What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-14 · 213 added, 236 removed, 390 unchanged (54% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30, December 31,

2025 (unaudited)

30 unchanged sentences

License and media rights payable 9,227 11,809

11,636 11,338

Derivatives and other long-term liabilities

Derivative and other long-term liabilities 1,236 1,327

Total liabilities

4 unchanged sentences

unlimited shares authorized;

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

158,009,541 and 158,009,541 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Additional paid-in capital

9 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended September 30, (unaudited)

Nine Months Ended September 30, (unaudited)

2024 2023 2024 2023

Three Months Ended March 31, (unaudited)

Revenue $ 12,262 $ 12,124

4 unchanged sentences

( 5,348 ) ( 8,369 )

Gain on initial investment in unconsolidated entity

Change in fair value of financial instruments

1 unchanged sentence

Other income (expense), net

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

Loss before provision for income taxes

16 unchanged sentences

Share-based compensation — — 187 — 187

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

Net loss — ( 6,212 ) ( 6,212 )

Balance—March 31, 2025

158,009,541 $ 1 $ 328,842 $ ( 307,781 ) $ 21,062

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

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, 2023

2 unchanged sentences

Share-based compensation — 842 — 842

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

Net 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 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

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)

Nine Months Ended September 30, (unaudited)

Three Months Ended March 31, (unaudited)

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Inventory provision

Change in fair value of financial instruments

Convertible debenture and other accrued interest 868 1,015

Share-based compensation

Changes in right-of-use assets 473 443

Allowance for credit losses 138 1,187

Change in fair value of financial instruments

( 702 ) ( 5,588 )

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

Gain on foreign currency transaction

( 870 ) ( 63 )

Other 524 1,657

Share-based compensation

Changes in operating assets and liabilities:

Accounts receivable, net

( 167 ) ( 1,151 )

Inventories, net

( 1,884 ) 3,593

Prepaid expenses and other current assets

1,305 ( 589 )

Accounts payable, accrued and other liabilities

( 1,266 ) ( 328 )

Operating lease obligations

( 1,701 ) ( 1,722 )

License and media rights

Operating lease obligations

( 605 ) ( 551 )

Income taxes receivable

Accounts payable, accrued and other liabilities

Other operating assets and liabilities, net

( 304 ) ( 449 )

Net cash used in operating activities

8 unchanged sentences

Net cash used in financing activities

( 133 ) ( 202 )

Net decrease in cash and cash equivalents

6 unchanged sentences

Non-cash purchase of property and equipment and intangible assets

Non-cash issuance of note receivable — ( 142 )

$ ( 83 ) $ ( 374 )

See Notes to Unaudited Condensed Consolidated Financial Statements

8 unchanged sentences

The majority of the Company's business is conducted in the United States of America.

The Company's primary products are made from proprietary strains of whole-plant hemp extracts containing a full spectrum of phytocannabinoids, terpenes, flavonoids and other hemp compounds.

The Company's primary products are made from high quality and proprietary strains of whole-plant hemp extracts containing a full spectrum of phytocannabinoids, terpenes, flavonoids, and other hemp compounds.

Hemp extracts are produced from the plant Cannabis sativa L.

("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.

The Company is engaged in research involving the effectiveness of a broad variety of compounds derived from hemp, as well as other botanical-based wellness products such as functional mushrooms.

The Company does not currently produce or sell medical or recreational marijuana or products derived from high THC cannabis plants.

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, 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, and Canada.

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

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

9 unchanged sentences

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.

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, 2025 and its results of operations for the three months ended March 31, 2025 and 2024, cash flows for the three months ended March 31, 2025 and 2024, and stockholders’ equity for the three months ended March 31, 2025 and 2024.

Operating results for the three months ended March 31, 2025, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025.

The unaudited interim condensed consolidated financial statements presented herein do not contain the required disclosures under U.S.

1 unchanged sentence

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

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

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.

related notes as of and for the year ended December 31, 2024, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 19, 2025.

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

4 unchanged sentences

Revenue Recognition

The majority of the Company's revenue is derived from sales of branded products to consumers via the Company's direct-to-consumer e-commerce website, as well as distributors, retail and wholesale business-to-business customers.

Additionally, on February 12, 2024, the Company and DeFloria LLC ("DeFloria") entered into a Master Services Agreement ("Services Agreement") pursuant to which the Company is compensated for the provision of certain services to DeFloria.

The service revenue is due to the Company and DeFloria, Inc.

("DeFloria") entering into a Master Services Agreement ("Services Agreement") in which the Company is compensated for the provision of certain services to DeFloria.

Refer to Note 3 for additional disclosure on the DeFloria Service Agreement.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2024 2023 2024 2023

Direct-to-consumer $ 8,166 $ 9,428 $ 23,758 $ 31,430

Business-to-business 4,347 4,866 12,783 15,880

Three Months Ended March 31,

Product revenue $ 12,187 $ 11,813

Service revenue 75 311

3 unchanged sentences

Recently Adopted Accounting Pronouncements

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.

In November 2023 the Financial Accounting Standards Board ("FASB") issued ASU 2023-07—Segment Reporting .

The guidance was issued to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments.

The guidance was effective for the year ended December 31, 2024, and the expanded interim disclosures are effective in entities in 2025 and will be applied retrospectively to all prior periods presented.

Refer to Note 13 "Operating Segment" for additional disclosures.

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 .

The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid.

The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024.

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.

On November 27, 2023, the FASB issued ASU 2023-07—Segment Reporting .

The new guidance was issued primarily to provide financial statement users with more disaggregated expense information about a public entity's reportable segments.

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

Other than described below, no new accounting pronouncements issued by the FASB had or may have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments.

The guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

ASU 2024-04 is effective for the Company beginning December 31, 2025.

The Company is currently evaluating the effect of adopting this ASU.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The new guidance requires disaggregated disclosure of income statement expenses for public business entities.

ASU 2024-03 is effective for the Company beginning December 31, 2026.

The Company is currently evaluating the effect of adopting this ASU.

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.

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

The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

For public business entities, the new requirements is effective for annual periods beginning after December 15, 2024.

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.

FAIR VALUE MEASUREMENT

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

The following table sets forth the Company's financial instruments that were measured at fair value on a recurring basis at March 31, 2025 and December 31, 2024, by level within the fair value hierarchy:

March 31, 2025

Level 1 Level 2 Level 3 Total

1 unchanged sentence

Stanley Brothers USA Holdings purchase option $ — $ — $ — $ —

$ — $ — $ 370 $ 370

Debt interest rate conversion feature — — 970 970

Total financial assets $ — $ — $ 970 $ 970

$ — $ — $ 1,328 $ 1,328

Investment in unconsolidated entity:

6 unchanged sentences

Stanley Brothers USA Holdings purchase option $ — $ — $ 52 $ 52

$ — $ — $ 1,730 $ 1,730

Debt interest rate conversion feature — — 1,023 1,023

Total financial assets $ — $ — $ 1,075 $ 1,075

$ — $ — $ 2,602 $ 2,602

Investment in unconsolidated entity:

2 unchanged sentences

Debt conversion option $ — $ 786 $ — $ 786

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.

There were no transfers between levels of the fair value hierarchy and there were no changes in the fair value methodologies during the three months ended March 31, 2025, and the year ended December 31, 2024.

Investment in Unconsolidated Entity

On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA BioSciences PBC ("AJNA"), and a subsidiary of British American Tobacco PLC (LSE:

BATS and NYSE:

BTI) ("BAT").

On April 6, 2023, the Company jointly formed an entity, DeFloria, with AJNA BioSciences ("AJNA"), and a subsidiary of British American Tobacco ("BAT").

AJNA is a botanical drug development company.

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 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.

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

AJNA is partially owned and was co-founded by a member of the Stanley Brothers.

The seven Stanley brothers (the "Stanley Brothers") founded CWB Holdings, Inc.

(predecessor to Charlotte's Web, Inc).

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

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

As of March 31, 2025, BAT holds an equity interest in DeFloria in the form of 2,000,000 or 100 % preferred units ( 200,000 preferred units as of March 31, 2024) 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 4,000,000 or approximately 50 % ( 400,000 common shares as of March 31, 2024), respectively, of DeFloria's voting common units following a 1-10 stock split when DeFloria converted from a Limited Liability Company to a Corporation.

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.

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.

DeFloria used the investments for the clinical development of a hemp botanical Investigational New Drug application and has concluded 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 September 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 March 31, 2025 and December 31, 2024, respectively.

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 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 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, 2025 and March 31, 2024, a loss of $ 100 and $ 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, 2025 and December 31, 2024, the DeFloria investment represents an investment of $ 10,700 and $ 10,800 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:

September 30, December 31,

March 31, December 31,

Expected term (years)

10 unchanged sentences

BATS and NYSE:

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$").

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

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.

5 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 the 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 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 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.

For the three months ended March 31, 2025 and March 31, 2024, a loss of $ 53 and $ 54 , respectively, related to the debt interest rate conversion feature was recognized as a change in fair value of financial instruments in the condensed consolidated statement of operations.

As of March 31, 2025 and December 31, 2024, the debt interest rate conversion feature represents a financial asset of $ 970 and $ 1,023 , 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:

September 30, December 31,

March 31, December 31,

Stated interest rate 5.0 % 5.0 %

7 unchanged sentences

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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

no dividends.

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.

1 unchanged sentence

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

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.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the three months ended March 31, 2025 and March 31, 2024, a gain of $ 78 and a loss of $ 56 , 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, 2025 and December 31, 2024, the debt conversion option represents a financial liability of $ 709 and $ 786 , 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,

March 31, December 31,

Expected volatility

10 unchanged sentences

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.

The Company is not obligated to exercise the SBH Purchase Option.

5 unchanged sentences

Changes in assumptions that reasonably could have been different at the reporting date may result in a higher or lower determination of fair value.

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

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.

For the three months ended March 31, 2025, the Company determined that there is a highly unlikely probability that the Company will exercise the SBH Purchase Option.

As such, the Company recognized a loss of $ 52 within change in fair value of financial instruments in the condensed consolidated statements of operations, and the SBH Purchase Option represents a financial asset of nil within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

For the three months ended March 31, 2024, the Company recognized a loss of $ 951 related to the SBH Purchase Option within change in fair value of financial instruments in the condensed consolidated statements of operations.

As of December 31, 2024, the SBH Purchase Option represents a financial asset of $ 52 within SBH purchase option and other derivative assets in the condensed consolidated balance sheets.

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.

As of March 31, 2025, the value of the SBH Purchase Option was nil as the exercising of the option is considered unlikely.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

(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 fair value model of the SBH Purchase Option:

September 30, December 31,

The following additional assumptions are used in the fair value model of the SBH Purchase Option as of December 31, 2024:

Expected volatility

127.0 % 125.0 %

Expected term (years)

1 unchanged sentence

Weighted average cost of capital

51.9 % 50.6 %

Inventories consist of the following:

September 30, December 31,

Harvested Hemp and seeds

1 unchanged sentence

Raw materials

11,530 11,903

Finished goods

2 unchanged sentences

( 983 ) ( 1,576 )

Total inventory

$ 18,916 $ 18,907

Inventory Provision

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

1 unchanged sentence

On October 11, 2022, the Company entered into a Promotional Rights Agreement (the "MLB Promotional Rights Agreement") with MLB Advanced Media L.P., on its own behalf and on behalf of Major League Baseball Properties, Inc., the Office of the Commissioner of Baseball, The MLB Network, LLC and the Major League Baseball Clubs (collectively, the "MLB"), pursuant to which the Company entered into a strategic partnership with MLB to promote the Company's new NSF-Certified for Sport® product line.

