INFORMATION STATEMENT

This Information Statement is being furnished by the Board of Directors of Charlie’s Holdings, Inc., a Nevada Corporation (the “Company”, “we”, “our” or “us”), to the holders of record of shares of our common stock, par value $0.001 per share (“Common Stock”), and our Series A Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred”), as of the close of business on January 18, 2022 (the “Record Date”), to provide information with respect to the following action (the “Corporate Action”) that were approved by majority of our outstanding voting securities, on an as converted basis (the “Majority Shareholders”), following a recommendation that shareholders approve the Corporate Action by our Board of Directors acting by written consent:

Our Board of Directors’ authority to implement the 2019 Plan Amendment will not become effective until 20 calendar days after this Information Statement is first mailed or otherwise delivered to our shareholders of record as of the close of business on the Record Date.

AUTHORIZATION BY THE BOARD OF DIRECTORS AND THE MAJORITY SHAREHOLDERS

Under the Nevada Revised Statutes and the Company’s Amended and Restated Bylaws, any action that can be taken at an annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote if the holders of outstanding stock having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present consent to such action in writing. Accordingly, approval of the 2019 Plan Amendment required the affirmative vote or written consent of a majority of our issued and outstanding voting securities, consisting of our Common Stock and our Series A Convertible Preferred Stock (“Series A Preferred”). Holders of Series A Preferred are entitled to vote, on an as-converted basis, along with holders of our Common Stock. On the Record Date, holders of our voting securities were entitled to cast a total of 242,906,805 votes, of which (i) 210,890,737 votes were attributable to holders of shares of our Common Stock, with the holders thereof being entitled to cast one vote per share, and (ii) 32,016,068 votes were attributable to holders of our outstanding shares of Series A Preferred, with the holders thereof being entitled to approximately 226 votes per share of Series A Preferred held.

Our Board of Directors unanimously adopted resolutions by written consent approving the 2019 Plan Amendment on December 22, 2021, subject to approval by holders of a majority of our outstanding voting securities. On December 22, 2022, we received written consents approving the 2019 Plan Amendment from holders of approximately 50.3% of our outstanding voting securities as of the Record Date.

Accordingly, we have obtained all corporate approvals and/or ratifications required for the 2019 Plan Amendment. We are not seeking written consent of the 2019 Plan Amendment from any other stockholder, and the other stockholders will not be given an opportunity to vote with respect to the 2019 Plan Amendment. This Information Statement is furnished solely for the purposes of advising stockholders of the approval of the 2019 Plan Amendment by written consent and giving stockholders notice of the forthcoming amendment to our Plan, as required by the Nevada Revised Statutes and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

As the 2019 Plan Amendment was approved by written consent of the holders of a majority of the Company’s voting securities as of the Record Date, there will be no stockholders’ meeting, and representatives of the principal accountants for the current year and for the most recently completed fiscal year will not have the opportunity to make a statement if they desire to do so and will not be available to respond to appropriate questions from our stockholders.

Following the expiration of the 20-day period mandated by Rule 14c of the Exchange Act and the provisions of the Nevada Revised Statutes, the 2019 Plan Amendment will become effective.

DESCRIPTION OF THE CORPORATE ACTION

AMENDMENT TO THE CHARLIE’S HOLDINGS 2019 OMNIBUS INCENTIVE PLAN

General

On December 22, 2021, our Board unanimously approved of the amendment to the 2019 Plan, subject to shareholder approval, to increase the number of shares of Common Stock reserved for issuance thereunder by unanimous written consent by an aggregate of 15.0 million shares, from 11,072,542 shares to a new total of 26,072,542 shares. 8,306,666 shares of our Common Stock are currently reserved for issuance under the 2019 Plan upon exercise of outstanding options or otherwise under outstanding awards. As a result, only 2,765,876 are shares currently available for issuance as stock options or other awards under the 2019 Plan. The 2019 Plan Amendment will allow the Company to maintain a sufficient number of available shares for future grants under the 2019 Plan.

Background and Purpose

        The 2019 Plan was adopted by our Board on May 8, 2019. The 2019 Plan provides for the issuance of stock-based awards to attract and retain the services of executives and other key employees. Keeping a proportionate number of shares available for issuance under the 2019 Plan in relation to our issued and outstanding shares of Common Stock provides the ability and flexibility to present compensation packages which compare favorably with those offered by other companies. As only 2,765,876 shares are currently available for issuance under the 2019 Plan, our Board voted by unanimous written consent to adopt the Plan Amendment to provide for an additional 15.0 million shares for future grants under the 2019 Plan. Upon the effectiveness of the amendment to the 2019 Plan, we intend to promptly issue options or other incentives under the 2019 Plan, although at this time we have not entered into any agreements regarding the issuance of options or Common Stock under the 2019 Plan.

