What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-08 · 175 added, 117 removed, 436 unchanged (40% of the section changed)

35 unchanged sentences

License and media rights payable

Derivative and other long-term liabilities 3,780 3,823

14,093 11,338

Derivatives and other long-term liabilities

Total liabilities

4 unchanged sentences

unlimited shares authorized;

157,227,855 and 154,332,366 shares issued and outstanding as of March 31, 2024 and December 31, 2023

157,495,042 and 154,332,366 shares issued and outstanding as of June 30, 2024 and December 31, 2023

Additional paid-in capital

9 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31, (unaudited)

Three Months Ended June 30, (unaudited)

Six Months Ended June 30, (unaudited)

2024 2023 2024 2023

Revenue $ 12,289 $ 16,006 $ 24,413 $ 33,016

4 unchanged sentences

( 12,145 ) ( 10,709 ) ( 20,514 ) ( 18,305 )

Gain on initial investment in unconsolidated entity

— 10,700 — 10,700

Change in fair value of financial instruments

1 unchanged sentence

Other income (expense), net

Loss before provision for income taxes

( 6 ) ( 1,376 ) 605 ( 2,074 )

Income tax expense

Income (loss) before provision for income taxes

( 11,011 ) 2,844 ( 20,629 ) ( 67 )

Income tax benefit (expense)

( 46 ) — ( 62 ) —

Net income (loss)

$ ( 11,057 ) $ 2,844 $ ( 20,691 ) $ ( 67 )

Per common share amounts (Note 10)

Net loss per common share, basic and diluted

Net income (loss) per common share, basic

$ ( 0.07 ) $ 0.02 $ ( 0.13 ) $ —

Net income (loss) per common share, diluted

$ ( 0.07 ) $ 0.02 $ ( 0.13 ) $ —

See Notes to Unaudited Condensed Consolidated Financial Statements

9 unchanged sentences

Share-based compensation — — 842 — 842

Net loss — ( 9,634 ) ( 9,634 )

Net income (loss) — ( 9,634 ) ( 9,634 )

Balance— March 31, 2024

157,227,855 $ 1 $ 328,024 $ ( 281,357 ) $ 46,668

Common shares issued upon vesting of restricted share units, net of withholding 267,187 — ( 20 ) — ( 20 )

Share-based compensation — — 237 — 237

Net income (loss) — — — ( 11,057 ) ( 11,057 )

Balance—June 30, 2024

157,495,042 $ 1 $ 328,241 $ ( 292,414 ) $ 35,828

Balance—December 31, 2022

2 unchanged sentences

Share-based compensation — — 375 — 375

Net loss — — — ( 2,912 ) ( 2,912 )

Net income (loss) — — — ( 2,912 ) ( 2,912 )

Balance—March 31, 2023

152,432,914 $ 1 $ 325,737 $ ( 250,839 ) $ 74,899

Common shares issued upon vesting of restricted share units, net of withholding 392,204 — ( 6 ) — ( 6 )

Share-based compensation — — 624 — 624

Net income (loss) — — — 2,844 2,844

Balance—June 30, 2023

152,825,118 $ 1 $ 326,355 $ ( 247,995 ) $ 78,361

See Notes to Unaudited Condensed Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Three Months Ended March 31, (unaudited)

Six Months Ended June 30, (unaudited)

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Change in fair value of financial instruments

1,860 ( 5,351 )

Convertible debenture and other accrued interest 1,015 697

Inventory provision

Convertible debenture accrued interest 1,931 1,954

Share-based compensation

Changes in right-of-use assets 908 976

Change in fair value of financial instruments

720 ( 9,612 )

Gain on investment in unconsolidated entity — ( 10,700 )

(Gain)/loss on foreign currency transaction

( 1,430 ) 979

Other 238 957

Changes in operating assets and liabilities:

Accounts receivable, net

( 154 ) ( 1,104 )

Inventories, net

1 unchanged sentence

Prepaid expenses and other current assets

License and media rights

( 2,500 ) ( 2,000 )

Accounts payable, accrued and other liabilities

Operating lease obligations

( 1,121 ) ( 1,436 )

Accounts payable, accrued and other liabilities

License and media rights

( 2,500 ) ( 4,000 )

Income taxes receivable

Other operating assets and liabilities, net

20 unchanged sentences

( 269 ) ( 163 )

Non-cash issuance of note receivable — ( 156 )

See Notes to Unaudited Condensed Consolidated Financial Statements

5 unchanged sentences

Charlotte's Web Holdings, Inc.

together with its subsidiaries (collectively "Charlotte's Web" or the "Company") is a public company incorporated pursuant to the laws of the Province of British Columbia and is also a Certified B Corp.

together with its subsidiaries (collectively "Charlotte's Web" or the "Company") is a public company incorporated pursuant to the laws of the Province of British Columbia and a Certified B Corp.

The Company's common shares are publicly listed on the Toronto Stock Exchange ("TSX") under the symbol "CWEB" and quoted on the OTCQX under the symbol "CWBHF." The Company's corporate headquarters is located in Louisville, Colorado in the United States of America.

6 unchanged sentences

The Company does not currently have any plans to expand into such high THC products in the near future.

The Company's product categories include full spectrum hemp extract oil tinctures (liquid product), gummies, capsules, CBD topical creams and lotions, and pet products.

The Company's current product categories include full spectrum hemp extract oil tinctures (liquid product), gummies, capsules, soft-gels, CBD topical creams and lotions, and pet products.

The Company's products are distributed through its e-commerce website, third-party e-commerce websites, select distributors, health practitioners, and a variety of brick-and-mortar specialty retailers.

The Company grows its proprietary hemp domestically in the United States on farms leased in northeastern Colorado and sources hemp through contract farming operations in Arizona, Kentucky, Oregon, and Canada.

The Hemp grown in Canada is utilized exclusively in the Canadian markets or for research purposes and not in products sold within the United States.

7 unchanged sentences

Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates ("ASU") of the Financial Accounting Standards Board ("FASB").

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company's financial position as of March 31, 2024 and its results of operations for the three months ended March 31, 2024 and 2023, cash flows for the three months ended March 31, 2024 and 2023, and stockholders’ equity for the three months ended March 31, 2024 and 2023.

Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company's financial position as of June 30, 2024 and its results of operations for the three and six months ended June 30, 2024 and 2023, cash flows for the six months ended June 30, 2024 and 2023, and stockholders' equity for the three and six months ended June 30, 2024 and 2023.

Operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024.

The unaudited interim condensed consolidated financial statements presented herein do not contain the required disclosures under GAAP for annual consolidated financial statements.

14 unchanged sentences

The following table sets forth the disaggregation of the Company's revenue:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2024 2023 2024 2023

Direct-to-consumer $ 7,820 $ 10,734 $ 15,592 $ 22,002

1 unchanged sentence

Service revenue 74 — 385 —

Total revenue

$ 12,289 $ 16,006 $ 24,413 $ 33,016

1 unchanged sentence

Recently Adopted Accounting Pronouncements

There are no new accounting pronouncements adopted by the FASB that had or may have a material impact on the accompanying unaudited interim condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Other than described below, no new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") may have a material impact on the Company's consolidated financial statements and related disclosures.

There are no new recent accounting pronouncements that have been issued by the Financial Accounting Standards Board ("FASB") and adopted by the Company had or may have a material impact on the accompanying unaudited interim condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Other than described below, no new accounting pronouncements issued by the FASB may have a material impact on the Company's consolidated financial statements and related disclosures.

On December 14, 2023, the FASB issued a final standard on improvements to income tax disclosures, ASU 2023-09, Improvements to Income Tax Disclosures .

11 unchanged sentences

FAIR VALUE MEASUREMENT

The following table sets forth the Company's financial instruments that were measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023, by level within the fair value hierarchy:

March 31, 2024

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023, by level within the fair value hierarchy:

June 30, 2024

Level 1 Level 2 Level 3 Total

1 unchanged sentence

Stanley Brothers USA Holdings purchase option

$ — $ — $ 745 $ 745

Debt interest rate conversion feature — — 691 691

Total financial assets

$ — $ — $ 1,436 $ 1,436

Investment in unconsolidated entity:

6 unchanged sentences

Stanley Brothers USA Holdings purchase option

$ — $ — $ 1,730 $ 1,730

Debt interest rate conversion feature — — 872 $ 872

Total financial assets

$ — $ — $ 2,602 $ 2,602

Investment in unconsolidated entity:

2 unchanged sentences

Debt conversion option $ — $ 3,213 $ — 3,213

There were no transfers between levels of the hierarchy during the three months ended March 31, 2024, and the year ended December 31, 2023.

There were no transfers between levels of the fair value hierarchy during the three and six month periods ended June 30, 2024 and the year ended December 31, 2023.

Investment in Unconsolidated Entity

5 unchanged sentences

The entity was established to pursue FDA-approval for a botanical drug to target a neurological condition.

BAT holds an equity interest in DeFloria in the form of 200,000 or 100 % preferred units following its $ 10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

Effective February 12, 2024, BAT invested an additional $ 3 million into DeFloria in exchange for a convertible debenture.

The Company and AJNA each hold 400,000 or 50 %, respectively, of DeFloria's voting common units.

BAT holds an equity interest in DeFloria in the form of 200,000 or 100 % preferred units following its $ 10 million initial investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

In 2024, BAT and AJNA invested an additional $ 5 million and $ 2 million, respectively, into DeFloria in exchange for a convertible debenture.

The Company and AJNA each hold 400,000 or approximately 50 %, respectively, of DeFloria's voting common units.

The Company's contribution to DeFloria is a license permitting the use of certain proprietary hemp intellectual property, including clinical and consumer data.

1 unchanged sentence

AJNA's contribution to the entity is laboratory and regulatory services, clinical expertise, and the provision of clinical services.

DeFloria is expected to use the investments for the clinical development of a hemp botanical Investigational New Drug application and has commenced Phase I clinical development.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

( In thousands, except share, per share, per unit, and number of years)

expected to use the investments for the clinical development of a hemp botanical Investigational New Drug application and has commenced Phase I clinical development.

Concurrently with the formation of DeFloria, the Company was issued a warrant to purchase 865,052 shares of Class A Common Stock of AJNA for an exercise price of $ 2.89 per share.

1 unchanged sentence

All changes from the remeasurement of the warrant will be recorded as a change in fair value of financial instruments in the condensed consolidated statements of operations.

The Company determined the fair value of the AJNA warrants to be de minimis and as such no value was recorded as of March 31, 2024.

The Company determined the fair value of the AJNA warrants to be de minimis and as such no value was recorded as of June 30, 2024.

The Company determined that it has a variable interest in the investment in DeFloria;

5 unchanged sentences

Upon formation of the entity, the Company elected the fair value option because it allowed the investment to be valued based on current market conditions.

As such, the investment has been remeasured at fair value at each reporting date, with changes recognized in condensed consolidated statements of operations as changes in fair value of financial instruments for the period.

For the three months ended March 31, 2024, a loss of $ 800 , respectively, related to the investment in DeFloria was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

As of March 31, 2024 and December 31, 2023, the DeFloria investment represents an investment of $ 10,200 and $ 11,000 within the condensed consolidated balance sheets.

For the three and six month ending June 30, 2023, the Company recognized a gain for the initial investment in DeFloria of $ 10,700 within gain on initial investment in unconsolidated entity in the condensed consolidated statements of operations.

The investment has been remeasured at fair value at each reporting date, with changes recognized in condensed consolidated statements of operations as changes in fair value of financial instruments for the period.

For the three months ended June 30, 2024 and June 30, 2023, a gain of $ 1,000 and $ 0 , respectively, related to the investment in DeFloria was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

Additionally, for the six months ended June 30, 2024 and June 30, 2023, a gain of $ 200 and $ 0 , respectively, related to the investment in DeFloria was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

As of June 30, 2024 and December 31, 2023, the DeFloria investment represents an investment of $ 11,200 and $ 11,000 , respectively, within the condensed consolidated balance sheets.

The use of assumptions for the fair value determination includes a high degree of subjectivity and judgment using unobservable inputs (level 3 on the fair value hierarchy), which results in estimation uncertainty.

3 unchanged sentences

The following additional assumptions are used in the model:

March 31, December 31,

June 30, December 31,

Expected term (years)

3 unchanged sentences

Discount for lack of marketability 31.0 % 20.0 %

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

( In thousands, except share, per share, per unit, and number of years)

Convertible Debt Derivatives

6 unchanged sentences

("CBD") as an ingredient in food products and dietary supplements in the United States.

(The term "federal regulation" is defined as the date that federal laws in the United States permit, authorize or do not prohibit the use of CBD as an ingredient

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share, per share, per unit, and number of years)

in food products and dietary supplements).

(The term "federal regulation" is defined as the date that federal laws in the United States permit, authorize or do not prohibit the use of CBD as an ingredient in food products and dietary supplements).

Following federal regulation of CBD, the annualized rate of interest shall reduce to 1.5 %.

