refund included in other operating income.

(p) Represents other income from litigation settlement.

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Liquidity and Capital Resources

Our principal uses for cash are working capital, debt service and capital expenditures and other growth initiatives. As of December 31, 2025, we had $222.8 million cash on hand and as of December 31, 2024 we had $46.2 million (excluding CDS segment cash of $2.8 million). As of December 31, 2025, we had up to $65.8 million of availability under the 2023 ABL Facility. After giving effect to the issuance of the 2032 Notes and redemption of the 2026 Notes in February 2025, our cash on hand would have been $90.2 million as of December 31, 2024, and borrowing availability under the ABL would have remained the same. We have no borrowings outstanding under our ABL as of December 31, 2025. Our Convertible Senior Notes matured on July 15, 2024, and were retired with cash.

Our adjusted working capital which we define as current assets less cash and current liabilities, increased $21.6 million compared to the prior year end. This amount excludes CDS segment assets and liabilities held for sale in 2024.

As of

(in thousands) December 31, December 31,

The increase in adjusted working capital is primarily a result of increased other current assets from inventory deposits relating to growth. For the years ended December 31, 2025 and 2024, we invested $13.5 million and $4.6 million, respectively, in capital expenditures. We had restricted assets of $29.9 million and $28.7 million as of December 31, 2025 and 2024, respectively. Restricted assets consist of escrow deposits under the MSA and insurance deposits. On the 25th anniversary of each annual deposit, we are entitled to receive reimbursement of the principal amount of escrow remaining for that year. See “Master Settlement Agreement” below for details.

Cash Flows from Continuing Operations

Our cash flows from continuing operations as reflected in the Consolidated Statements of Cash Flows are summarized as follows:

(in thousands) For the years ended December 31,

Cash provided by (used in)

Cash Flows from Operating Activities

For the year ended December 31, 2025, net cash provided by operating activities was $57.4 million, a decrease of $3.6 million compared to the prior year period. The decrease is primarily due to unfavorable changes of $27.9 million in working capital partially offset by an increase of $27.6 million in net income, net of non-cash items of $5.8 million. The primary drivers of non-cash items were $8.4 million increase in deferred tax expenses. $1.7 million increase in depreciation and amortization and $1.2 million increase in losses from equity method investments, partially offset by $1.2 million increase in noncash lease income and $3.2 million decrease in loss on investments.

Cash Flows from Investing Activities

For the year ended December 31, 2025, net cash used in investing activities was $31.7 million, an increase of $21.2 million compared to 2024, primarily due to $13.5 million in capital expenditures, including to build U.S. manufacturing for our modern oral brands, the net purchases of an additional $7.4 million in investments by our captive insurance subsidiary, the purchases of non-marketable equity securities of $2.8 million, and $8.0 million paid by TPB Canada for the option to purchase the distribution business.

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Cash Flows from Financing Activities

For the year ended December 31, 2025, net cash provided by financing activities was $148.3 million, an increase of $276.6 million compared to the prior year period, primarily due to a net increase in cash of $42.8 million related to the February 2025 issuance of the 2032 Notes, an increase of $11.0 million from Interchange subscription agreement proceeds, $97.5 million increase related to ATM Program proceeds, and $2.2 million related to stock compensation activity, as well as $5.1 million of common stock repurchases in the prior year period that did not repeat in 2025.

Long-Term Debt

Notes payable and long-term debt consisted of the following at December 31, 2025 and 2024, in order of preference:

December 31, December 31,

Less deferred financing costs (6,375 ) (1,396 )

2032 Notes

On February 19, 2025, we entered into an indenture relating to the issuance and sale of $300.0 million aggregate principal amount of its 7.625% Senior Secured Notes due 2032 (the “2032 Notes”), by and among the Company, the guarantors party thereto and GLAS Trust Company LLC, as trustee and notes collateral agent. The 2032 Notes incur interest at a rate of 7.625%, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025. Proceeds from the offering were approximately $293.0 million and were used to redeem the 2026 Notes and for general corporate purposes

The 2032 Notes are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by certain existing and future wholly-owned domestic restricted subsidiary of the Company (collectively, the “Guarantors” as defined in the indenture governing the 2032 Notes or the “2032 Notes Indenture”). The 2032 Notes and the related guarantees are secured by first-priority liens on substantially all of the existing and future assets of the Company and the Guarantors that do not secure the 2023 ABL Facility (as defined below), subject to certain exceptions. The 2032 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 the 2032 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 is not in default on its covenants; however, there are earnings and market capitalization requirements that if not met could limit the aggregate amount of quarterly dividends payable during a fiscal year. The 2032 Notes Indenture provides for customary events of default.

We incurred debt issuance costs attributable to the 2032 Notes of $7.3 million which are amortized to interest expense using the straight-line method over the expected life of the 2032 Notes.

2026 Notes

On February 11, 2021, we closed a private offering of $250.0 million aggregate principal amount of our 5.625% senior secured notes due 2026 (the “2026 Notes”). The 2026 Notes incurred interest at a rate of 5.625%. Interest on the 2026 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.We used the proceeds from the offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs and expenses and (iii) for general corporate purposes.

On February 20, 2025 (the “Redemption Date”), we used a portion of the proceeds from the issuance and sale of the 2032 Notes to redeem all $250.0 million of its outstanding 2026 Notes at a redemption price equal to 100% of the aggregate principal amount of the 2026 Notes, plus accrued and unpaid interest thereon to, but excluding the Redemption Date. Upon redemption of the 2026 Notes, the indenture governing the 2026 Notes was satisfied and discharged in accordance with its terms.

We incurred debt issuance costs attributable to the issuance of the 2026 Notes of $6.4 million, with the remaining $1.2 million written off to loss on debt extinguishment upon termination.

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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 (the “Collateral Agent”) and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature. In connection with the 2023 ABL Facility, certain existing inventory was contributed to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to customary exceptions) by all assets of the ABL Borrower.

The 2023 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 a first in first 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. The 2023 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 a first in first 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 the 2023 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 the first 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 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 the first 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.

Applicable Margin Applicable Margin

Level Historical Excess Availability for SOFR Loans or Base Rate Loans

The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four 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 for thirty (30) consecutive calendar days with the $9.4 million level automatically increased in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any accordion facility.

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The 2023 ABL Facility will mature on the earlier of (x) November 7, 2027 and (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) will not 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.

We have not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $2.3 million outstanding under the facility and has an available balance of $65.8 million based on the borrowing base as of December 31, 2025.

We incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.

Additional Information with Respect to our Unrestricted Subsidiaries

Under the terms of the 2032 Notes, the Company designated certain of its subsidiaries as “Unrestricted Subsidiaries”, including Interchange Partners LLC and Intrepid Brands, LLC. The Company is required under the terms of the indenture governing the 2032 Notes to present additional information that reflects the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company’s Unrestricted Subsidiaries as of and for the periods presented. This additional information for 2025 is presented below.

Income Statement for the year ended December 31, 2025:

Year Ended December 31,

Company and

Restricted Unrestricted

Subsidiaries Subsidiaries Consolidated

(Income) losses from equity method investment 1,268 (109 ) 1,159

Loss on extinguishment of debt 1,235 - 1,235

Net income attributable to non-controlling interest 759 9,228 9,987

Net income attributable to Turning Point Brands, Inc. $ 46,747 $ 11,418 $ 58,165

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Balance Sheet as of December 31, 2025:

Company and

Restricted Unrestricted

Subsidiaries Subsidiaries Eliminations Consolidated

ASSETS

Current assets:

Deferred financing costs, net 1,180 - - 1,180

Master Settlement Agreement (MSA) escrow deposits 29,887 - - 29,887

Investment in unrestricted subsidiaries - 11,069 (11,069 ) -

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Deferred income tax liabilities, net 8,289 - - 8,289

Commitments and contingencies

Stockholders’ equity:

Distribution Agreements

For a description of our material distribution agreements, see Item 1. “Business - Distribution and Supply Agreements.”

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Master Settlement Agreement

On November 23, 1998, the major U.S. cigarette manufacturers, Philip Morris USA, Inc., Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company and R.J. Reynolds Tobacco Company, entered into the MSA with attorneys general representing states that agreed to settle certain recovery actions (the “Settling States”). In order to be in compliance with the MSA and subsequent states’ statutes, we were required to fund an escrow account with each of the Settling States based on the number of cigarettes or cigarette equivalents (which is measured by pounds of MYO cigarette smoking tobacco) sold in such state. We discontinued our generic category of MYO in 2019 and ourZig-Zagbranded MYO cigarette smoking tobacco in 2017. Pending a change in MSA legislation, we have no remaining product lines covered by the MSA and will not be required to make future escrow deposits and, therefore, do not expect to accrue any loss contingencies subject to the MSA in the future.

The following table summarizes our escrow deposit balances (in thousands) by sales year as of:

Deposits as of December 31,

Off-Balance Sheet Arrangements

At December 31, 2025, we had no foreign currency contracts outstanding. During 2024, we executed various foreign exchange contracts for the purchase and sale of €3.6 million. At December 31, 2024, we had foreign currency contracts outstanding for the purchase and sale of €2.1 million. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2024.

Future Cash Requirements

The Company’s primary future cash requirements will be to fund operations, lease payments, debt service and capital expenditures. The Company’s contractual obligations primarily include long-term debt and lease obligations. For information regarding our long-term debt obligations and cash payment obligations thereunder, please see above and Note 14, “Notes Payable and Long-Term Debt” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. For information regarding our lease obligations and cash payment obligations thereunder, please see Note 17, “Lease Commitments” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

In 2025, we made no repurchases of our common stock. In 2024, we repurchased 154,945 shares of our common stock for a total cost of $5.1 million at an average price per share of $32.60, and have $200 million of authorization remaining under our Board approved repurchase program at December 31, 2025.

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Regulation and Legislation

While we are subject to several regulatory regimes and requirements, the following may meaningfully impact operations or resources:

Federal Regulation

Certain tobacco and nicotine products, cigarette papers, and cigarette tubes are subject to federal excise taxes. Any future increases in federal excise taxes on the Company’s products could have a material adverse effect on the results of operations or financial condition of the Company. The Company is unable to predict the likelihood of future increases in federal excise taxes. As of December 31, 2025, federal excise taxes are not assessed on certain novel nicotine products, including nicotine pouches, e-cigarettes and related products. Changes to these requirements could affect our results of operations.

State and Local Regulation

As of December 31, 2025, the states require excise tax payments on most of our products. These required taxes may increase over time or be expanded to cover additional product categories and may in some cases impact the consumer demand of the products. In addition, there are several local taxing jurisdictions requiring taxes and/or licensing. Several states have also implemented or are considering implementing additional regulations on our products, including sales restrictions. These requirements may impact which products we are allowed to offer for sale or may influence retailers’ likelihood of carrying regulated products more generally.

FDA Regulation

On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) authorized the FDA to immediately regulate the manufacture, sale, and marketing of four categories of tobacco products – cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. On August 8, 2016, the FDA deeming regulation became effective. The deeming regulation gave the FDA the authority to also regulate all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Accordingly, the FDA has since regulated our cigar and cigar wrap products. Subsequently, on April 14, 2022, the FDA Center for Tobacco Products also obtained jurisdiction over non-tobacco nicotine products (“NTN Products”), including synthetic nicotine. That law subjects NTN Products to the same requirements as tobacco-derived products.

The FDA currently assesses tobacco product user fees on six classes of regulated tobacco products and computes user fees using a methodology similar to the methodology used by the U.S Department of Agriculture to compute the Tobacco Transition Payment Program (“TTPP,” also known as the “Tobacco Buyout”) assessment. First, the total, annual, congressionally established user fee assessment is allocated among the various classes of tobacco products using the federal excise tax weighted market share of tobacco products subject to regulation. Then, the assessment for each class of tobacco products is divided among individual manufacturers and importers.

Tobacco products regulated by FDA are subject to premarket filing requirements, most significantly Premarket Tobacco Product Applications (“PMTAs”) or Substantial Equivalence Reports (“SEs”).