Summary of the 2019 Plan

Set forth below is a summary of the 2019 Plan. This summary is qualified in its entirety by reference to the full text of the 2019 Plan filed as Appendix B to the Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission (“SEC”) May 28, 2019. Any shareholder who wishes to obtain a copy of the 2019 Plan may do so by written request to Charlie’s Holdings, Inc., 1007 Brioso Drive, Costa Mesa, California 92627, Attention: Vanessa Wells.

The 2019 Plan superseded and replaced Company’s 2013 Stock Incentive Plan (the “2013 Plan”). Any awards outstanding under the 2013 Plan on the date of approval of the 2019 Plan remained subject to the 2013 Plan and no new awards were granted under the 2013 Plan following the adoption of the 2019 Plan. All shares of Common Stock that remained authorized and available for issuance under the 2013 Plan, as well as any shares subject to outstanding awards under the 2013 Plan that subsequently expired, terminated, or were surrendered or forfeited for any reason, without issuance of shares, automatically became available for issuance under the 2019 Plan.

Eligibility

Awards may be granted under the 2019 Plan to officers, employees and consultants of our Company and our subsidiaries and to our non-employee directors. Incentive stock options may be granted only to employees of our Company or one of our subsidiaries. As of December 22, 2022, approximately 35 individuals were eligible to receive awards under the 2019 Plan, including four executive officers and two non-employee directors.

Administration

The 2019 Plan will be administered by the Compensation Committee of the Board of Directors. The Compensation Committee, in its discretion, selects the individuals to whom awards may be granted, the time or times at which such awards are granted, and the terms of such awards. The Compensation Committee may delegate its authority to the extent permitted by applicable law.

Number of Authorized Shares

A total of 11,072,542 shares of Common Stock are authorized for issuance under the 2019 Plan, which represents approximately 3.8% of the fully diluted shares of Common Stock outstanding on the Record Date, which includes conversion of the Series A Preferred and the exercise of outstanding warrants to purchase our Common Stock. In addition, any awards outstanding under the Prior Plan will remain subject to and be paid under the Prior Plan and any shares then subject to outstanding awards under the Prior Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the 2019 Plan. Up to 11,072,542 shares may be granted under the 2019 Plan as incentive stock options under Section 422 of the Code. The shares of Common Stock issuable under the 2019 Plan will consist of authorized and unissued shares, treasury shares, and shares purchased on the open market or otherwise.

If any award is canceled, terminates, expires or lapses for any reason prior to the issuance of shares or if shares are issued under the 2019 Plan and thereafter are forfeited to us, the shares subject to such awards and the forfeited shares will again be available for grant under the 2019 Plan. In addition, the following items will not count against the aggregate number of shares of Common Stock available for grant under the 2019 Plan:

Shares tendered or withheld to pay the option exercise price or tax withholding for any award (including restricted stock and restricted stock units) will continue to count against the aggregate number of shares of Common Stock available for grant under the 2019 Plan. In addition, the total number of shares covering stock-settled SARs or net-settled options will be counted against the pool of available shares, not just the net shares issued upon exercise. Any shares of Common Stock repurchased by us with cash proceeds from the exercise of options will not be added back to the pool of shares available for grant under the 2019 Plan.

Adjustments

If certain changes in the Common Stock occur by reason of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in stock, or other increase or decrease in the Common Stock without our receipt of consideration, or if there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by us, we will equitably adjust the number and kind of securities for which stock options and other stock-based awards may be made under the 2019 Plan. In addition, if there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by us, we will equitably adjust the number and kind of securities subject to any outstanding awards and the exercise price of any outstanding stock options or SARs.

Types of Awards

The 2019 Plan permits the granting of any or all of the following types of awards:

Minimum Vesting Requirements 

Equity-based awards granted under the 2019 Plan will have a one-year minimum vesting requirement. This requirement does not apply to (i) substitute awards resulting from acquisitions, (ii) shares delivered in lieu of fully vested cash awards, or (iii) awards to non-employee directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of stockholders (but not sooner than 50 weeks after the grant date). Also, the Compensation Committee may grant equity-based awards without regard to the minimum vesting requirement with respect to a maximum of five percent of the available share reserve authorized for issuance under the 2019 Plan. In addition, the minimum vesting requirement does not apply to the Compensation Committee’s discretion to provide for accelerated exercisability or vesting of any award, including in cases of retirement, death, disability or a change in control, in the terms of the award or otherwise.

No Repricing

Without stockholder approval, the Compensation Committee is not authorized to:

Clawback

All cash and equity awards granted under the 2019 Plan will be subject to clawback, cancellation, recoupment, rescission, payback, reduction, or other similar action in accordance with the terms of any Company clawback or similar policy or any applicable law related to such actions, as may be in effect from time to time.

Transferability

Awards are not transferable other than by will or the laws of descent and distribution, except that in certain instances transfers may be made to or for the benefit of designated family members of the participant for no value.