On January 29, 2024, the Company and MLB entered into the First Amendment to the Promotional Rights Agreement ("First Amendment").

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

On May 13, 2025, the Company and MLB entered into a letter agreement ("PRA Letter Agreement") terminating the MLB Promotional Rights Agreement as of May 13, 2025 and waives the Company's obligation to pay the current and remaining aggregate rights fee of $ 18 million for the remainder of the term of the MLB Promotional Rights Agreement.

As consideration under the MLB promotional rights agreement, the Company has paid 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, 2025 and December 31, 2024, the carrying value of the licensed properties was $ 10,717 and $ 11,691 , respectively, recorded as a license and media rights asset within the condensed consolidated balance sheets.

As of March 31, 2025 and December 31, 2024, the carrying value of the media rights was $ 3,000 , respectively, 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, 2025 and March 31, 2024, the Company paid the MLB $ 0 and $ 2,500 , respectively, as part of the committed cash payments, and recognized $ 974 , 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.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

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 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 September 30, 2024 are as follows:

The PRA Letter Agreement terminates the MLB Promotional Rights Agreement and waives the Company's obligation to pay the current and remaining aggregate rights fee of $ 18 million for the remainder of the term.

Maturities of the MLB license and media rights payable as of March 31, 2025 are as follows:

2025 (9 months remaining) $ 5,500

4 unchanged sentences

Total non-current license and media rights payable

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

As of March 31, 2025, expected amortization of licensed properties are as follows:

2025 (9 months remaining) $ 2,923

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 is 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.

1 unchanged sentence

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.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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

The following is a summary of the Company's convertible debenture as of March 31, 2025 :

As of March 31, 2025

Principal Amount Unamortized Debt Discount and Costs Net Carrying Amount

6 unchanged sentences

Convertible debenture due November 2029 $ 58,172 $ ( 14,541 ) $ 43,631

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.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2025 and March 31, 2024 , the Company recognized a foreign currency gain of $ 62 and $ 925 , respectively, related to the net carrying value of the debenture within the condensed consolidated statements 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 September 30, 2024 and September 30, 2023, the principal amount of the debenture includes $ 5,360 and $ 2,479 , 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 nine months ended September 30, 2024 and September 30, 2023:

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

Interest and Amortization Expense 2024 2023 2024 2023

As of March 31, 2025 and December 31, 2024 , the principal amount of the debenture includes $ 6,800 and $ 6,078 , respectively, of accrued interest expense.

The following is a summary of the interest expense and amortization expense, recorded within the condensed consolidated statements of operations, of the Company's convertible debenture for the three months ended March 31, 2025 and 2024 :

Three Months Ended March 31,

Interest expense $ 722 $ 733

Amortization of debt discounts and costs 463 401

Total $ 1,182 $ 1,080 $ 3,464 $ 3,146

Total interest and amortization expense

$ 1,185 $ 1,134

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 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.

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, 2025 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.

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 .

The leases have remaining lease terms of less than 0.4 to 9.9 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.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Maturities of operating lease liabilities as of March 31, 2025 are as follows:

Operating Leases

5 unchanged sentences

Total non-current lease liabilities

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

SHAREHOLDERS’ EQUITY

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

As of March 31, 2025 and December 31, 2024, 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 preferred shares have been issued or are outstanding.

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

Common Shares

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.

As of March 31, 2025 and December 31, 2024, the Company was authorized to issue an unlimited number of common shares, which have no par value.

LOSS PER SHARE

3 unchanged sentences

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

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

Three Months Ended March 31,

Net loss $ ( 6,212 ) $ ( 9,634 )

Weighted-average number of common shares - basic 158,009,541 156,036,670

Dilutive effect of securities — — — —

Dilutive effect of stock options and awards — —

Weighted-average number of common shares - diluted

158,009,541 156,036,670

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Loss per common share – basic and diluted $ ( 0.04 ) $ ( 0.06 )

As of March 31, 2025 and March 31, 2024, 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 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:

Three and Nine Months Ended September 30,

Outstanding options 3,351,687 5,522,942

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 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.

For the three months ended March 31, 2025, 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.

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 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

Expected term (years)

Risk-free interest rate

Expected dividend yield

Value of underlying share

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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:

There were no options granted for the three months ended March 31, 2025 and March 31, 2024.

Detail of the number of stock options outstanding for the three months ended March 31, 2025 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

( 161,392 ) 0.50

Outstanding as of September 30, 2024

Outstanding as of March 31, 2025

3,351,687 $ 0.90 7.08 $ —

Exercisable/vested as of September 30, 2024

Exercisable/vested as of March 31, 2025

2,813,055 $ 1.01 6.78 $ —

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.

There were no options granted or exercised during the three months ended March 31, 2025 and March 31, 2024, respectively.

Restricted share units

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

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

Upon vesting, one common share of the Company 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 nine months ended September 30, 2024 and 2023 was $ 1,024 and $ 1,150 , respectively.

There were no shares vested during the three months ended March 31, 2025.

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

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Number of Shares

Average Grant Date Fair Value

Grant Date Fair Value

Outstanding as of December 31, 2024

1 unchanged sentence

( 75,843 ) $ 0.21

( 1,385,840 ) $ 0.23

( 3,429,863 ) $ 0.30

Shares withheld upon vesting

( 735,172 ) $ 0.46

Outstanding as of September 30, 2024

Outstanding as of March 31, 2025

4,409,234 $ 0.26

Share-based Compensation Expense

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.

Share-based compensation expense for all equity arrangements for the three months ended March 31, 2025 and March 31, 2024 was $ 187 and $ 842 , respectively, included in selling, general and administrative expense in the condensed consolidated statements of operations.

As of March 31, 2025, $ 1,121 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 1.33 years.

The Company reported income tax expense of $ 0 and $ 16 for the three months ended March 31, 2025 and 2024, respectively.

The Company's effective tax rate in the three months ended March 31, 2025 and 2024 was 0.0 % and ( 0.2 )% , respectively.

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

federal statutory rate of 21.0% for the three months end March 31, 2025 and 2024 , respectively, primarily due to the valuation allowance.

The effective tax rate for the three months ended March 31, 2025 is consistent with the three months ended March 31, 2024, as the Company has been in a full valuation allowance for both periods.

OPERATING SEGMENT

Segment information

The Company has determined that it operates in a single operating and reportable segment, which is the production and sale of hemp-based CBD wellness products, which makes up substantially all of the revenue at this time.

This is consistent with how the chief operating decision maker (the "CODM") allocates resources and assesses performance.

The Company’s CODM is the executive operations committee that includes the chief executive officer, the chief financial officer, the chief operations officer and the chief people officer.

The majority of Company’s products have similar characteristics due to the same raw material ingredient (CBD and derivatives), similar nature of cultivation process, the type of customer and the regulatory nature of the industry.

The CODM assesses performance for this segment and decides how to allocate resources based on pre-tax net income/(loss) that is reported on the consolidated statement of operations.

The measure of segment assets is reported on the consolidated balance sheets as total assets.

For the three months ended March 31, 2025 and 2024, the segment's revenues and pre-tax net loss were $ 12,262 and $ 12,124 ;

and $( 6,212 ) and $( 9,618 ), respectively.

There are no differences between segment revenues, pre-tax net income/(loss) and the Company's consolidated revenues and pre-tax net income/(loss).

General Information

Factors used to Identify Reportable Segments:

The Company operates as a single reportable segment, focusing primarily on the production and sale of hemp-based CBD wellness products.

Products and Services:

The Company's revenue is primarily derived from the production and sale of hemp-based CBD wellness products.

CHARLOTTE’S WEB HOLDINGS, INC.

1 unchanged sentence

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

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 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.

Chief Operating Decision Maker (CODM):

The Company's Chief Executive Officer, the Chief Financial Officer, the Chief Operations Officer, and the Chief People Officer.

Measure of Segment Profit or Loss and Total Assets:

The CODM evaluates performance and allocates resources based on pre-tax net income/(loss), as presented in the accompanying financial statements.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Significant Segment Expenses

The following significant expenses are regularly reviewed by the CODM for the three months ended March 31, 2025 and 2024:

Cost of goods sold $ 6,032 and $ 5,213 , respectively;

Selling, general, and administrative expenses $ 11,578 and $ 15,280 , respectively;

Change in fair value of financial instruments $( 126 ) and $( 1,860 ), respectively;

and Depreciation and Amortization $ 2,449 and $ 2,493 , respectively.

Reconciliation to Consolidated Financial Statements

As the Company operates as a single reportable segment, the amounts presented above align directly with the consolidated totals in the financial statements.

For the Three Months Ended March 31,

Product Revenue

$ 12,187 $ 11,813

Service Revenue 75 311

Total Revenue $ 12,262 $ 12,124

Cost of goods sold

$ 6,230 $ 6,911

Gross profit %

50.8 % 57.0 %

Selling, general, and administrative expenses

11,578 15,280

Operating loss $ ( 5,348 ) $ ( 8,369 )

Change in fair value of financial instruments ( 126 ) ( 1,860 )

Other income (expense), net

Loss before provision for income taxes

$ ( 6,212 ) $ ( 9,618 )

Other segment information

Depreciation/Amortization 2,449 2,493

Total assets 108,023 141,778

Long-term liabilities 68,473 75,478

RELATED PARTY TRANSACTIONS

Effective November 2020, the Company issued a secured promissory note, where $ 1,000 was loaned to one of the Company's founders.

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 November 2020, the Company issued a secured promissory note, where $ 1,000 was loaned to one of the Stanley Brothers.

The note receivable was secured by equity instruments with certain of the Stanley Brothers, 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, which date was subsequently extended.

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

1 unchanged sentence

The note has been fully reserved for as of December 31, 2024 .

CHARLOTTE’S WEB HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On March 2, 2021, the Company entered into the SBH Purchase Option with Stanley Brothers USA as discussed above ( Note 3 "Fair Value Measurement").

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

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.

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

Effective January 5, 2023, the Company entered into a Brand License and Option Agreement with JMS Brands LLC, an entity owned by one of the Stanley Brothers.

Pursuant to the Brand License and Option Agreement, the Company licensed certain intellectual property from JMS Brands LLC, for an annual license fee of $ 500 .

As of January 5, 2024 , the Brand License and Option Agreement has expired.

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

AJNA is a botanical drug development company.

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 initial $ 10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

AJNA is partially owned and was co-founded by a member of the Stanley Brothers.

BAT holds an equity interest in the entity in the form of 2,000,000 preferred units following its $ 10 million investment and has the right to participate in future equity issuances to maintain its pro rata equity position.

The Company and AJNA each hold 4,000,000 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 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).

As of March 31, 2025 and December 31, 2024 , the remaining note receivable of $ 51 and $ 71 , respectively, is presented in other assets in the condensed consolidated balance sheets.

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 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.

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

For the three months ended March 31, 2025 and March 31, 2024, the Company recognized $ 75 and $ 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 $ 342 and $ 648 as of March 31, 2025 and December 31, 2024, respectively.

On June 21, 2024, the Company entered into a consulting agreement with Jared Stanley, former executive of the Company, and current member of the Board of Directors.

In consideration for Mr.

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

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

SUBSEQUENT EVENTS

The Company and MLB entered into the PRA Letter Agreement terminating the MLB Promotional Rights Agreement as of May 13, 2025 and waives the Company's obligation to pay the remaining aggregate rights fee of $ 18 million for the current and remainder of the term of the MLB Promotional Rights Agreement.

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