A successful PMTA must demonstrate that the subject product is “appropriate for the protection of public health,” taking into account the effect of the marketing of the product on all sub-populations while a Substantial Equivalence Report must demonstrate that a new product either has the same characteristics as its predicate product or different characteristics but does not raise different questions of public health. We submitted premarket filings for certain of our regulated products in order to continue selling these products while they remain under review. We have continued to supplement these applications with additional information and have responded to information requests from the FDA; however, there can be no guarantee that the FDA will accept such amendments and responses or that the applications will meet the standard of “appropriate for the protection of public health” or “substantially equivalent,” as appropriate. FDA’s interpretation and implementation of these standards likewise may change over time, which may negatively impact our existing or future premarket filings. Currently, the FDA has indicated its enforcement priority is those applicants who have received negative action on their application, such as a Marketing Denial Order or Refuse to File notification and who continue to illegally sell those unauthorized products, as well as products for which manufacturers failed to submit a premarket filing. Despite these stated enforcement priorities, given the FDA’s limited resources we expect that for a period of time there may be a lack of enforcement, which may adversely impact our ability to compete in the marketplace against those who continue to sell unauthorized products. This issue could grow worse should the federal government decrease the size of certain agencies or resources, including the U.S. Department of Justice or U.S. Customs and Border Protection.

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On May 4, 2022, the FDA proposed two tobacco product standards related to combusted tobacco products: (1) a ban on menthol as a characterizing flavor in cigarettes; and (2) a ban on all characterizing flavors (including menthol) in cigars. On June 21, 2022, the FDA also issued a proposed product standard related to restricting the level of nicotine in traditional cigarettes. On March 8, 2023, the FDA proposed requirements for tobacco product manufacturing practice (“TPMPs”). Once finalized, TPMPs would establish requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of finished and bulk tobacco products. These regulations are required to go through the formal rulemaking process where we have had the opportunity to provide comments with regard to the impact such standards would have on our products. As of February 2025, these proposed rules were withdrawn or otherwise delayed. The FDA’s policy on these and other regulated products may change or expand over time in ways not yet known and may significantly impact our products or our premarket filings.

Inflation

Inflation in general and the continued increases in costs of goods and services, such as food and gas prices, have had a substantial negative effect on the purchasing power of consumers. While historically, we have been able to pass on most cost increases to our consumers, no assurance can be given that we will continue to be able to do so. In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our successful procurement with regard to our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers.

Recent Accounting Pronouncements

See Item 8 of Part II, “Financial Statements and Supplementary Data - Note 2 - Summary of Significant Accounting Policies - Recent Accounting Pronouncements”.

Critical Accounting Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. When more than one accounting principle, or the method of its application, is generally accepted, we select the principle or method that is appropriate in the specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties. Actual results could differ from these estimates. We evaluate our estimates, including those related to intangibles, investments in debt security and the fair value of the Creative Distribution Solutions segment on an ongoing basis. We base these estimates on our historical experience and other assumptions we believe are appropriate under the circumstances. In preparing these consolidated financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial statements. Our significant accounting policies are discussed in Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.

Indefinite-lived Intangible Assets

We follow the provisions of ASC 350, Intangibles – Goodwill and Other in accounting for indefinite-lived intangible assets. Indefinite-lived intangible assets are tested for impairment annually on December 31, or more frequently if certain indicators are present, in accordance with ASC 350-20-35 and ASC 350-30-35, respectively. Examples of such indicators could include but are not limited to a significant loss of market share, significant decline in operating results, change in management strategy or operations, economic decline, and other significant disruptions to the business.

We estimate the fair value of our indefinite-lived assets using the relief from royalty valuation methodology. This methodology is based on what the Company would be willing to pay as a royalty in order to exploit the related benefits of the asset. The value of the asset is determined by discounting the inherent after-tax royalty savings associated with ownership or possession of the asset over the expected useful life. In 2024, based on quantitative assessments, the fair values of our Zig-Zag and Stokers’ indefinite-lived intangible assets exceeded their carrying values by a significant amount. We identified the estimate of the fair value of the Company’s indefinite lived assets as a critical estimate because of the significant assumptions used in these analyses including, but are not limited to, projected revenue, the weighted average cost of capital and royalty rate. We used modest growth rates in projecting the revenue related to these indefinite-lived intangible assets. As we do for each impairment assessment, for our future impairment assessments we will evaluate the reasonableness and relevance of our previous performance assumptions, considering both internal and external factors existing at the impairment test date, to determine if changes to those performance assumptions are warranted.

If actual results are not consistent with the Company’s estimates and/or other assumptions change, the Company may be exposed to future impairment charges that could materially and adversely impact its financial position and results of operations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Sensitivity

Our inventory purchases from RTI are denominated in euros. Accordingly, we have exposure to potentially adverse movements in the euro exchange rate. In addition, RTI provides a contractual hedge against catastrophic currency fluctuation in our agreement. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that offsets the effects of changes in foreign exchange rates.

We regularly review our foreign currency risk and hedging programs and may as part of that review determine at any time to change our hedging policy. During 2025, we did not execute any foreign exchange contracts. During 2024, we executed various foreign exchange contracts for the purchase of €3.6 million and sale of €3.6 million with maturity dates ranging from October 2024 to June 2025. At December 31, 2025, we had no foreign currency contracts outstanding. A 10% change in the euro to U.S. dollars exchange rate would change our pre-tax income by approximately $1.7 million per year.

Credit Risk

At December 31, 2025 and 2024, we had bank deposits, including MSA escrows, in excess of federally insured limits of approximately $221.8 million and $47.4 million, respectively. The Company has chosen to invest a portion of the MSA escrows, from time to time, in U.S. Government securities including Treasury notes and Treasury bonds. We sell our products to distributors, retail establishments, and individual consumers throughout the U.S. and also have sales of Zig-Zag® premium cigarette papers in Canada. In 2025, we had no customers that accounted for more than 10% of our net sales. In 2024 we had one customer that accounted for more than 10% of our net sales and in 2023 we had no customers that accounted for more than 10% of our net sales. We perform periodic credit evaluations of our customers and generally do not require collateral on trade receivables. Historically, we have not experienced significant losses due to customer credit issues.

Interest Rate Sensitivity

In February 2025, we issued the 2032 Notes in an aggregate principal amount of $300 million. We carry the 2032 Notes at face value. Since the 2032 Notes bear interest at a fixed rate, we have no financial statement risk associated with increases in interest rates. However, the fair value of the 2032 Notes changes when the market price of our stock fluctuates, or interest rates change. Our remaining debt instrument is the 2023 ABL Facility, which has no borrowing outstanding. The 2023 ABL Facility is subject to a floating rate. Accordingly, if we make borrowings under the 2023 ABL Facility, we will be exposed to fluctuations in interest rates.

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Item 8. Financial Statements and Supplementary Data

TURNING POINT BRANDS, INC.

CONTENTS

Page

Reports of KPMG LLP (PCAOB ID: 185) 53

Reports of RSM US LLP (PCAOB ID: 49) 55

Financial Statements:

Consolidated Balance Sheets as of December 31, 2025 and 2024 56

Notes to Consolidated Financial Statements 62

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Turning Point Brands, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheet of Turning Point Brands, Inc. and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders’ equity for the year ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of whether General Wireless Operations, Inc. and its distribution business were variable interest entities of the Company

As discussed in Notes 2 and 12 to the consolidated financial statements, during the year ended December 31, 2025, the Company contributed 100% of its interest in South Beach Brands LLC (SBB) to General Wireless Operations, Inc. (GWO) in exchange for 49% of the issued and outstanding GWO common stock. The Company has the right to redeem the contribution of SBB from GWO at fair market value under certain circumstances and also received a purchase option with a 15-year term to acquire the remaining 51% equity interest in GWO. Subsequent to this first transaction, on August 8, 2025, SBB acquired a distribution business. In connection with this acquisition, 10233625 Canada Corp. (Turning Point Brands Canada), an indirect consolidated subsidiary of the Company, purchased an option from SBB to acquire this distribution business for fair market value less the option price. The Company evaluates whether it holds a controlling financial interest in unconsolidated entities, whether the entities are variable interest entities (VIEs) and if the Company is the primary beneficiary of any identified VIE to determine whether the Company is required to consolidate the entities. The Company performs this analysis on an ongoing basis. The Company concluded that the distribution business acquired by GWO is a VIE that the Company is not required to consolidate and, upon reconsideration, concluded GWO meets the definition of a VIE and is accounted for as an equity method investment.

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Report of Independent Registered Public Accounting Firm (continued)

We identified the evaluation of whether the distribution business acquired by GWO and, upon reconsideration, GWO were VIEs of the Company as a critical audit matter. Complex auditor judgment and increased extent of audit effort was required to evaluate the Company’s determination of (1) whether GWO and the distribution business acquired by GWO were VIEs and (2) the primary beneficiary of the VIEs, which required management to apply complex consolidation accounting standards and make significant judgments.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s application of the variable interest model and assessment of reconsideration events. We evaluated the reasonableness of the Company’s conclusions related to whether the distribution business acquired by GWO was a VIE of the Company. Specifically, we (1) evaluated the terms of the agreements by reading the purchase agreements and other related documents that govern the formation and activities of the entities (the Contractual Arrangements), (2) tested whether the Company appropriately determined the primary beneficiary by evaluating the Contractual Arrangements of the entities to determine if the Company has the power to direct activities that most significantly impact the economic performance of the VIE, and if the Company has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could be significant to the VIE, (3) read the terms of the option purchased by the Company, through the Canadian subsidiary, and evaluated whether the terms met the power criterion, and (4) evaluated the terms and tested whether any party has the unilateral and substantive right to terminate related agreements, including through inquiry of internal counsel. Additionally, we evaluated the Company’s assessment that the reconsideration event resulted in GWO becoming a VIE of the Company accounted for under the equity method of accounting by assessing the underlying terms and nature of agreements between the Company, GWO and its acquired distribution business.

/s/ KPMG LLP

We have served as the Company’s auditor since 2025.

Louisville, Kentucky

March 2, 2026

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Turning Point Brands, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Turning Point Brands, Inc. and its subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ RSM US LLP

We served as the Company’s auditor from 2006 to 2025.

Charlotte, North Carolina

March 6, 2025

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Turning Point Brands, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2025 and 2024

(dollars in thousands except share data)

December 31, December 31,

ASSETS

Current assets:

Current assets held for sale - 11,470

Deferred income tax assets, net - 995

Deferred financing costs, net 1,180 1,823

Master Settlement Agreement (MSA) escrow deposits 29,887 28,676

Noncurrent assets held for sale - 3,859

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current liabilities held for sale - 2,049

Deferred income tax liabilities, net 8,289 -

Other long-term liabilities 4,138 -

Commitments and contingencies

Stockholders’ equity:

Accumulated other comprehensive loss (1,563 ) (2,903 )

Total liabilities and stockholders’ equity $ 763,750 $ 493,353

The accompanying notes are an integral part of the consolidated financial statements.

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Turning Point Brands, Inc. and Subsidiaries

Consolidated Statements of Income

for the years ended December 31, 2025, 2024, and 2023

(dollars in thousands except share data)

For the years ended December 31,

Other operating income - (1,674 ) (4,345 )

(Income) losses from equity method investment 1,159 (75 ) 2,313

Loss (gain) on extinguishment of debt 1,235 - (1,664 )

Loss from discontinued operations, net of tax - (7,517 ) (285 )

Net income (loss) attributable to non-controlling interest 9,987 701 (681 )

Net income attributable to Turning Point Brands, Inc. $ 58,165 $ 39,809 $ 38,462

Basic income (loss) per common share:

Discontinued operations - (0.43 ) (0.01 )

Diluted income (loss) per common share:

Discontinued operations - (0.39 ) (0.01 )

Diluted earnings per share $ 3.11 $ 2.14 $ 2.01

Weighted average common shares outstanding:

The accompanying notes are an integral part of the consolidated financial statements.

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Turning Point Brands, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

for the years ended December 31, 2025, 2024, and 2023

(dollars in thousands)

For the years ended December 31,

Other comprehensive income (loss), net of tax

Unrealized gain on investments, net of tax of $48 in 2025 and $0 in 2024 99 50 -

The accompanying notes are an integral part of the consolidated financial statements.

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Turning Point Brands, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

for the years ended December 31, 2025, 2024, and 2023

(dollars in thousands)

For the years ended December 31,

Cash flows from operating activities:

Loss from discontinued operations, net of tax - 7,517 285

Loss (gain) on extinguishment of debt 1,235 - (1,664 )

Loss on sale of property, plant, and equipment 106 75 62

Gain on insurance recovery of inventory loss - - (15,181 )

Loss (gain) from equity method investments 1,159 (75 ) 2,313

Depreciation and other amortization expense 6,177 4,439 2,921

Gain on MSA investments - (14 ) -

Changes in operating assets and liabilities:

Operating cash flows from discontinued operations - 6,104 10,641

Cash flows from investing activities:

Proceeds from sale of investments 6,363 5,420 -

Purchase of options agreement (8,000 ) - -

Purchases of non-marketable equity investments (2,783 ) (500 ) -

Proceeds on sale of property, plant and equipment - 5 3

MSA escrow deposits, net 33 46 -

Investing cash flows from continuing operations (31,671 ) (10,509 ) (5,906 )

Investing cash flows from discontinued operations - - -

Net cash used in investing activities $ (31,671 ) $ (10,509 ) $ (5,906 )

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Turning Point Brands, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (cont.)

for the years ended December 31, 2025, 2024, and 2023

(dollars in thousands)

For the years ended December 31,

Cash flows from financing activities:

Convertible Senior Notes repurchased $ - $ (118,541 ) $ (41,794 )

At the market offering proceeds 97,499 - -

Interchange subscription agreement 11,000 - -

Proceeds from call options - - 114

Redemption of options (33 ) (335 ) (346 )

Redemption of restricted stock units (2,324 ) (914 ) (995 )

Issuance of restricted stock units 1 - -

Redemption of performance based restricted stock units (2,626 ) (1,212 ) -

Issuance of performance based restricted stock units - - -

Common stock repurchased - (5,051 ) -

Financing cash flows from discontinued operations - - -

Effect of foreign currency translation on cash $ (205 ) $ (182 ) $ 13

Cash, beginning of period:

Cash, end of period:

Supplemental disclosures of cash flow information:

Cash paid during the period for income taxes, net $ 10,384 $ 20,997 $ 12,447

Supplemental schedule of noncash investing activities:

Accrued capital expenditures $ - $ 18 $ 8

Accrued consideration for acquisition of investments $ - $ - $ 248

Supplemental schedule of noncash financing activities:

The accompanying notes are an integral part of the consolidated financial statements.

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Turning Point Brands, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

for the years ended December 31, 2025, 2024, and 2023

(dollars in thousands)

Cost of Accumulated

Common Additional Repurchased Other Accumulated Non-

Voting Stock, Paid-In Common Comprehensive Earnings Controlling

Shares Voting Capital Stock Income (Loss) (Deficit) Interest Total

Foreign currency translation, net of tax of $0 - - - - (50 ) - (24 ) (74 )

Stock compensation expense - - 6,561 - - - - 6,561

Issuance of performance based restricted stock units 105,032 1 75 - - - - 76

Issuance of restricted stock units 40,910 - 2 - - - - 2

Redemption of restricted stock units (8,590 ) - (195 ) - - - - (195 )

Settlement of call options, net of tax of $28 - - 86 - - - - 86

Foreign currency translation, net of tax of $0 - - - - (115 ) - (82 ) (197 )

Unrealized gain on investments, net of tax of $0 - - - - 50 - - 50

Acquisition of non-controlling interest - - - - - - 750 750

Stock compensation expense - - 7,243 - - - - 7,243

Redemption of options (9,735 ) - (335 ) - - - - (335 )

Issuance of performance based restricted stock units 129,316 1 - - - - - 1

Issuance of restricted stock units 106,249 1 78 - - - - 79

Redemption of restricted stock units (31,483 ) - (993 ) - - - - (993 )

Cost of repurchased common stock (154,945 ) - - (5,051 ) - - - (5,051 )

Unrealized loss on derivative instruments, net of tax of $18 - - - - 63 - - 63

Foreign currency translation, net of tax of $0 - - - - 174 - 45 219

Unrealized gain on investments, net of tax of $48 - - - - 99 - - 99

Stock compensation expense - - 6,974 - - - - 6,974

Redemption of options (572 ) - (33 ) - - - - (33 )

Issuance of performance based restricted stock units 104,532 - - - - - - -

Issuance of restricted stock units 103,612 1 - - - - - 1

Redemption of restricted stock units (30,590 ) - (2,324 ) - - - - (2,324 )

Interchange subscription agreement contribution - - 5,752 - - - 5,248 11,000

The accompanying notes are an integral part of the consolidated financial statements.

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Turning Point Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

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

Note 1. Organizations 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® along with FRE®, Beech-Nut® and Trophy®. The Company’s products are available in more than 220,000 retail outlets in North America. The Company operates two segments, Zig-Zag products and Stoker’s products.

Discontinued Operations

On January 2, 2025, the Company contributed 100% of its interest in South Beach Brands LLC (“SBB”), the subsidiary that owned and operated the Company’s former Creative Distribution Solutions (“CDS”) reportable segment, to General Wireless Operations, Inc. (“GWO”) in exchange for 49% of the issued and outstanding GWO common stock. GWO is majority owned by Standard General, LP. The Company established RSH Holding Trust ("RSH Trust") to hold its interest in GWO which is managed by an independent trustee that votes our interest in GWO in accordance with GWO's board's recommendation, and GWO is controlled by Standard General, L.P.

As of December 31, 2024, the assets and liabilities associated with the CDS segment were classified as held for sale. Accordingly, the financial results of the CDS segment were classified as discontinued operations and reported separately for all periods presented herein until its disposition on January 2, 2025. Following the discontinued operations classification, the Company has two reportable segments, which are reflected herein. Unless otherwise noted, disclosures in the notes to these consolidated financial statements relate solely to the Company's continuing operations, comprised of the Zig-Zag and Stoker’s segments. See Note 3, "Assets and Liabilities Held for Sale and Discontinued Operations" for additional information regarding the CDS divestiture, including the assets and liabilities held for sale and the income or losses from discontinued operations.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The Company’s estimates include those affecting the valuation of goodwill and other intangible assets, the fair value of assets held for sale, deferred income tax valuation allowances, the valuation of investments, share-based payments, and the valuation of inventory, including reserves.

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented.

Note 2. Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, all of which are wholly-owned, 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 with one 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 are not 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.

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.

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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. (refer to Note 12, "Other Assets") is a VIE for which the Company is not 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 Trust, which was established by the Company and is managed by an independent trustee that votes our interest in GWO in accordance with GWO's board's recommendations, holds 49% indirect interest in the distribution business through its interests in General Wireless Operations, Inc. ("GWO") and, through Turning Point Brands Canada, the Company has a variable interest through a purchase option to acquire the equity interests of GWO's distribution business. However, the Company does not 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 judgement that the distribution business is a VIE for which the Company is not required to consolidate. See Note 12 "Other Assets" for further discussion of the acquisition of the distribution business by General Wireless Operations, Inc. and the terms of the option on its equity interests. Turning Point Brands Canada charged a fee to the distribution business in 2025. The agreement was terminated in the fourth quarter.

Subsequent to the acquisition of the distribution business by General Wireless Operations, the Company determined that the General Wireless Operations Equity Method Investment is a VIE of which we are not 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 General Wireless Operations’ economic performance. Standard General, L.P’s voting rights are conveyed through an equity interest that is not considered at risk. Based on the foregoing, management believes in its judgement that General Wireless Operations is a VIE for which the Company is not required to consolidate.

Revenue Recognition

The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606), 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 the five-step analysis outlined in Topic 606: (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 ASC 606 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 Note 21, “Segment Information”.

Held for Sale and Discontinued Operations

The Company classifies assets and liabilities to be sold (disposal group) as held for sale in the period when all of the applicable criteria are met, including: (i) management commits to a plan to sell, (ii) the disposal group is available to sell in its present condition, (iii) there is an active program to locate a buyer, (iv) the disposal group is being actively marketed at a reasonable price in relation to its fair value, (v) significant changes to the plan to sell are unlikely, and (vi) the sale of the disposal group is generally probable of being completed within one year.

Assets and liabilities held for sale are presented separately within the Consolidated Balance Sheets with any adjustments necessary to measure the disposal group at the lower of its carrying value or fair value less costs to sell. Depreciation of property, plant and equipment and amortization of intangible and right-of-use assets are not recorded while these assets are classified as held for sale. For each period the disposal group remains classified as held for sale, its recoverability is reassessed, and any necessary adjustments are made to its carrying value.

The Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that will have a major effect on its operations and financial results. The results of discontinued operations are reported as Loss from discontinued operations, net of tax in the Consolidated Statements of Income for the current and prior periods commencing in the period in which the held for sale criteria are met. Loss from discontinued operations includes direct costs attributable to the divested business and excludes any cost allocations associated with any shared or corporate functions. Loss from discontinued operations will include any gain or loss recognized upon disposition or from any adjustment of the carrying amount of the assets and liabilities of the discontinued operations to fair value less costs to sell while classified as held for sale.

Derivative Instruments

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 ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, 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 do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

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Shipping Costs

The Company records shipping costs incurred as a component of selling, general and administrative expenses. Shipping costs incurred were approximately $29.7 million, $17.9 million, and $16.0 million in 2025, 2024, and 2023, respectively.

Research and Development and Quality Assurance Costs

Research and development and quality assurance costs are expensed as incurred. These expenses, classified as selling, general and administrative expenses, were approximately $0.9 million, $1.3 million, and $0.6 million in 2025,2024, and 2023, respectively.

Cash and Cash Equivalents

The Company considers any highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents.

Inventories

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

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation is provided using the straight-line method over the lesser of the estimated useful lives of the assets or the life of the leases for leasehold improvements (4 to 7 years for machinery, equipment and furniture, 10 to 15 years for leasehold improvements, and up to 15 years for buildings and building improvements). Expenditures for repairs and maintenance are charged to expense as incurred. The costs of major repairs and improvements are capitalized and depreciated over their estimated useful lives. Upon disposition of fixed assets, the costs and related accumulated depreciation amounts are relieved. Any resulting gain or loss is reflected in operations during the period of disposition. Long-lived assets are reviewed for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Goodwill and Other Intangible Assets

The Company follows the provisions of ASC 350, Intangibles – Goodwill and Other in accounting for goodwill and other intangible assets. Goodwill is tested for impairment annually on December 31, or more frequently if certain indicators are present.

When testing goodwill for impairment, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds its fair value, limited to the amount of goodwill at the reporting unit. The Company determines fair values for each of the reporting units using a combination of the income approach and/or market approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Under the market approach, the Company selects peer sets based on close competitors and reviews the revenue and EBITDA multiples to determine the fair value. See Note 11, “Goodwill and Other Intangible Assets” for further information on goodwill.

Indefinite-lived intangible assets are tested for impairment at least annually; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value. The Company’s fair value methodology is primarily based on the relief from royalty approach.

Definite-lived intangible assets are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from 3.5 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets.

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 (Level 1) and the lowest priority to unobservable inputs (Level 3).

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

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Equity Investments

The Company's investments include equity securities, which are accounted for at cost and under the equity method of accounting.

For equity investments that do not qualify to be accounted for under the equity method of accounting and that do not have a readily determinable fair value, the Company has elected a practical expedient to record the investment at the original cost, as adjusted for impairment and observable price changes. Under the practical expedient, if a qualitative analysis indicates impairment exists, the fair value of the investment is required to be estimated and any excess of the carrying value over the estimated fair value is recognized as an impairment loss.

Equity investments accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that any loss in value of the investment may be other than temporary. A loss in value of an investment is other than temporary when evidence of a loss in value indicates the absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.

In the absence of observable data, the Company estimates the fair values of these investments using a market approach derived from applying market multiples of comparable public companies to the financial results of each investment. The valuation methodology and the significant assumptions used by management in estimating the fair values of each investment involve a high degree of judgment and may involve the use of third-party valuation specialists.

Deferred Financing Costs

Deferred financing costs are amortized over the terms of the related debt obligations using the straight-line method. Unamortized amounts are expensed upon extinguishment of the related borrowings. Deferred financing costs are presented as a direct deduction from the carrying amount of that debt liability except for deferred financing costs relating to our revolving credit facility, which are presented as an asset.

Income Taxes

The Company records the effects of income taxes under the liability method in which deferred income tax assets and liabilities are recognized based on the difference between the financial and tax basis of assets and liabilities using the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company assesses its ability to realize future benefits of deferred tax assets by determining if they meet the “more likely than not” criteria in ASC 740, Income Taxes. If the Company determines that future benefits do not meet the “more likely than not” criteria, a valuation allowance is recorded.

Advertising and Promotion

Advertising and promotion costs, including point of sale materials, are expensed as incurred and amounted to $29.8 million, $12.0 million, and $7.6 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Stock-Based Compensation

The Company measures stock-based compensation costs related to its stock options on the fair value-based method under the provisions of ASC 718, Compensation – Stock Compensation. The fair value-based method requires compensation cost for stock options to be recognized over the requisite service period based on the fair value of stock options granted. The Company determined the fair value of these awards using the Black-Scholes option pricing model.

The Company grants performance-based restricted stock units (“PRSU”) subject to both performance-based and service-based vesting conditions. The fair value of each PRSU is the Company’s stock price on the date of grant. For purposes of recognizing compensation expense as services are rendered in accordance with ASC 718, the Company assumes all employees involved in the PRSU grant will provide service through the end of the performance period. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the PRSU grant.

The Company grants restricted stock units (“RSU”) subject to service-based vesting conditions. The fair value of each RSU is the Company’s stock price on the date of grant. The Company recognizes compensation expense as services are rendered in accordance with ASC 718. Stock compensation expense is recorded over the service period in the RSU grant.

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 be no 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 would not 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 be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

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Master Settlement Agreement (MSA)

Forty-six states, certain U.S. territories, and the District of Columbia are parties to the Master Settlement Agreement (“MSA”) and the Smokeless Tobacco Master Settlement Agreement (“STMSA”). To the Company’s knowledge, signatories to the MSA include 49 cigarette manufacturers and/or distributors. The only signatory to the STMSA is US Smokeless Tobacco Company. In the Company’s opinion, the fundamental basis for each agreement is the states’ consents to withdraw all claims for monetary, equitable, and injunctive relief against certain tobacco products manufacturers and others and, in return, the signatories have agreed to certain marketing restrictions and regulations as well as certain payment obligations.

Pursuant to the MSA and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to also include 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, with sub-accounts on behalf of each settling state. The STMSA has no similar provisions. The MSA escrow accounts are governed by states’ statutes that expressly give the manufacturers the option of opening, funding, and maintaining an escrow account in lieu of becoming a signatory to the MSA. The statutes require companies who are not signatories to the MSA to deposit, on an annual basis, into qualified banks, escrow funds based on the number of cigarettes or cigarette equivalents, i.e., the pounds of MYO tobacco, sold. The purpose of these statutes is expressly stated to be to eliminate the cost disadvantage the settling manufacturers have as a result of entering into the MSA. Such companies are entitled to direct the investment of the escrowed funds and withdraw any appreciation, but cannot withdraw the principal for 25 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. Either option – becoming an MSA signatory or establishing an escrow account – is permissible.

The Company chose to open and fund an MSA escrow account as its means of compliance. It is management’s opinion, due to the possibility of future federal or state regulations, though none have to date been enacted, that entering into one or both of the settlement agreements or establishing and maintaining an escrow account would not necessarily prevent future regulations from having a material adverse effect on the results of operations, financial position, and cash flows of the Company.

Various states have enacted or proposed complementary legislation intended to curb the activity of certain manufacturers and importers of cigarettes that are selling into MSA states without signing the MSA or who have failed to properly establish and fund a qualifying escrow account. To the best of the Company’s knowledge, no such statute has been enacted which could inadvertently and negatively impact the Company, which has been, and is currently, fully compliant with all applicable laws, regulations, and statutes. However, there can be no assurance that the enactment of any such complementary legislation in the future will not have a material adverse effect on the results of operations, financial position, or cash flows of the Company.

Pursuant to the MSA escrow account statutes, in order to be compliant with the MSA escrow requirements, companies selling products covered by the MSA are required to deposit such funds for each calendar year into a qualifying escrow account by April 15 of the following year. At December 31, 2025, the Company had on deposit approximately $32.0 million, the fair value of which was approximately $29.9 million. At December 31, 2024, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.7 million. During 2025, no monies were deposited into this qualifying escrow account. The investment vehicles available to the Company are specified in the state escrow agreements and are limited to low-risk government securities.

The Company discontinued its generic category of MYO in 2019 and itsZig-Zagbranded MYO cigarette smoking tobacco in 2017. Thus, pending a change in MSA legislation, the Company has no remaining product lines covered by the MSA and will not 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 Level 2 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.

Gross Gross Estimated Gross Gross Estimated

Unrealized Unrealized Fair Unrealized Unrealized Fair

Cost Gains Losses Value Cost Gains Losses Value

As of

Less than one year $ -

Greater than ten years 1,955

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

Deposits as of December 31,

Concentration of Credit Risk:At December 31, 2025 and 2024, the Company had bank deposits, including MSA escrow accounts, in excess of federally insured limits of approximately $221.8 million and $47.4 million, respectively. During 2025 and 2024, the Company invested a portion of the MSA escrow accounts in U.S. Government securities including TIPS, Treasury notes, and Treasury bonds.

The Company sells its products to distributors, retail establishments, and consumers throughout the U.S. and also sells Zig-Zag® premium cigarette papers in Canada and some smaller quantities in other countries. For 2025, the Company did not have any customers that accounted for more than 10% of net sales. There was one customer that accounted for more than 10% of net sales for 2024 and there were no customers that accounted for more than 10% of nets sales for 2023. The Company performs periodic credit evaluations of its customers and generally does not require collateral on trade receivables. Historically, the Company has not experienced significant credit losses.

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Accounts Receivable

Accounts receivable are recognized at their net realizable value. All accounts receivable are trade related, recorded at the invoiced amount, and do not bear interest. The Company maintains allowances for credit losses for estimated uncollectible invoices resulting from a customer’s inability to pay (bankruptcy, out of business, etc., i.e. “bad debt” which results in write-offs). The activity of allowance for credit losses for the years ended December 31, 2025, 2024, and 2023 is as follows:

Balance at beginning of period $ 66 $ 78 $ 40

Additions to allowance account during period 140 23 38

Deductions of allowance account during period - (35 ) -

Balance at end of period $ 206 $ 66 $ 78

Recent Accounting Pronouncements

Recently adopted

In December 2023, the FASB issued guidance which enhances income tax disclosures to require reporting entities to disclose annual income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes and to provide additional disaggregated information for individual jurisdictions under certain conditions. The guidance also requires disclosure of amounts and percentages in the annual rate reconciliation table, rather than amounts or percentages, and will eliminate certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The Company adopted ASU 2023-09 prospectively in the 2025. See Note 15 "Income Taxes" for new disclosures relating to 2025 only.

Issued but not yet adopted

In November 2024, the FASB issued guidance requiring reporting entities to disclose in the notes to the financial statements, specified information about certain categories of expenses including purchases of inventory, employee compensation, depreciation and amortization for each caption on the income statement where such expenses are included. This guidance will be effective for the Company beginning with its fiscal 2027 annual financial statements and interim periods thereafter. Early adoption is permitted, in addition to either prospective or retrospective application. The Company is currently assessing the impact and extent to which this guidance will affect its disclosures.

Note 3. Assets and Liabilities Held for Sale and Discontinued Operations

On January 2, 2025, the Company entered into an agreement to contribute 100% of its interest in SBB, the subsidiary that owns and operates the Company’s CDS segment, to GWO in exchange for 49% of the issued and outstanding GWO common stock on a fully-diluted basis. GWO is majority owned by Standard General, LP. Under certain circumstances the Company has the right to redeem the contribution of SBB from GWO at fair market value. In addition, the Company received an option with a 15-year term to purchase the remaining 51% of GWO at an exercise price initially set at $22.0 million, which decreases over time based on certain tax sharing payments to GWO.

The assets and liabilities associated with the CDS business have been classified as held for sale as of December 31, 2024, and its financial results are classified as discontinued operations and reported separately for all periods presented herein. With the strategic shift of the Company's operations, as a result of this transaction, the CDS segment has been classified as discontinued operations. As a result, the Company now has two reportable segments as disclosed in Note 21, "Segment Information".

Upon meeting the criteria for held for sale classification, the Company recorded a non-cash charge of $8.8 million with an equivalent valuation allowance against net assets held for sale to reduce the carrying value of the disposal group to fair value. Fair value of the disposal group utilized inputs within Level 3 of the fair value hierarchy, and was determined using both a market and an income approach.

The Company incurred no income or loss from discontinued operations for the year ended December 31, 2025. The following table summarizes income from discontinued operations, net of tax, included in the Consolidated Statements of Income:

For the years ended December 31,

Selling, general, and administrative expenses 12,246 18,442

Loss on assets held for sale fair value adjustment 8,801 -

Amortization of other intangible assets 1,843 1,899

Goodwill and intangible impairment loss - -

Operating loss from discontinued operations (10,116 ) (383 )

Interest income (146 ) -

Loss from discontinued operations before income taxes (9,970 ) (383 )

Income tax benefit (2,453 ) (98 )

Loss from discontinued operations $ (7,517 ) $ (285 )

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The following table summarizes the carrying amounts of assets and liabilities classified as held for sale and included in the Consolidated Balance Sheets:

December 31,

Current assets

Inventories, net 5,813

Other current assets 2,874

Current assets held for sale 11,470

Noncurrent assets

Right of use assets 51

Other intangible assets, net 12,609

Allowance to adjust held for sale assets to fair value (8,801 )

Noncurrent assets held for sale 3,859

Total assets held for sale $ 15,329

Current liabilities

Accounts payable $ 532

Accrued liabilities 1,517

Current liabilities held for sale 2,049

Noncurrent liabilities

Lease liabilities -

Noncurrent liabilities held for sale -

Total liabilities held for sale $ 2,049

Note 4. Joint Venture Agreement

In September 2024, a wholly-owned subsidiary of the Company invested $0.8 million to acquire a 50% ownership interest in ALP Supply Co., LLC ("ALP"). Additionally, the Company has provided ALP with a $10.0 million line of credit. ALP is a joint venture established between the subsidiary and Last Country Ventures, LLC for the purpose of selling and distributing tobacco-free moist nicotine pouches in various strengths. Per the joint venture agreement, the Company's subsidiary will be responsible for selling products to ALP and providing warehousing and shipping services on its behalf. The Company has determined that ALP is a VIE and that it has a controlling financial interest requiring consolidation. As a result, the assets, liabilities and result of operations of ALP have been included in the Company's consolidated financial statements.

The assets and liabilities of ALP included in the consolidated balance sheet at December 31, 2025, primarily include $28.1 million in cash, $2.3 million in accounts receivable, $4.6 million of inventory, $5.1 million of other assets, $0.1 million of property, plant and equipment, and accounts payable and accrued liabilities of $18.1 million inclusive amounts payable to the Company of $8.1 million. The assets and liabilities of ALP included in the consolidated balance sheet at December 31, 2024 primarily included $5.3 million in cash, $0.9 million of inventory, $1.1 million of other assets, and accounts payable and accrued liabilities of $3.6 million inclusive of amounts payable to the Company of $3.2 million.

Note 5. Derivative Instruments

Foreign Currency

The Company’s policy is to manage the risks associated with foreign exchange rate movements. The policy allows hedging up to 100% of its anticipated purchases of inventory over a forward period that will not exceed 12 rolling and consecutive months. The Company may, from time to time, hedge currency for non-inventory purchases, e.g., production equipment, not to exceed 100% of the purchase price. During 2025, the Company did not execute any foreign currency contracts. During 2024, the Company executed various foreign exchange contracts which met hedge accounting requirements for the purchase of €3.6 million and sale of €3.6 million.

At December 31, 2025, the Company had no foreign currency contracts outstanding. At December 31, 2024, the Company had foreign currency contracts outstanding for the purchase of €2.1 million and sale of €2.1 million. The fair value of the foreign currency contracts at December 31, 2024, resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities. A $0.1 million gain, $0.2 million gain and $0.9 million loss were reclassified from Accumulated other comprehensive loss to Cost of sales for the years ended December 31, 2025, 2024 and 2023, respectively.

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Note 6. 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 are not 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's 2032 Notes bear interest at a rate of 7.625% per year. As of December 31, 2025, the fair value approximated $313.8 million, with a carrying value of $300.0 million.

The Company’s 2026 Notes were retired at par on February 20, 2025. As of December 31, 2024, the fair value of the 2026 Notes approximated $251.2 million, with a carrying value of $250.0 million.

See Note 14, “Notes Payable and Long-Term Debt” for further information regarding the Company’s long-term debt.

Foreign Currency

TPB US Equity

TPB · 10-K · period ended 2025-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

TPB US Equity☆

TPB · 10-K · period ended 2025-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

TPB US Equity