Change in Control

In the event of a change in control of the Company, the Compensation Committee may accelerate the time period relating to the exercise of any award.  In addition, the Compensation Committee may take other action, including (a) providing for the purchase of any award for an amount of cash or other property that could have been received upon the exercise of such award had the award been currently exercisable, (b) adjusting the terms of the award in a manner determined by the compensation committee to reflect the change in control, or (c) causing an award to be assumed, or new rights substituted therefor, by another entity with appropriate adjustments to be made regarding the number and kind of shares and exercise prices of the award. “Change in control” is defined under the 2019 Plan and requires consummation of the applicable transaction.

Term, Termination and Amendment of the 2019 Plan

Unless earlier terminated by the Board of Directors, the 2019 Plan will terminate, and no further awards may be granted, ten years after the date on which it is approved by stockholders. The board may amend, suspend or terminate the 2019 Plan at any time, except that, if required by applicable law, regulation or stock exchange rule, stockholder approval will be required for any amendment. The amendment, suspension or termination of the 2019 Plan or the amendment of an outstanding award generally may not, without a participant’s consent, materially impair the participant’s rights under an outstanding award.

Federal Income Tax Information

The following is a brief summary of the U.S. federal income tax consequences of the 2019 Plan generally applicable to us and to participants in the 2019 Plan who are subject to U.S. federal taxes. The summary is based on the Code, applicable Treasury Regulations, and administrative and judicial interpretations thereof, each as in effect on the date of this Proxy Statement, and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws.

Nonqualified Stock Options. A participant generally will not recognize taxable income upon the grant or vesting of a nonqualified stock option with an exercise price at least equal to the fair market value of the Common Stock on the date of grant and no additional deferral feature. Upon the exercise of a nonqualified stock option, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the stock option on the date of exercise and the exercise price of the stock option. When a participant sells the shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the exercise price of the stock option.

Incentive Stock Options. A participant generally will not recognize taxable income upon the grant of an incentive stock option. If a participant exercises an incentive stock option during employment or within three months after employment ends (one year in the case of permanent and total disability), the participant will not recognize taxable income at the time of exercise for regular U.S. federal income tax purposes (although the participant generally will have taxable income for alternative minimum tax purposes at that time as if the stock option were a nonqualified stock option). If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year from the date the participant exercised the option and (b) two years from the grant date of the stock option, the participant generally will recognize long-term capital gain or loss equal to the difference between the amount the participant received in the disposition and the exercise price of the stock option. If a participant sells or otherwise disposes of shares acquired upon exercise of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a “disqualifying disposition,” and the participant generally will recognize taxable ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the exercise price of the stock option (or, if less, the excess of the amount realized on the disposition of the shares over the exercise price of the stock option). The balance of the participant’s gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be.

With respect to both nonqualified stock options and incentive stock options, special rules apply if a participant uses shares of Common Stock already held by the participant to pay the exercise price or if the shares received upon exercise of the stock option are subject to a substantial risk of forfeiture by the participant.

Stock Appreciation Rights. A participant generally will not recognize taxable income upon the grant or vesting of a SAR with a grant price at least equal to the fair market value of Common Stock on the date of grant and no additional deferral feature. Upon the exercise of a SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the grant price of the SAR.

Restricted Stock Awards, Restricted Stock Units, and Performance Awards. A participant generally will not have taxable income upon the grant of restricted stock, restricted stock units or performance awards. Instead, the participant will recognize ordinary income at the time of vesting or payout equal to the fair market value (on the vesting or payout date) of the shares or cash received minus any amount paid. For restricted stock only, a participant may instead elect to be taxed at the time of grant.

Other Stock or Cash-Based Awards. The U.S. federal income tax consequences of other stock or cash-based awards will depend upon the specific terms of each award.

Tax Consequences to Us. In the foregoing cases, we generally will be entitled to a deduction at the same time, and in the same amount, as a participant recognizes ordinary income, subject to limitations imposed under the Code.

Section 409A. We intend that awards granted under the 2019 Plan comply with, or otherwise be exempt from, Section 409A of the Code, but make no representation or warranty to that effect.

Tax Withholding. We are authorized to deduct or withhold from any award granted or payment due under the 2019 Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of Common Stock or otherwise settle an award under the 2019 Plan until all tax withholding obligations are satisfied.

Plan Benefits

Participation in the 2019 Plan is entirely within the discretion of the Compensation Committee. Because we cannot predict the rate at which the Compensation Committee will issue awards or the terms of awards granted under the 2019 Plan, it is not possible to determine the number of shares that will be purchased or the value of benefits that may be obtained by executive officers and other employees under the 2019 Plan in the future.

The following table discloses all awards granted to the persons or groups specified below under the 2019 Plan during our fiscal year ended December 31, 2021: