What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-08 · 151 added, 136 removed, 475 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30, December 31,

2024 (unaudited)

38 unchanged sentences

unlimited shares authorized;

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

157,762,229 and 154,332,366 shares issued and outstanding as of September 30, 2024 and December 31, 2023

Additional paid-in capital

9 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended June 30, (unaudited)

Six Months Ended June 30, (unaudited)

Three Months Ended September 30, (unaudited)

Nine Months Ended September 30, (unaudited)

2024 2023 2024 2023

6 unchanged sentences

Gain on initial investment in unconsolidated entity

— 10,700 — 10,700

Change in fair value of financial instruments

2 unchanged sentences

( 1,189 ) 841 ( 584 ) ( 1,234 )

Income (loss) before provision for income taxes

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

Income tax benefit (expense)

Loss before provision for income taxes

( 5,787 ) ( 15,143 ) ( 26,416 ) ( 15,211 )

Net income (loss)

Income tax expense

$ ( 5,787 ) $ ( 15,143 ) $ ( 26,478 ) $ ( 15,211 )

Per common share amounts (Note 10)

Net income (loss) per common share, basic

$ ( 0.07 ) $ 0.02 $ ( 0.13 ) $ —

Net income (loss) per common share, diluted

Net loss per common share, basic and diluted

$ ( 0.04 ) $ ( 0.10 ) $ ( 0.17 ) $ ( 0.10 )

18 unchanged sentences

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

Common shares issued upon vesting of restricted share units, net of withholding 267,187 — ( 15 ) — ( 15 )

Share-based compensation — — 217 — 217

Net income (loss) — — — ( 5,787 ) ( 5,787 )

Balance—September 30, 2024

157,762,229 $ 1 $ 328,443 $ ( 298,201 ) $ 30,243

Balance—December 31, 2022

10 unchanged sentences

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

Common shares issued upon vesting of restricted share units, net of withholding 954,738 — ( 127 ) — ( 127 )

Share-based compensation — — 647 — 647

Net income (loss) — — — ( 15,143 ) ( 15,143 )

Balance—September 30, 2023

153,779,856 $ 1 $ 326,875 $ ( 263,138 ) $ 63,738

See Notes to Unaudited Condensed Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Six Months Ended June 30, (unaudited)

Nine Months Ended September 30, (unaudited)

Cash flows from operating activities:

3 unchanged sentences

Inventory provision

Convertible debenture accrued interest 1,931 1,954

Convertible debenture and other accrued interest

Share-based compensation

Changes in right-of-use assets 1,373 1,453

Allowance for credit losses 138 1,187

Change in fair value of financial instruments

( 702 ) ( 5,588 )

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

(Gain)/loss on foreign currency transaction

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

Gain on foreign currency transaction

( 870 ) ( 63 )

6 unchanged sentences

Prepaid expenses and other current assets

1,305 ( 589 )

Accounts payable, accrued and other liabilities

( 1,266 ) ( 328 )

Operating lease obligations

24 unchanged sentences

Non-cash purchase of property and equipment and intangible assets

( 269 ) ( 163 )

Non-cash issuance of note receivable — ( 142 )

11 unchanged sentences

Hemp extracts are produced from the plant Cannabis sativa L.

("Cannabis"), and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol ("THC") concentration of not more than 0.3% on a dry weight basis ("Hemp").

("Cannabis" or "CBD"), and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol ("THC") concentration of not more than 0.3% on a dry weight basis ("hemp").

The Company is engaged in research involving the effectiveness of a broad variety of compounds derived from hemp.

1 unchanged sentence

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

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 current product categories include full spectrum hemp extract oil tinctures (liquid product), gummies, capsules, soft-gels, CBD topical creams and lotions, broad spectrum botanical CBD, mushrooms, 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, Colorado, 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.

5 unchanged sentences

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S.

generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

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 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.

generally accepted accounting principles ("U.S.

GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Any reference in these notes to applicable guidance is meant to refer to U.S.

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 September 30, 2024 and its results of operations for the three and nine months ended September 30, 2024 and 2023, cash flows for the nine months ended September 30, 2024 and 2023, and stockholders' equity for the three and nine months ended September 30, 2024 and 2023.

Operating results for the three and nine months ended September 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 U.S.

GAAP for annual consolidated financial statements.

Certain amounts presented in prior periods have been reclassified to conform with the current period presentation.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2023 included in the Company's Annual Report on Form 10-K filed with the SEC on March 21, 2024.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2023 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 21, 2024.

Inventories are stated at the lower of cost or net realizable value.

8 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2024 2023 2024 2023

2 unchanged sentences

Service revenue 74 — 459 —

Total revenue

$ 12,587 $ 14,294 $ 37,000 $ 47,310

1 unchanged sentence

Recently Adopted Accounting Pronouncements

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.

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

Recently Issued Accounting Pronouncements Not Yet Adopted

8 unchanged sentences

The guidance is effective for calendar year public entities in 2024 year-end financial statements and should be adopted retrospectively unless impracticable.

The Company is currently evaluating the impact, if any, that the updated standard will have on the Company's consolidated financial statements and related disclosures.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

Company is currently evaluating the impact, if any, that the updated standard will have on the Company's consolidated financial statements and related disclosures.

FAIR VALUE MEASUREMENT

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

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

September 30, 2024

Level 1 Level 2 Level 3 Total

21 unchanged sentences

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

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.

There were no transfers between levels of the fair value hierarchy and there were no changes in the fair value methodologies during the three and nine month periods ended September 30, 2024 and the year ended December 31, 2023.

Investment in Unconsolidated Entity

4 unchanged sentences

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

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

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

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.

1 unchanged sentence

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.

Additionally, the Company has a supply agreement with DeFloria, under which the Company supplies the oils at cost used to produce and develop the new drug.

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

The Company's contribution to DeFloria is a license

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.

permitting the use of certain proprietary hemp intellectual property, including clinical and consumer data.

Additionally, the Company has a supply agreement with DeFloria, under which the Company supplies the oils at cost used to produce and develop the new drug.

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.

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 June 30, 2024.

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

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.

For the nine month ended September 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 the condensed consolidated statements of operations as changes in fair value of financial instruments for the period.

For the three months ended September 30, 2024 and September 30, 2023, a gain of $ 200 and $ 400 , 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 nine months ended September 30, 2024 and September 30, 2023, a gain of $ 400 and $ 400 , 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 September 30, 2024 and December 31, 2023, the DeFloria investment represents an investment of $ 11,400 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:

June 30, December 31,

September 30, December 31,

Expected term (years)

11 unchanged sentences

BTI) (the "Lender"), providing for the issuance of $ 56.8 million (C$ 75.3 million) convertible debenture (the "debenture").

The debenture was denominated in Canadian Dollars ("CAD" or "C$").

The debenture is convertible into 19.9 % ownership of the Company's common shares at a conversion price of C$ 2.00 per common share of the Company on the TSX.

The debenture will accrue interest at a stated annualized rate of 5 % until such time that there is federal regulation permitting the use of cannabidiol, a phytocannabinoid derived from the plant Cannabis sativa L.

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

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 in food products and dietary supplements).

2 unchanged sentences

Debt Interest Rate Conversion Feature

The debt interest rate conversion feature is classified as a financial asset and is 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.

The debt interest rate conversion feature is classified as a financial asset and is remeasured at fair value at each reporting date, with changes recognized in the condensed consolidated statements of operations as changes in fair value of financial instruments for the period.

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 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.

For the three months ended September 30, 2024 and September 30, 2023, a gain of $ 259 and a loss of $ 38 , 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 nine months ended September 30, 2024 and September 30, 2023, a gain of $ 105 and a loss $ 544 , 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 September 30, 2024 and December 31, 2023, the debt interest rate conversion feature represents a financial asset of $ 958 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:

June 30, December 31,

September 30, December 31,

Stated interest rate 5.0 % 5.0 %

5 unchanged sentences

Per the debenture, the Lender has the option, at any time before the Maturity Date at no additional consideration, for all or any part of the principal amount to be converted into fully paid and non-assessable common shares.

The Company assessed this conversion feature and determined that the debt conversion option is an embedded derivative that requires bifurcation and is classified as a financial liability.

The Company assessed this conversion feature and determined that the debt conversion option is an embedded derivative that requires bifurcation and is classified as a financial liability within the condensed consolidated balance sheet.

The debt conversion option is initially measured at fair value and is revalued at each reporting period using the Black-Scholes option pricing model based on Level 2 observable inputs.

The assumptions used by the Company are the quoted price of the Company's common shares in an active market, risk-free interest rate, volatility and expected life, and assumes no dividends.

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

The assumptions used by the Company are the quoted price of the Company's common shares in an active market, risk-free interest rate, volatility and expected life, and assumes

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.

no dividends.

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 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:

June 30, December 31,

For the three months ended September 30, 2024 and September 30, 2023, a gain of $ 1,338 and a loss of $ 4,661 , 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 nine months ended September 30, 2024 and September 30, 2023, a gain of $ 1,558 and $ 5,700 , 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 September 30, 2024 and December 31, 2023, the debt conversion option represents a financial liability of $ 1,589 and $ 3,213 , respectively, within derivative and other long-term liabilities in the condensed consolidated balance sheets.

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

September 30, December 31,

Expected volatility

19 unchanged sentences

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

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.

For the three months ended September 30, 2024 and September 30, 2023, a loss of $ 375 and a gain of $ 275 , respectively, related to the SBH Purchase Option was recognized as change in fair value of financial instruments in the statements of operations.

For the nine months ended September 30, 2024 and September 30, 2023, a loss of $ 1,360 and a gain of $ 32 , 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 September 30, 2024 and December 31, 2023, the SBH Purchase Option represents a financial asset of $ 370 and $ 1,730 , respectively, within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

CHARLOTTE’S WEB HOLDINGS, INC.

4 unchanged sentences

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

June 30, December 31,

September 30, December 31,

Expected volatility

5 unchanged sentences

Inventories consist of the following:

June 30, December 31,

September 30, December 31,

Harvested hemp and seeds

8 unchanged sentences

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.

For the nine months ended September 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.

For the nine months ended September 30, 2024, write-offs of inventory previously reserved for of $ 5,041 were recognized.

Additionally, for the nine months ended September 30, 2024 and 2023, the Company sold harvested hemp that had a full inventory provision.

The sale of hemp resulted in a $ 235 and $ 12,854 reduction to the inventory provision as of September 30, 2024 and 2023, respectively.

LICENSE AND MEDIA RIGHTS

3 unchanged sentences

The First Amendment extended the agreement through December 31, 2027, with an aggregate rights fee of $ 23 million for the remainder of the term.

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 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.

As of September 30, 2024 and December 31, 2023, the carrying value of the licensed properties was $ 12,666 and $ 14,589 , respectively, recorded as a license and media rights asset within the condensed consolidated balance sheets.

As of September 30, 2024 and December 31, 2023, the carrying value of the media rights was $ 3,150 and $ 4,982 , respectively, recorded as a prepaid asset and a license and media rights asset within the condensed consolidated balance sheets.

For the three months ended September 30, 2024 and September 30, 2023, the Company paid MLB $ 2,500 and $ 2,000 , respectively, as part of the committed cash payments, and recognized $ 1,774 and $ 2,949 , respectively, in amortization expense related to the license and media right assets.

For the nine months ended September 30, 2024 and September 30, 2023, the Company paid MLB $ 5,000 and $ 6,000 , respectively, as part of the committed cash payments, and recognized $ 3,773 and $ 6,846 , 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 June 30, 2024 are as follows:

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

2024 (3 months remaining)

4 unchanged sentences

Total non-current license and media rights payable

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

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

2024 (3 months remaining)

2 unchanged sentences

On November 14, 2022, the Company entered into the Subscription Agreement with BT DE Investments, Inc., providing for the issuance of a $ 56.8 million ( C$ 75.3 million ) convertible debenture.

The debenture was denominated in Canadian Dollars ("CAD" or "C$").

The debenture is convertible into 19.9 % ownership of the Company’s common shares at a conversion price of C$ 2.00 per common share of the Company.

2 unchanged sentences

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

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

Convertible Debenture

Convertible debenture due November 2029 $ 59,668 $ ( 16,213 ) $ 43,455

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

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

As of September 30, 2024

Principal Amount Unamortized Debt Discount and Costs Net Carrying Amount

Convertible Debenture

Convertible debenture due November 2029 $ 61,115 $ ( 15,945 ) $ 45,170

The following is a summary of the Company's convertible debenture as of December 31, 2023 :

3 unchanged sentences

Convertible debenture due November 2029 $ 60,116 $ ( 17,588 ) $ 42,528

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

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 .

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

For the three months ended September 30, 2024 and September 30, 2023, the Company recognized a foreign currency loss of $ 533 and a gain of $ 994 , respectively, related to the net carrying value of the debenture within the condensed consolidated statement of operations.

Additionally, for the nine months ended September 30, 2024 and September 30, 2023, the Company recognized a foreign currency gain of $ 822 and $ 174 , 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 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,

As of September 30, 2024 and September 30, 2023, the principal amount of the debenture includes $ 5,360 and $ 2,479 , respectively, of accrued interest expense.

Three Months Ended September 30, Nine Months Ended September 30,

Interest and Amortization Expense 2024 2023 2024 2023

5 unchanged sentences

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 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.

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 September 30, 2024 there is no litigation pending that could have, individually or 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.

The leases have remaining lease terms of less than one to eleven years , some of which include options to extend the leases for up to five years .

The leases have remaining lease terms of less than one year to ten years , some of which include options to extend the leases for up to five years .

Generally, the lease agreements do not include options to terminate the lease.

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

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

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

Operating Leases

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SHAREHOLDERS’ EQUITY

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

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

common shares.

The Company is also authorized to issue preferred shares issuable in series.

To date, no shares of preferred shares have been issued or are outstanding.

To date, no preferred shares have been issued or are outstanding.

Common Shares

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,

As of September 30, 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 September 30,

Nine Months Ended September 30,

2024 2023 2024 2023

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

$ ( 5,787 ) $ ( 15,143 ) $ ( 26,478 ) $ ( 15,211 )

Weighted-average number of common shares - basic 157,495,042 153,094,229 156,921,955 152,632,806

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157,495,042 153,094,229 156,921,955 152,632,806

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

Loss per common share – basic

$ ( 0.04 ) $ ( 0.10 ) $ ( 0.17 ) $ ( 0.10 )

Loss per common share – diluted

$ ( 0.04 ) $ ( 0.10 ) $ ( 0.17 ) $ ( 0.10 )

As of September 30, 2024 and September 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

CHARLOTTE’S WEB HOLDINGS, INC.

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

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

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:

Three and Nine Months Ended September 30,

Outstanding options 3,742,095 6,535,407

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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 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.

For the three and nine months ended September 30, 2024 and September 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

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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 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,

There were no options granted for the nine months ended September 30, 2024.

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

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

Nine Months Ended September 30,

Expected volatility

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

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:

Detail of the number of stock options outstanding for the nine months ended September 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

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( 2,038,039 ) 0.56

Outstanding as of June 30, 2024

Outstanding as of September 30, 2024

3,742,095 $ 0.86 7.56 $ —

Exercisable/vested as of June 30, 2024

Exercisable/vested as of September 30, 2024

2,810,305 $ 0.93 7.19 $ —

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.

There were no options granted during the nine months ended September 30, 2024.

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

There were no options exercised during the nine months ended September 30, 2024 and 2023.

Restricted share units

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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 six months ended June 30, 2024 and 2023 was $ 946 and $ 872 , respectively.

The fair value of shares vested during the nine months ended September 30, 2024 and 2023 was $ 1,024 and $ 1,150 , respectively.

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

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( 735,172 ) $ 0.46

Outstanding as of June 30, 2024

Outstanding as of September 30, 2024

4,956,167 $ 0.26

Share-based Compensation Expense

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.

Share-based compensation expense for all equity arrangements for the three months ended September 30, 2024 and 2023 was $ 217 and $ 647 , respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

CHARLOTTE’S WEB HOLDINGS, INC.

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

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 % .

based compensation expense for all equity arrangements for the nine months ended September 30, 2024 and 2023 was $ 1,296 and $ 1,646 , respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

As of September 30, 2024, $ 1,461 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 2.11 years.

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

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

The Company's effective tax rate as of September 30, 2024 and September 30, 2023 was 0.2 % and 0 %, respectively .

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

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.

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

The effective tax rate as of September 30, 2024 is consistent with the nine months ended September 30, 2023 , as the Company has been in a full valuation allowance for both periods.

RELATED PARTY TRANSACTIONS

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The note receivable was secured by equity instruments with certain founders of the Company, bore interest at 3.25 % per annum, and required the unpaid principal and unpaid interest balances to be paid on or before the maturity date of November 13, 2021.

Effective December 28, 2023, the Company entered into a second amendment of the promissory note to extend the maturity date until November 13, 2024.

Effective November 13, 2024, the Company entered into a third amendment of the promissory note to extend the maturity date until November 13, 2029.

According to the terms of the agreement, no additional interest will accrue through the payment date.

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The SBH Purchase Option was purchased for total consideration of $ 8,000 .

Certain founder s of the Company, who are or were employees at the time, are the majority shareholders of Stanley Brothers USA.

Certain founder s of the Company, who are or were employees of the Company at the time, are the majority shareholders of Stanley Brothers USA.

On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA and BAT.

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

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

As of September 30, 2024 , the remaining note receivable of $ 85 , 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 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.

For the three and nine months ended September 30, 2024, the Company recognized $ 74 and $ 459 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 as of September 30, 2024.

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.

3 unchanged sentences

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