4 unchanged sentences

The debt interest rate conversion feature, if triggered, reduces the stated interest rate of the debenture to 1.5% upon federal regulation of CBD in the United States.

For the three months ended March 31, 2024 and March 31, 2023, a loss of $ 54 and $ 605 , respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

As of March 31, 2024 and December 31, 2023, the debt interest rate conversion feature represents a financial asset of $ 800 and $ 872 , respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

For the three months ended June 30, 2024 and June 30, 2023, a loss of $ 101 and a gain of $ 106 , respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

Additionally, for the six months ended June 30, 2024 and June 30, 2023, a loss of $ 154 and $ 506 , respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

As of June 30, 2024 and December 31, 2023, the debt interest rate conversion feature represents a financial asset of $ 691 and $ 872 , respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

To determine the value of the debt interest rate conversion feature, the Company utilizes a probability weighted income approach.

2 unchanged sentences

The following additional assumptions are used in the model:

March 31, December 31,

June 30, December 31,

Stated interest rate 5.0 % 5.0 %

9 unchanged sentences

Volatility is based on the actual historical market activity of the Company's shares.

The expected life is based on the remaining contractual term of the debenture and the risk-free interest rate is based on the implied yield available on U.S.

Treasury Securities with a maturity equivalent to the expected maturity of the debenture.

For the three months ended March 31, 2024 and March 31, 2023, a loss of $ 56 and a gain of $ 6,257 , respectively, related to the debt conversion option was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

As of March 31, 2024 and December 31, 2023, the debt conversion option represents a financial liability of $ 3,200 and $ 3,213 , respectively, within derivative and other long-term liabilities in the condensed consolidated balance sheets.

The expected life is based on the remaining contractual term of the debenture and the risk-free

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

( In thousands, except share, per share, per unit, and number of years)

interest rate is based on the implied yield available on U.S.

Treasury Securities with a maturity equivalent to the expected maturity of the debenture.

For the three months ended June 30, 2024 and June 30, 2023, a gain of $ 276 and $ 4,066 , respectively, related to the debt conversion option was recognized as a change in fair value of financial instruments in the condensed consolidated statements of operations.

For the six months ended June 30, 2024 and June 30, 2023, a gain of $ 220 and $ 10,361 , respectively, related to the debt conversion option was recognized as a change in fair value of financial instruments in the statements of operations.

As of June 30, 2024 and December 31, 2023, the debt conversion option represents a financial liability of $ 2,892 and $ 3,213 , respectively, within derivative and other long-term liabilities in the condensed consolidated balance sheets.

The following table provides the assumption regarding Level 2 fair value measurements inputs at their measurement dates:

March 31, December 31,

June 30, December 31,

Expected volatility

9 unchanged sentences

The SBH Purchase Option was purchased for total consideration of $ 8,000 and has a term of five years (extendable for an additional two years upon payment of additional consideration).

The SBH Purchase Option provides the Company the option to acquire all or substantially all the shares of Stanley Brothers USA on the earlier of February 26, 2024 and federal legalization of cannabis in the United States, or such earlier time as Stanley Brothers USA and the Company agree, at a purchase price to be determined at the time of exercise of the SBH Purchase Option.

The SBH Purchase Option provides the Company the option to acquire all or substantially all the shares of Stanley Brothers USA at a purchase price to be determined at the time of exercise of the SBH Purchase Option.

Upon exercise of the SBH Purchase Option, the purchase price will be determined based on application of predetermined multiples of Stanley Brothers USA revenue and earnings before interest, taxes, depreciation, and amortization ("EBITDA") measures.

7 unchanged sentences

Changes in fair value measurements, if significant, may affect performance of cash flows.

For the three months ended March 31, 2024 and 2023, a loss of $ 951 and $ 300 , respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments in the condensed consolidated statements of operations.

As of March 31, 2024 and December 31, 2023, the SBH Purchase Option represents a financial asset of $ 779 and $ 1,730 , respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

For the three months ended June 30, 2024 and June 30, 2023, a loss of $ 34 and a gain of $ 57 , respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments in the statements of operations.

For the six months ended June 30, 2024 and June 30, 2023, a loss of $ 985 and $ 243 , respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments in the condensed consolidated statements of operations.

As of June 30, 2024 and December 31, 2023, the SBH Purchase Option represents a financial asset of $ 745 and $ 1,730 , respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

( In thousands, except share, per share, per unit, and number of years)

The Monte Carlo valuation model considers multiple revenue and EBITDA outcomes for Stanley Brothers USA and other probabilities in assigning a fair value.

Primary assumptions utilized include financial projections of Stanley Brothers USA and the probability and timing of exercise.

The following additional assumptions are used in the model of the SBH Purchase Option:

March 31, December 31,

The following additional assumptions are used in the fair value model of the SBH Purchase Option:

June 30, December 31,

Expected volatility

4 unchanged sentences

51.8 % 50.6 %

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share, per share, per unit, and number of years)

Inventories consist of the following:

June 30, December 31,

Harvested hemp and seeds

5 unchanged sentences

( 7,240 ) ( 3,808 )

Total inventory

$ 18,673 $ 21,538

Inventory Provision

For the six months ended June 30, 2024, inventory provisions of $ 3,926 were expensed through cost of goods sold in the condensed consolidated statements of operations.

The increase in the inventory provision was primarily due to the revaluation on aged hemp based on current market conditions.

LICENSE AND MEDIA RIGHTS

4 unchanged sentences

As consideration under the MLB promotional rights agreement, the Company has paid and is committed to pay a combination of cash over the license period, along with upfront non-cash consideration in the form of equity, as well as contingent consideration in the form of contingent payments based on revenue.

As of March 31, 2024 and December 31, 2023, the carrying value of the licensed properties was $ 14,614 and $ 14,589 , respectively, recorded as a license and media rights asset within the condensed consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, the carrying value of the media rights was $ 4,000 and $ 4,982 recorded as a prepaid asset and a license and media rights asset within the condensed consolidated balance sheets.

For the three months ended March 31, 2024 and March 31, 2023, the Company paid the MLB $ 2,500 and $ 2,000 , respectively, as part of the committed cash payments, and recognized $ 974 and $ 1,824 , respectively, in amortization expense related to the license and media right assets.

Licensed properties are amortized straight line and media rights are amortized as incurred.

As of June 30, 2024 and December 31, 2023, the carrying value of the licensed properties was $ 13,640 and $ 14,589 , respectively, recorded as a license and media rights asset within the condensed consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, the

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

( In thousands, except share, per share, per unit, and number of years)

carrying value of the media rights was $ 3,950 and $ 4,982 recorded as a prepaid asset and a license and media rights asset within the condensed consolidated balance sheets.

For the three months ended June 30, 2024 and June 30, 2023, the Company paid MLB $ 0 and $ 2,000 , respectively, as part of the committed cash payments, and recognized $ 1,025 and $ 2,074 , respectively, in amortization expense related to the license and media right assets.

For the six months ended June 30, 2024 and June 30, 2023, the Company paid MLB $ 2,500 and $ 4,000 , respectively, as part of the committed cash payments, and recognized $ 1,999 and $ 3,897 , respectively, in amortization expense related to the license and media right assets.

Licensed properties are amortized straight line and media rights are amortized as incurred.

The MLB First Amendment agreement extended the maturities of the future payment by an additional 2 years.

Maturities of the MLB license and media rights payable as of March 31, 2024 are as follows:

Maturities of the MLB license and media rights payable as of June 30, 2024 are as follows:

2024 (6 months remaining)

4 unchanged sentences

Total non-current license and media rights payable

As of March 31, 2024, expected amortization of licensed properties are as follows:

As of June 30, 2024, expected amortization of licensed properties are as follows:

2024 (6 months remaining)

6 unchanged sentences

Following federal regulation of CBD, the stated annualized rate of interest shall reduce to 1.5 % .

Interest is accrued annually and payable on the maturity date or date of earlier conversion.

The maturity date for the debenture is November 14, 2029.

The following is a summary of the Company's convertible debenture as of March 31, 2024 :

As of March 31, 2024

The following is a summary of the Company's convertible debenture as of June 30, 2024 :

As of June 30, 2024

Principal Amount Unamortized Debt Discount and Costs Net Carrying Amount

10 unchanged sentences

The debenture was C$ 75.3 million per the subscription agreement and translated to USD on the transaction date.

For the three months ended March 31, 2024 and March 31, 2023 , the Company recognized a foreign currency gain of $ 925 and $ 12 , respectively, related to the net carrying value of the debenture within the condensed consolidated statements of operations .

For the three months ended June 30, 2024 and June 30, 2023, the Company recognized a foreign currency gain of $ 430 and a loss of $ 831 , respectively, related to the net carrying value of the debenture within the condensed consolidated statement of operations .

Additionally, f or the six months ended June 30, 2024 and June 30, 2023 , the Company recognized a foreign currency gain of $ 1,355 and a loss of $ 820 , respectively, related to the net carrying value of the debenture within the condensed consolidated statement of operations .

Interest is accrued annually and payable on the maturity date or date of earlier conversion.

On conversion, accrued interest will either be converted into common shares equal to the amount of accrued interest or will be paid in cash if agreed with the Lender.

As of March 31, 2024 and December 31, 2023 , the principal amount of the debenture includes $ 3,915 and $ 3,182 , respectively, of accrued interest expense.

The following is a summary of the interest expense and amortization expense, recorded within the condensed consolidated statements of operation, of the Company's convertible debenture for the three months ended March 31, 2024:

Three Months Ended March 31,

As of June 30, 2024 and June 30, 2023 , the principal amount of the debenture includes $ 4,636 and $ 1,777 , respectively, of accrued interest expense.

The following is a summary of the interest expense and amortization expense, recorded within the statement of operation, of the Company's convertible debenture for the three and six months ended June 30, 2024 and June 30, 2023 :

Three Months Ended June 30, Six Months Ended June 30,

Interest and Amortization Expense 2024 2023 2024 2023

Interest expense $ 721 $ 701 $ 1,454 $ 1,398

Amortization of debt discounts and costs 427 349 828 668

Total interest and amortization expense

$ 1,134 $ 1,016

Total $ 1,148 $ 1,050 $ 2,282 $ 2,066

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business.

Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that as of March 31, 2024 there is no litigation pending that could have, individually and in the aggregate, a material adverse effect on the Company’s financial position, results of operations or cash flows.

Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that as of June 30, 2024 there is no litigation pending that could have, individually and in the aggregate, a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company has lease arrangements related to office space, warehouse and production space, and land to facilitate agricultural operations.

4 unchanged sentences

( In thousands, except share, per share, per unit, and number of years)

Maturities of operating lease liabilities as of March 31, 2024 are as follows:

Maturities of operating lease liabilities as of June 30, 2024 are as follows:

Operating Leases

6 unchanged sentences

SHAREHOLDERS’ EQUITY

As of March 31, 2024 and December 31, 2023, the Company's share capital consists of one class of issued and outstanding shares:

As of June 30, 2024 and December 31, 2023, the Company’s share capital consists of one class of issued and outstanding shares:

common shares.

2 unchanged sentences

Common Shares

As of March 31, 2024 and December 31, 2023, the Company was authorized to issue an unlimited number of common shares, which have no par value.

LOSS PER SHARE

The Company computes loss per share of common shares.

Basic net loss per common share is computed by dividing the net loss by the weighted-average number of common shares outstanding.

Diluted loss per common share is computed by dividing the net loss by the weighted-average number of common shares together with the number of additional common shares that would have been outstanding if all potentially dilutive common shares had been issued, unless anti-dilutive.

The following table sets forth the computation of basic and dilutive net loss per share attributable to common shareholders:

Three Months Ended March 31,

Net loss $ ( 9,634 ) $ ( 2,912 )

As of June 30, 2024 and December 31, 2023, the Company was authorized to issue an unlimited number of common shares, which have no par value.

INCOME (LOSS) PER SHARE

The Company computes income (loss) per share of common shares.

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding.

Diluted income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common shares together with the number of additional common shares that would have been outstanding if all potentially dilutive common shares had been issued, unless anti-dilutive.

The following table sets forth the computation of basic and dilutive net income (loss) per share attributable to common shareholders:

Three Months Ended June 30,

Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ ( 11,057 ) $ 2,844 $ ( 20,691 ) $ ( 67 )

Weighted-average number of common shares - basic 157,227,855 152,481,470 156,632,263 152,398,273

Dilutive effect of stock options and awards — —

Dilutive effect of securities — 278,618 — —

Weighted-average number of common shares - diluted

157,227,855 152,760,088 156,632,263 152,398,273

Loss per common share – basic and diluted $ ( 0.06 ) $ ( 0.02 )

As of March 31, 2024 and March 31, 2023, potentially dilutive securities include stock options, restricted share units, common share warrants, and convertible debenture conversion.

When the Company recognizes a net loss from continuing operations, all potentially

Income (loss) per common share – basic $ ( 0.07 ) $ 0.02 $ ( 0.13 ) $ —

Income (loss) per common share – diluted $ ( 0.07 ) $ 0.02 $ ( 0.13 ) $ —

As of June 30, 2024 and June 30, 2023, potentially dilutive securities include stock options, restricted share units, and convertible debenture conversion.

When the Company recognizes a net loss from continuing operations, all potentially dilutive shares are anti-dilutive

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

( In thousands, except share, per share, per unit, and number of years)

dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per share.

The potentially dilutive awards outstanding for each period are presented in the table below:

and are consequently excluded from the calculation of diluted net loss per share.

As such, for the three and six months ended June 30, 2024 and for the six months ended June 30, 2023, all potentially dilutive shares have been excluded.

When the Company recognizes net income from continuing operations, the Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period.

Three Months Ended June 30,

Six Months Ended June 30,

2024 2023 2024 2023

Outstanding options 4,523,486 7,012,707 4,523,486 7,012,707

4 unchanged sentences

If the convertible debenture in diluted EPS is anti-dilutive, or if the conversion value of the debenture does not exceed their conversion price for a reporting period, then the shares underlying the notes will not be reflected in the Company’s calculation of diluted EPS.

For the three months ended March 31, 2024, the price of the Company's shares did not exceed the conversion price and therefore there was no impact to potential common share diluted EPS during those periods.

For the three and six months ended June 30, 2024 and June 30, 2023, the price of the Company’s Shares did not exceed the conversion price and therefore there was no impact to diluted EPS during those periods.

SHARE-BASED COMPENSATION

3 unchanged sentences

Upon the exercise of any stock options, the Company issues shares to the award holder from the pool of authorized but unissued common shares.

There were no options granted for the three months ended March 31, 2024.

The fair values of options granted for the three months ended March 31, 2023 were determined using a Black-Scholes model.

The following principal inputs were used in the valuation of awards issued for the three months ended March 31, 2023:

Three Months Ended March 31,

There were no options granted for the six months ended June 30, 2024.

The fair values of options granted for the six months ended June 30, 2023 were determined using a Black-Scholes model.

The following principal inputs were used in the valuation of awards issued for the six months ended June 30, 2023:

Six Months Ended June 30,

Expected volatility

6 unchanged sentences

( In thousands, except share, per share, per unit, and number of years)

Detail of the number of stock options outstanding for the three months ended March 31, 2024 under the Company's 2015 legacy option plan and the Company's amended 2018 long term incentive plan (collectively, the "Plans") is as follows:

Detail of the number of stock options outstanding for the six months ended June 30, 2024 under the Company's 2015 legacy option plan and the Company's amended 2018 long term incentive plan (collectively, the "Plans") is as follows:

Number of Options

5 unchanged sentences

( 1,256,648 ) 0.50

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

4,523,486 $ 0.83 7.94 $ —

Exercisable/vested as of March 31, 2024

Exercisable/vested as of June 30, 2024

3,442,986 $ 0.89 7.69 $ —

There were no options granted during the three months ended March 31, 2024.

The weighted average grant-date fair value of options granted during the three months ended March 31, 2023 was $ 0.56 .

There were no options exercised during the three months ended March 31, 2024 and 2023.

There were no options granted during the six months ended June 30, 2024.

The weighted average grant-date fair value of options granted during the six months ended June 30, 2023 was $ 0.38 .

There were no options exercised during the six months ended June 30, 2024 and 2023.

Restricted share units

The Company has issued time-based restricted share units to certain employees as permitted under the amended 2018 long term incentive plan ("the 2018 Plan").

The Company has issued time-based restricted share units to certain employees as permitted under the 2018 long term incentive plan ("the 2018 Plan").

The restricted share units granted vest in accordance with the board-approved agreement, typically over equal installments up to four years .

Upon vesting, one common share of the Company is issued for each restricted share unit awarded.

Upon vesting, one share of the Company’s common shares is issued for each restricted share unit awarded.

The fair value of each restricted share unit granted is equal to the market price of the Company’s shares at the date of the grant.

The fair value of shares vested during the three months ended March 31, 2024 and 2023 was $ 869 and $ 740 , respectively.

The fair value of shares vested during the six months ended June 30, 2024 and 2023 was $ 946 and $ 872 , respectively.

Details of the number of restricted share units outstanding under the 2018 Plan is as follows:

Number of Shares

Grant Date Fair Value

Average Grant Date Fair Value

Outstanding as of December 31, 2023

2 unchanged sentences

( 898,685 ) $ 0.24

( 3,162,676 ) $ 0.30

Shares withheld upon vesting

( 627,359 ) $ 0.49

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

5,583,322 $ 0.26

Share-based Compensation Expense

Share-based compensation expense for all equity arrangements for the three months ended March 31, 2024 and 2023 was $ 842 and $ 375 , respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

As of March 31, 2024, $ 1,783 of total unrecognized share-based compensation expense related to unvested options granted to employees is expected to be recognized over a weighted-average period of 2.25 years.

Share-based compensation expense for all equity arrangements for the three months ended June 30, 2024 and 2023 was $ 237 and $ 624 , respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

( In thousands, except share, per share, per unit, and number of years)

The Company reported income tax expense of $ 16 and $ 0 for the three months ended March 31, 2024 and 2023, respectively.

The Company's effective tax rate in the three months ended March 31, 2024 and 2023 was ( 0.2 )% and 0 %, respectively.

compensation expense for all equity arrangements for the six months ended June 30, 2024 and 2023 was $ 1,079 and $ 999 , respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

As of June 30, 2024, $ 2,776 of total unrecognized share-based compensation expense related to unvested options and restricted stock units granted to employees is expected to be recognized over a weighted-average period of 2.17 years.

The Company reported income tax expense of $ 46 and $ 0 for the three months ended June 30, 2024 and 2023, respectively.

Additionally, income tax expense for the six months ended June 30, 2024 and 2023 was of $ 62 and $ 0 , respectively.

The Company's effective tax rate for the three and six months ended June 30, 2024 and June 30, 2023 was 0.2 % and 0 % .

The Company’s effective tax rates differ from the U.S.

federal statutory rate of 21.0 % for the three months end March 31, 2024 and 2023 , respectively, primarily due to the valuation allowance.

The effective tax rate for the three months ended March 31, 2024 is consistent with the three months ended March 31, 2023, as the Company has been in a full valuation allowance for both periods.

federal statutory rate of 21% for the three and six months end June 30, 2024 and June 30, 2023 , respectively, primarily due to the valuation allowance.

The effective tax rate for the three and six months ended June 30, 2024 is consistent with the three and six months ended June 30, 2023 , as the Company has been in a full valuation allowance for both periods.

RELATED PARTY TRANSACTIONS

10 unchanged sentences

AJNA is partially owned and was co-founded by a co-founder of Charlotte's Web.

BAT holds an equity interest in the entity in the form of 200,000 preferred units following its $ 10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

BAT holds an equity interest in the entity in the form of 200,000 preferred units following its initial $ 10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

The Company and AJNA each hold 400,000 of the entity's voting common units (Note 3).

1 unchanged sentence

The principal and interest of the note receivable will be paid in 36 monthly installments.

As of March 31, 2024 , the remaining note receivable of $ 113 is presented in other assets in the condensed consolidated balance sheets.

On February 12, 2024, BAT invested an additional $ 3 million in DeFloria in the form of convertible debt (refer to Note 3).

As of June 30, 2024 , the remaining note receivable of $ 99 , is presented in other assets in the condensed consolidated balance sheets.

In 2024, BAT and AJNA invested an additional $ 5 million and $ 2 million, respectively, in DeFloria in the form of convertible debt (refer to Note 3).

Additionally, on February 12, 2024, the Company and DeFloria entered into a separate master services agreement pursuant to which the Company will be compensated for the provision of certain services to DeFloria.

For the three months ended March 31, 2024, the Company recognized $ 311 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria.

Additionally, the Company has an accounts receivable balance due from DeFloria of $ 74 for the three months ended March 31, 2024.

For the three and six months ended June 30, 2024, the Company recognized $ 74 and $ 385 in revenue and cost of goods sold, respectively, related to the service agreement with DeFloria.

Additionally, the Company has an accounts receivable balance due from DeFloria of $ 74 , for the three and six months ended June 30, 2024, respectively.

On June 21, 2024, the Company entered into a consulting agreement with Jared Stanley, Co-Founder of Charlotte's Web, former executive of the Company, and current member of the Board of Directors.

The consulting agreement will remain in effect until June 13, 2025.

In consideration for Mr.

Stanley's services, he will receive a bi-weekly fee of $ 6 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements